Question

Explain the importance of small businesses to the American economy.

Answer 1

From job creation to generating revenue, small businesses are invaluable and also supporting local economies across the country, they also make an incredible impact on America’s overall economy. Big businesses may dominate the stock markets but small businesses create new job opportunities, generate revenue and drive economic growth in countries like America. The following are important factors of small businesses:

• Competition: Small Businesses inject new competition in local markets or into previously stale markets. For example if a farmer may be able to offer cheaper produce because he doesn’t have to spend money on shipping. In that case, an agile startup may be able to innovate new technology faster than a bulky forcing change in thinking and behavior.
• Local Recruitment: In addition to being major employers, small businesses create more new jobs than larger firms. Small businesses also operate locally, which gives them a strong preference for hiring local people. They represent more than 99.7 percent of U.S. employers, and they create approximately 60 to 80 percent of the new jobs available every year. Additionally, small businesses employ approximately 130 million people, including 8 million people who work for the 600,000+ franchised small businesses.
• Diversity in business: Small businesses also have more flexibility, and can be started by almost anyone. That makes them more diverse in form, function, culture, and potential than large corporations. The greater diversity we have in the economy, the easier it is for the economy to withstand tough conditions.
• Generating revenue: Even though it sounds like a bad thing, many startups and small businesses eventually fail. That turnover gives the community a chance to learn, recover, and rebuild, which is beneficial in the long run, driving even more new growth.
• Inventive Minds: Patent-seeking small companies earn 13 to 14 more patents per employee than larger firms. They encourage their employees to be innovative and creative, using their technical skills and common sense to create new inventions and technology. These small companies' contributions to the U.S. economy are significant through their inherent and marketable worth.
• Exporting Importance: Small businesses are important due to their role in exporting to other nations. Ninety-seven percent of identified exporters are small businesses, and they produce 26 percent of the export value through their products they ship to consumers in other countries. Exporting U.S. goods to other nations also helps to keep the U.S. economy strong. Without the impact of small businesses, American exports would be much lower, which would significantly damage the U.S. economy.
• Influencing the market: Because small businesses contribute to the GDP, they also contribute to the stock market. When the U.S. economy is growing—an action directly affected by small businesses—businesses across the board typically report better earnings. This drives a positive effect on the stock market. Likewise, small businesses buy many of the goods produced by indexed companies.

That is why Small business plays a very important role in America Economy. They provide steady employment—more than 500,000 small businesses with employees start annually—healthy economic growth, and they make an impact in their communities.