Facts About Small Businesses and Why They Influence the Economy

Developing and developed economies receive a major boost from the new small businesses. Small businesses create employment opportunities otherwise non-existent while channeling the profits they make back to the economy thus impacting on its positive growt

Whenever people decide to start a new business they begin small and grow gradually. Small is the defining factor here.

However, some sectors have regulations that discourage a new business from starting with minimal or scaled down resources examples include banks where a minimum capital is required usually a very high figure.

Small businesses in most sectors of an economy start off on owner’s capital and grow to record sustainable profits thereby creating employment. Opportunities are also created for businesses that offer support services.

Let’s take a look at a typical scenario for instance.

Three new businesses open up along one street; one is a clothes retail store, another serves excellent cuisine while the third provides architectural services. Probably a grocery store will soon open to provide supplies to the restaurant or a realty firm to develop the blueprints designed by the architecture firm or even a Laundromat to provide wash services. That is one possible result while another could result in direct competitors to the above businesses setting up shop in the same area to tap into the profits.

Within no time the street grows to a busy trading hub and that is when banks begin opening up new branches on the same street to provide financial services to the businesses. Meanwhile all the new start-ups employ people who pay taxes just as they do as businesses and that money goes into infrastructure development and definitely you have a growing economy.

It is a known fact that big companies pay the highest taxes and create the most job openings but compared to small businesses a lot of money exchanges hands at the small business level. I am talking about the loans from banks the business to business deals happening on a daily basis and not forgetting their national input in regard to tax payments.

Small businesses are used as instruments to measure economic growth in most countries. Their combined revenue runs into billions in some countries like the United States. And with changing trends, there are more entrepreneurs today than there were two decades ago especially in developed and developing countries.

The best government administrations are those that recognize the power of small businesses and provide incentives to nurture their growth in the hope that the small businesses will fuel economic growth.

Small businesses fuel competition which in turn invokes innovation, at this juncture the overall productivity goes up and the final effect is upward growth for the economy. Therefore without a doubt, small businesses determine a country’s economic trend.


1 comment

Add a comment

0 answers +0 votes
Post comment Cancel
Colin Dovey
This comment has 0 votes  by
Posted on Oct 3, 2010