Often called the backbone of the economy, small businesses are anything but small. Similar to how each of us requires a backbone in order to function well, Economics (especially in today’s constantly evolving business world) could not function without these types of businesses. Simply put: the overarching global business behemoths could not sustain their economic lives very long (or successfully) without small businesses helping to keep their day-to-day operations afloat.
It’s All About Perspective
Whether a partnership, sole proprietorship, or corporate organization, the term “Small Business” can be somewhat misleading because good things (especially when it pertains to business) DO come in small packages.
Small businesses play a pivotal role in the global economy by creating jobs, helping to build strong communities, and driving innovation, all of which fosters economic growth.
Even though a strong economy is capable of supporting both big and small businesses, no society can run successfully when small business is not present. In order for large corporations to thrive and continue to succeed, they rely on small business.
In an article for Business News Daily published in October 2023, Stephan Goetz, Professor of Agricultural and Regional Economics at Penn State University and Director of the Northeast Regional Center for Rural Development, stated, “Small, locally-owned business and startups tend to generate higher incomes for people in a community than big, non-local firms which can actually depress local economies.”
The Ever-Evolving Business Landscape
Larger corporations usually have less flexibility to incorporate newer ideas into older ways of doing business. Conversely, smaller businesses can adapt more quickly to changing market conditions – allowing the small business to grow and thrive. During economic downturns, this resilience helps to promote stabilization within local economies.
An age-old law, as timeless and true in zoology as it is in business: adapt to survive. In the Government of Canada’s March 2024 report, Key Small Business Statistics 2023, it was noted that:
- As of 2022, small businesses employed 5.7 million individuals in Canada, or 46.8 per cent of the total private labour force
- Based upon employment growth from 2017 to 2020, the highest concentration of High-Growth Firms (HGFs) in Canada is found in the following sectors: 6.0 per cent for information and cultural industries; 5.2 per cent for professional, scientific, and technical services; and 4.4 per cent for administrative and support, waste management and remediation services
Small businesses draw innovation and attract talent that brings inventions and solutions to previous ways of doing business. Which, of course, is one of the main reasons why large companies want to acquire small business: their innovators.
Essentially, the innovative new technology created by start-ups boosts the development of the big corporations.
It’s An Economic Backbone Thing
Quite simply, there is an array of multifaceted and far-reaching ways that small businesses can be viewed as the backbone of – as well as the contributor to – the economy.
They include:
Innovation and entrepreneurship – Fertile fields of innovation, small businesses are more likely to experiment with fresh ideas that fuel economic development. Job Creation – The backbone of job creation, small businesses employ millions of people. Small businesses are the principal source of employment in both developed and developing economies.
Increased Tax Revenue – The taxes paid by small businesses to local and national governments benefit the entire community by helping to fund such essential services as healthcare, schools, and public infrastructure. Revitalizing Communities – When people shop locally, they contribute to the overall look (as well as to the societal and economic growth) of communities/neighbourhoods. Gross Domestic Product (GDP) – From manufacturing and retail to services and technology, small businesses contribute greatly to the GDP of many countries.
Diverse Product and Service Offerings – It is the small business that offers unique and specialized products not readily available from larger retail chains. Supply Chain and Local Sourcing – Small businesses often source their products and services from other local small businesses; thereby strengthening both themselves and the entire local supply chain. This has been described as “a self-sustaining economic ecosystem.”
What’s In a Name?
Though it’s usually Big Corporations who garner most of the attention, it is often the nimbleness and flexibility of Small Business that proves to be more resilient – and more capable of suddenly pivoting – when times are tough. The fresh perspectives and new ways of thinking are a mindset offered by small business that are both innovative and entrepreneurial. A business may be defined as “small” by the number of employees it possesses and/or the fact that it has less annual revenue than a large corporation or even a regularsized business. However, Small Businesses perhaps should be viewed more with the moniker of Integral Businesses. Remember, even big businesses were small once. So, never underestimate the power of Small – as “they” say, size doesn’t matter.
Peter Campbell | Contributing Writer
