The Importance of Small Businesses to Local Economies

There is a reason why supporting small businesses is extremely important for the communities where they reside, and that is because these small businesses contribute a lot of advantages to the local economy that is beyond just paying government taxes.

Find out why small businesses are so important to local economies and communities as a whole:

1. Local employment

Every small business plays a significant part in contributing to local employment opportunities. When a small business opens, they hire employees from the locality, which helps stimulate local job growth and prevents people from moving to other places to look for jobs. They can even provide opportunities for individuals that are not employable by larger businesses due to lack of education or something other, which has a domino effect of reducing government expenses on unemployment checks, food stamps, and other forms of assistance.

Some small businesses even use tools such as ServiceNow Human Resources modules to streamline their hiring processes and prepare their organizations for scaling.

woman harvested vegetables

2. Community identity

Small businesses play a significant role in forming the identity of a community, be it a restaurant, pet store, coffee shop, gym, or other types of businesses. This identity or “character” is what makes a locality unique, which can also help boost tourism and bring in more money to the community.

3. Customer loyalty

Small businesses tend to be customer-oriented and involved in the community, which gives them the ability to understand the community’s needs and how their actions will impact the people within it. As such, small businesses are able to adapt promptly to rapidly changing economic climates. If the market falls, small businesses have loyal customers that will help keep them afloat, which, in turn, strengthens and stabilizes the local economy.

4. Tax contributions

With every small business that opens in a local community comes a corresponding contribution to local government taxes. The government uses these taxes to fund community programs and services, such as police departments, public schools, government assistance, and community beautification, among many others. So, in a sense, patrons of local businesses are giving back to their community every time they make a purchase or pay for a service.

Local businesses may also serve as the main contributors of special taxation districts because they charge sales tax that is based on their location. The money that goes to these special districts can then be used for projects like repaving sidewalks, building more parking areas, and restoring historical attractions.

5. Community involvement

Since many small businesses have strong connections to the people within their community, they tend to be involved in community projects. Business owners often offer sponsorship or donations to community projects, such as local sports leagues, food drives, scholarships, charity events, and many other things that help improve the local community as a whole.

6. Sense of community

Many small business owners know their customers on a first-name basis and form either casual or formal relationships with the people in the community. That said, they help form a sense of community and camaraderie within the locality, be it with customers or other business owners.

Fostering camaraderie is a crucial part of maintaining a harmonious relationship between members of the community. People in these types of localities are more willing to go out of the way to help their neighbors and tend to play an active role in the betterment of the community. Some of the direct results of this inter-community relationship include lower crime rates, a more positive environment, and a healthier local economy.

7. Productive competition

Small businesses need to compete with each other to thrive within the community. By being in competition with other businesses, they push each other to innovate, come up with new products or services, improve themselves, and do better than their competitors. All of these things can help form a healthy marketplace, which makes for a robust local economy. Moreover, continuous improvement also improves customer satisfaction, leading to increased revenue and thus more taxes for the local government.

8. Environmental benefits

Local businesses help reduce a community’s carbon emissions by making products and services within easy reach, therefore reducing the need to drive or take public transportation. Apart from this, locally-made products produced by small businesses serve as alternatives for mass-produced goods that are inherently less environmentally-friendly.

As you’ve probably realized by now, small businesses provide tons of benefits to their local community–all the more reason to support them by patronizing their products and services, leaving positive reviews, recommending them to other people, and promoting them on social media to help boost their revenue and brand awareness.

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