Small Business: The Backbone of Our Economy

small business

Whether it’s the mom-and-pop store in your neighborhood or a $20 million a year software company that’s driving economic growth, small business is the backbone of our economy. It’s where the majority of jobs are created, where new ideas and innovation are spawned, and where community life is shaped and celebrated.

But it’s not easy to be a small business. A plethora of unique factors make it difficult for small businesses to operate and grow at the same pace as large, established corporations. It’s a challenge that can be hard to understand and that often takes years of hard work to overcome.

One important factor is that small businesses often struggle with resource poverty, in which resources such as cash and people are stretched too thinly. This is because, compared to the revenues of larger companies, the owner-manager’s salary in a small business represents a far higher proportion of the total revenues (as shown in the chart below). As a result, it’s very difficult for a small business to afford the kind of professional staff and the specialized software that large firms take for granted.

Another factor is the difficulty of obtaining adequate financing, which can be exacerbated by the perception that small businesses are riskier than they actually are. Many small businesses are further hampered by the practice of using credit scores to determine how much money a business should receive from banks, which can be based on consumer credit rather than the specific financial health of a business.

Still, despite these challenges, small businesses provide enormous value to our society. They create meaningful jobs that are often more satisfying than positions with large, established corporations. They are rooted in the communities where they operate, giving back vitality and sustenance through a web of symbiotic relationships. They are the place where most entrepreneurs begin their careers and a source of entrepreneurship and opportunity for the people who work for them.

To honor and showcase small business, Good Company has a special series featuring a consulting firm outside Atlanta that helps other smaller firms grow; a biological dentistry practice that puts smiles back on patients’ faces in Katy, Texas; and a program management firm in Tallahassee that brings the family to work. Stay tuned to see what other stories we feature that showcase the many dimensions of small business.