Small business are major contributors to the economy and give back bolstering local economies.

[Dock, 10-20-23, Business News Daily, “Why Small Businesses Are Good for Local Economies”, https://www.businessnewsdaily.com/1298-small-business-good-for-economy.html, accessed: 7-16-24, AngH]

Small businesses are an important economic engine for both local communities and the national economy.

A widely cited 2019 report from the U.S. Small Business Administration found that small businesses generated 44% of all economic activity in the country. That same year, small businesses created two-thirds of all jobs in the U.S. In a post-pandemic world, small businesses have been the backbone of economic recovery and job growth.

“Small, locally owned businesses and startups tend to generate higher incomes for people in a community than big, nonlocal firms, which can actually depress local economies,” said Stephan Goetz, professor of agricultural and regional economics at Penn State and director of the Northeast Regional Center for Rural Development, in a statement published alongside the research.

Goetz said his research shows that small businesses directly benefit local economies – much more so than large businesses. This is because big box and large corporations have internal systems for services such as accounting, legal, supply and maintenance that are not necessarily based within the county or state. Small businesses, on the other hand, have to outsource these functions and usually do so to professionals within their local or regional communities – professionals who are likely to spend that money in the same community.

How small businesses benefit local economies

Small business has long been seen as a boon to local economies, but why is that? Small businesses help boost a community’s broader economy in several concrete ways that bigger businesses cannot.