Why Small Businesses Are Considered the Lifeblood of the U.S. Economy

Why Small Businesses Are Considered the Lifeblood of the U.S. Economy

December 27, 2022

Small businesses play a big role in the U.S. economy, and springtime is a great time to recognize their importance. Whether you’re buying Mother’s Day gifts, garden supplies, athletic apparel, books, electronics, lawn and patio items—or something else—consider buying them at a local small business instead of a big box store. Not only will you help the small business, you’ll help your local economy.

U.S. Small Business Administration (SBA) District Director Beth Goldberg summed it up in a 2019 news release: “When someone spends $100 at a local small business, $48 is recirculated in our local economy. But if that same $100 is spent at big box store or national retailer, only $14 makes it back to our local economy.”

The SBA established Small Business Week more than 50 years ago to recognize and support the important contributions of America’s small business owners and entrepreneurs. Held the first week of May, this year’s event features a NSBW virtual summit and a “Building a Better America Through Entrepreneurship” bus tour with stops across the country.

Small businesses may be bigger than you realize

 The country’s 31.7 million small businesses represent 99.9% of all U.S. businesses, according to the 2020 Small Business Profile. The profile, prepared by SBA’s Office of Advocacy, defines small businesses as firms with fewer than 500 employees. Here are some other interesting statistics from the 2020 SBA document:

  • Firms with 20-99 employees make up the largest share of small business employment.
  • Small businesses in the United States employed 60.6 million people in 2017, which was 47.1% of the private workforce.
  • Small businesses in the United States created 1.6 million net jobs in 2019.
  • The largest gain in net jobs in 2019 was at firms employing fewer than 20 employees, adding 1.1 million net jobs.
  • Firms employing 100-499 employees had the smallest net-job gains in 2019, adding 249,000 jobs.
  • In 2018, 97.5% of the firms exporting goods from the United States were small firms, generating 32% of the country’s $1.5 trillion in total exports

Ways to support small businesses

Whether a small business has one employee or 499, it provides important resources and employment opportunities for local residents. Small, local businesses are more likely to use local businesses too, ultimately supporting your community, your friends, neighbors, family members—and you!

In addition to purchasing their goods and services, here are some ways to support small businesses:

  • Spread the word: Tell friends and family members what you like about the business, why you support it—and why they should too.
  • Post online reviews: Describe what service you received or purchase you made, why you like it—and why you support the business. Consider sharing it on social media.
  • Share the business’s posts on social media: If you like something a small business posts on social media, share it! Also consider sharing a review or post about the business that you or one of your friends made.
  • Tell them you appreciate them: Telling the business owner or employees how much you like their products or services may make a big difference in their day—and could positively impact their next customer as well.
  • Buy gift cards: You can help boost sales revenue and then spread your support to the business by giving gift cards to friends or family members.

Helping small businesses succeed strengthens local economies, creates new job opportunities—and sometimes leads to incredible growth. For examples, consider the beginnings of Apple, Ben & Jerry’s, and Amazon. With your help, a small business near you might change the future too.

Important Disclosures This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.

 This material was prepared by LPL Financial.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL Financial affiliate, please note LPL Financial makes no representation with respect to such entity.