Although small in size, small businesses generate revenue that contributes to the economic growth of a nation. Small businesses can take the form of corporations, proprietorships, or partnerships, and typically employ fewer people.

Examples of small businesses include grocery shops, bakery shops, party planning services, translation services, car dealerships, and more. The importance of small businesses can be understood through the following points.

The biggest advantage of small businesses is the generation of employment per unit of capital. People who are idle during a particular period in the year have the opportunity to work in these small businesses, which helps transform India’s image from a job-seeking nation to a job-creating one.

Why are small businesses important?

Small businesses are important for many reasons, including job creation, exports, and innovation, but perhaps their biggest impact is on their local communities.

In fact, the AMEX 2018 Small Business Economic Impact Study found that approximately 67% of every dollar spent at a small business stays in the local community. This cycle stimulates the economy.

Creating Meaningful Jobs

Two out of three new net private sector jobs are created by small businesses. This figure refers to the number of new jobs created after subtracting the number of jobs that have been eliminated.

This trend has been reasonably consistent for 25 years and has continued since the end of the Great Recession. Not only do small businesses create a significant percentage of new jobs, but the jobs they create also provide high levels of job satisfaction.

Growing a Small Business to a Corporation

Small businesses do not always remain small. Large corporations, such as Nike and Ben and Jerry’s, started off as small businesses and grew to become major players in the national and international marketplace.

Many computer industry leaders began as “tinkerers,” working on hand-assembled machines out of their garages. Microsoft and Amazon are prime examples of how a small business idea can change the world. Small businesses that grow into large businesses often remain in the community in which the business was first established.

Having a large corporation headquartered in a community can further help provide employment and stimulate the local economy, creating a market that favors the development of additional small businesses.

Community support

When you purchase from a small business, you are not only supporting the business itself, but you are also putting money back into your own community. Community Futures’ research shows that for every $100 spent locally, $68 remains in the community.

Businesses are also well-known for supporting charitable initiatives within the community. Therefore, by supporting a small business, you are allowing them to continue investing in worthwhile initiatives. Small businesses also drive tourism, further contributing to the local economy and the reputation of the community.

They keep taxes close to home

One of the ways small businesses benefit the community is that the taxes they pay end up back in the community. Taxes paid to small businesses, as well as the local taxes paid by small businesses, end up paying for community improvements such as schools, green space, public transit, and health care. Conversely, taxes paid to big corporations, or when shopping online, may not stay within the local circuit.

They innovate and diversify the local marketplace

To stand out among the crowd, small businesses have to be innovative and unique. They must do something different from their competition, or they risk disappearing. That’s why most successful business owners tend to be innovative, creative entrepreneurs with one-of-a-kind ideas.

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