Small Business Owners and Their Impact on the Economy
There are generally three areas in which small business owners make huge inroads in economic growth. These three include:
- Steady employment
- Local and overall GDP
- Job creation/growth
One statistic from the United States Small Business Administration (SBA) suggests that, over a four-year span, more than half of all start-ups will still be in business. This provides stability for both the broader economy and the individuals employed at the firm.
Small business owners are also responsible for a sizable chunk of the GDP. Another study conducted by the SBA showed that small businesses were responsible for 50% of the non-farm private GDP in the United States.
Beyond that, startups are integral to the long-term economic success of a region. Many smaller and often more rural communities frequently look for outside, established businesses to spur economic growth in their region. Unfortunately, larger firms without ties to a region tend to mitigate the economic prospects of that region. In a study of data from the Edward Lowe Foundation, economist Stephan Goetz surmised that external larger firms might bring short-term benefits to an area, but long-term sustained economic growth was achieved more fluidly with local startup businesses.
A report by the Bureau of Labor and Statistics demonstrated that small businesses with between 1 and 49 employees were responsible for around 40 percent of the total net job growth in America.
By contrast, large firms with 500 or more employees were responsible for 41 percent. Thus, job growth between large mega-corporations and small businesses is roughly identical.
The Value of ALL Small Business Owners
Most data that looks at the value or the economic impact of a small business fails to examine the differences at the heads of those firms. Business owners who are minorities or women are making substantial headway in their fields. Indeed, a study conducted by the National Women’s Business Council discovered that women-owned businesses were responsible for $3 trillion and 23 million jobs. That is roughly 16 percent of the total United States economy.
Minority-owned businesses are also important facets of overall economic growth in America. Between 2002 and 2007, the overall number of small businesses grew by 18%. But, African-American-owned businesses grew by 60%, Hispanic-owned businesses saw a 44% uptick, and Asian-owned firms rose in number by 41%. After the economic downturn between 2007 and 2011, these numbers dropped substantially. But, minority-owned small businesses still account for over 15% of all businesses in the United States. Without these contributions from minority- and women-business owners, the economy of the United States would lose over $3 trillion in gross net worth.
Clearly the complete impact of small business owners cannot be understated. They are truly the backbone of the American economy and virtually every other economy around the world. In the United States alone, small businesses (defined by the SBA as a firm with fewer than 500 employees) account for 99.7% of all companies. Each year, over 500,000 small businesses are created.
While gigantic firms like Walmart or Facebook may be the face of the American economy, it is small businesses and small business owners who make the real difference.