Does small business help grow the economy?

The majority of American jobs are created by small business.  Over the past 17 years, small business has created 65% of new American jobs.  The US government classifies businesses with fewer than 500 employees as small businesses.

On April 5^th, 2012, President Obama signed the “Jumpstart Our Business Startups” (also known as the JOBS Act) into effect.  It is a bill that will make it easier for startups and small businesses to raise funds, especially through online crowdfunding.  Crowdfunding describes the collective cooperation, attention and trust by people who network and pool their money and other resources together, usually via the Internet to support efforts initiated by other people or organizations.  The bill passed Congress through a 73-26 Senate vote and a 380-41 House vote, including an amendment designed to protect crowdfund investors in order to make it easier for startups to access financing.

The JOBS Act should help the current unemployment rate by making funding more accessible to startups.  Experts believe it will be the main factor driving the increase in new companies being founded and of course, with that comes the need to hire new staff.

Small business drives the U.S. economy by providing jobs for over half of the nation's private workforce. The latest figures from the SBA show that small businesses with fewer than 20 employees increased employment by 853,074 during 2011-2012.  Small businesses are job creators and create 60-80% of new net jobs.

The Small Business Administration (SBA) announced that small businesses make up more than 99.7% of all employers.  Other reasons the SBA loves small businesses is that they also create more than 50% of the nonfarm private gross domestic product (GDP).  Additionally, the 22.9 million small businesses in the United States are located in virtually every neighborhood.  Small businesses employ about 50 percent of all private sector workers and home-based businesses account for 53% of all small businesses.  Another interesting statistic is that four years after start-up, half of all small businesses with employees remain open.

So how else can small businesses really help boost the economy?  Local economies realize distinct benefits from the activities of local and small businesses.  “Small businesses, in turn, can realize competitive advantages by employing a local focus in their service and marketing activities. Major benefits of business in the local economy include a boost in employment and discretionary income in the community, tax income increases for local governments and a loyal customer base for businesses.”  Employing people in the local economy boosts the employment rate.  Additionally, businesses pay a significant portion of all taxes in the United States, including income tax, property tax and employment tax.  “Having more businesses in the local economy can boost tax income for local governments, bringing in more money to repair roads, develop schools and improve public services.”

As stated in today’s blog, small businesses do indeed help boost the economy and things are looking up with the passage of the JOBS Act by President Obama.  That does not mean there is still not a lot of work to be done by Congress in order to help small businesses succeed but things are looking up.  For the past few decades, small business has been the cornerstone of American employment and those numbers should only continue to rise.  Small businesses are key in helping local economies grow and creating new jobs.  I hope today’s piece has given you more insight into how small business can indeed improve the economy and the strides the government is taking to make that a reality.

Here are some articles on small business and the economy you might want to check out:

“JOBS Act to jumpstart the economy”: http://www.forbes.com/sites/work-in-progress/2012/04/05/jobs-act-to-jumpstart-the-job-market/

“How small business grows the economy”: http://bradsugarsblog.com/how-small-business-grows-the-economy/

“How many jobs does small business create’: http://www.businessweek.com/smallbiz/running_small_business/archives/2011/10/how_many_jobs_do_small_businesses_create_depends_what_small_means.html

Until next time…