Although small businesses are often thought of as small businesses, they actually make up a large portion of the U.S. economy. According to the U.S. Small Business Administration (SBA), small businesses make up more than 99% of U.S. businesses and employ more than 46% of all private sector employees. Given their enormous influence in the U.S. economy, it's clear that small businesses are the backbone of America.
Small business owners need to know the value of their business and how it impacts those around them, including large corporations. Read this article to learn about the broader impact small businesses have on the economy and large businesses.
>> Read next: Problems that can kill small businesses
Why are small businesses important?
Small businesses are important for many reasons, including job creation, exports and innovation, but perhaps their greatest impact is their impact on local communities. Small Business Strategist Leslie Hassler discussed how successful small businesses leverage resources within their communities.
“As small businesses continue to scale, they employ more people, make more connections with other small businesses and nonprofits, and an ecosystem of connections is formed, so the economic impact is It increases,” Hassler told Business News Daily. “Today's small business owners are not only concerned about their own personal success, but also the success of their teams and communities.”
In fact, every dollar spent at a small business is two to four times more likely to be recirculated within the local community. This cycle stimulates the economy.
According to Civil Economics, approximately 53% of every purchase made at a small business can be recycled back into the local economy. In contrast, he said only 13.6% of purchases from large chain retailers have the potential to be recirculated in local communities.
Why is the existence of small and medium-sized businesses important for large companies?
Although large corporations may seem to hold the power in our economic society, the very existence of small businesses is an important factor in their success. Thibaud Clement, former CEO of Loomly, shares his five ways small businesses can become big opportunities for larger companies.
- vendor: Small businesses may offer solutions for specific needs or special cases that larger vendors don't yet offer. This is often the case when emerging technology companies sign deals with Fortune 500 companies.
- customer: The United States is home to more than 30 million small businesses, so it's no surprise that they represent a significant portion of the overall market and significant growth potential for many large companies.
- Competitors: Small businesses can communicate new trends and needs to large businesses.
- partner: Small businesses can create synergies with large businesses by combining their services to provide unique value to customers.
- Acquisition: In some cases, a smaller company complements a larger company's existing offer so well that it makes business sense for the latter to acquire the former.
Without small businesses, large businesses would not be able to prosper as much as they do today. Small businesses offer many important opportunities that shouldn't be overlooked.
How do small businesses impact large businesses?
Small businesses influence large businesses in many ways. For example, Hassler said many large companies are learning from the ingenuity, innovation, and agile management of small and medium-sized businesses. Large companies are often bogged down in bureaucracy, so we monitor small and medium-sized businesses to see what's working effectively in the market in real time. Then use those pivots to make data-driven decisions faster.
“Small businesses are more nimble than large companies, so the decision-making process is much faster,” Hassler said. “This means small businesses can test new technologies, processes, systems, and marketing techniques much faster than larger companies.”
Angelique Reise, CEO of business strategy firm Bold House, said that in addition to being at the forefront of innovation, small and medium-sized businesses act as competitors to large corporations in the war for talent, and that this is a challenge in the workplace. culture and diversity standards.
“Small and medium-sized businesses can more easily create the workplace culture and work-life integration programs that today's employees demand,” said Lewers. “But I would argue that this is a good thing for large companies because they are being pushed to do better about things like diversity, leadership programs, and wellness.”
Small businesses often take the lead in the overall business landscape. They influence workplace culture and tend to announce new products and strategies before larger companies.
What advantages do small businesses have over large businesses?
Large companies have many advantages over small businesses due to their strengths and resources. But the opposite is also true. For example, small businesses benefit from higher risk tolerance and speed standards. You're free to innovate and change as needed because you're not blocked by the many protocols, guidelines, internal politics, and layers of management that get in the way of large companies.
Additionally, Clement said small businesses typically benefit from fewer legal regulations.
“While all businesses must comply with the law, some specific laws apply differently depending on the size of the business, and large businesses typically have additional requirements compared to small businesses,” he said. said. “This is especially true when it comes to human resources. Once a company has more than 20, 50 or 500 employees, certain responsibilities apply.” [See local legislative issues small businesses should be watching.]
In addition, small businesses typically work closely within their local communities and therefore have the ability to better understand the needs of their customers.
“The biggest advantage, and the one most commonly cited by business customers, is that small businesses are very responsive to their needs,” Lewers said. “They can generate a small profit. In today's world, agility is everything.”
In addition to staying informed about what consumers want and adjusting their strategies accordingly, small businesses can better segment their customers and provide more personalized experiences. This is critical as consumers increasingly demand personalized products and services.
How can small businesses successfully collaborate with large corporations?
Small business owners shouldn't be afraid of large corporations, and vice versa. Both can work together in harmony. That said, small business owners should keep a few things in mind when working with large companies.
Clement said larger companies have more internal processes and policies, with deadlines to adhere to, rules to follow and requirements to meet. To counter this, he listed three strengths that small and medium-sized businesses need to succeed when working with large companies.
- Adaptability: Small businesses need to be able to tailor their products and services to meet the specifications required by larger partners.
- Legal expertise: To limit liability and protect profits, small business owners should consult a legal expert before signing a contract.
- Runway: Due to the longer sales cycles and payment schedules common to larger companies, small businesses may need access to additional working capital to keep their businesses afloat while they wait for payments. [Read related article: Small Business Financing Options That Bypass Traditional Banks]
Small businesses have the potential to grow alongside larger companies in today's market if they remain vigilant. They are the lifeblood of the U.S. economy, and we must use their resources and size to our advantage.
“Today, more opportunities exist for both small and large businesses to grow, even in ways that collaborate and compete,” Hassler said. “Today's symbiotic relationship will require continued intent on both sides if it is to continue to thrive.”
Small businesses make a big impact
Small businesses are essential to a thriving local economy, and their impact can be felt beyond geography. With fewer regulatory restrictions to consider than larger companies, small businesses can more easily test new products and strategies that could be major trends or game-changers for the nation's economy as a whole. Today's small business innovations can easily impact tomorrow's large business communities.
Natalie Hamminson contributed to this article. Interviews with sources were conducted for a previous version of this article.
