Small Businesses Play Key Role in Economic Growth

Small businesses litter the American landscape. From sea to shining sea, little Mom and Pop shops, along with businesses that each employ a few more than a handful of workers, provide a much needed service in the communities in which they reside. These services, if not undertaken by dedicated small business owners, would leave a serious product and services gap in local economies.

The Economic Flow of Components

Imagine for a moment, owning your own arts and crafts store. You might set up shop in a medium-sized town and start to get some regular customers. Behind many stores are a lot of product and service suppliers that your customers never see. In fact, they may not even put much thought into how your store gets stocked or where all the products they buy truly come from. Nevertheless, your arts and crafts business depends heavily on these other companies, both big and small, to provide your store with its needs.

When these suppliers keep the supply chain alive, and you pay them for the items you stock in your store, this general flow of money from consumer all the way back to the original manufacturer is critical to keeping any modern economy alive. When people become worried about the economy, and refuse to spend money in your store, it certainly hurts your bottom line. Once again, decreased rates of spending on the consumer end also tends to cause you to need to purchase items from your suppliers. In turn, your suppliers tend to need to buy less products from the manufacturers.

This result of slowing down product movement along the supply chain, as spending reductions occur from time to time, seriously effects the economy. When things are slow, less workers are needed to man your shop and positions along the supply line. As people get laid off, this creates an even more depressed economic state.

Hiring Local Employees

Another great service that small businesses provide for the economy is that they keep national and local employment rates up. According to the Small Business Administration, 55-percent of all jobs are provided by 23-million small businesses across America. It is a situation that causes many to ask why government does not do more to facilitate the formation and prolonged success of small businesses for the nation.

However, it also begs the question of why more people do not start more small businesses, knowing that at a minimum they can keep their own family-members employed. For many families, this is one way to keep themselves from becoming an unemployment statistic. Hence, this helps the economy by preventing even more people from needing to be placed on welfare.

Source:

http://economicdevelopment.org/2014/12/the-role-of-small-businesses-in-economic-growth/