- Small businesses are the lifeblood of the US economy and account for 99.7% of all employers.
- Small businesses work with larger enterprises as vendors, customers, competitors or partners.
- Large businesses can learn from small business ingenuity, innovation, agile management, customer service, workplace culture and diversity.
Small businesses are often viewed as small people, but they actually make up the majority of the US economy. As a small business owner, you must know the value of your business and how you impact the people around you – including large companies.
According to the US Small Business Administration (SBA), small businesses account for 99.7% of companies with paid employees, and more than a third have known US export values. What’s more, from 2000 to 2017, small businesses accounted for more than 65% of net job creation.
With such a large footprint in the US economy, it is clear that small businesses are the backbone of America.
Why are small businesses important?
Small businesses are important for many reasons – job creation, exports, innovation – but perhaps their biggest impact is on their local communities. Leslie Hasler, a small business scaling strategist, explains how successful small businesses leverage their resources within their communities.
“As small businesses continue to grow, their impact on the economy is strengthened as they hire more people and form more relationships with other small businesses and nonprofits, creating an ecosystem of personal connections. Weave the tantra,” Hasler told Business News Daily. “Today’s small business owner is concerned not only about their individual success, but the success of their team and their communities.”
In fact, the AMEX 2018 Small Business Economic Impact Study found that approximately 67% of every dollar spent on a small business lives in the local community. This cycle accelerates the economy.
Why is the presence of small businesses important to large businesses?
Although it may seem like large companies have the power, small businesses are an important element in their success. Loomly CEO Thibaud Clement lists five ways that small businesses can represent significant opportunities for larger businesses.
- Vendors: Small businesses can provide solutions to specific needs or edge cases that larger vendors do not yet provide. For example, this is often true when an emerging tech startup closes a deal with a Fortune 500 company.
- Customer: There were more than 30 million small businesses in the US in 2015, so it’s no surprise that small businesses represent a significant portion of the total addressable market or significant growth potential of many large businesses.
- Competitors: Small businesses can indicate emerging trends and needs for larger businesses.
- Partners: Small businesses can provide synergy to large businesses by mixing their respective offerings and providing unparalleled value to customers.
- Acquisition: In some cases, a smaller business complements a larger business’s existing offering so well that it makes business sense for the latter to acquire the former.
Without small businesses, large companies would not have been able to thrive in their own way. Small businesses provide many much-needed opportunities that cannot be overlooked.
How do small businesses affect large businesses?
Small businesses affect large enterprises in many ways. For example, Hustler said that many large businesses learn from the ingenuity, innovation and agile management of a small business. Since large businesses are often blocked by red tape, they watch small business trends in real time to see how the market is operating efficiently. They then use those pivots to make data-driven decisions.
“Since small businesses are more agile than larger businesses, the decision-making process is much faster,” Hasler said. “This means that small businesses can test new technologies, processes, systems, and marketing methods much more quickly than larger businesses.”
In addition to leading innovation, Boldhaus CEO Angelique Rivers said small businesses act as competition for larger businesses in the war for talent, which is affecting workplace culture and standards of diversity.
“Small companies are able to easily create the workplace cultures and work-life integration programs that employees are looking for today,” Revers said. “But I would argue that it is good for large businesses, because it is pushing them to do better on diversity, leadership programs, wellness and more.”
What are the advantages of small businesses over large businesses?
Because of the strength and resources, large corporations have many advantages over small businesses; However, the opposite statement can also be made. For example, small businesses benefit from higher limits for risk tolerance and speed. They can freely innovate and change as needed, as they are not blocked by the many protocols, guidelines, office politics and management that hinder large businesses.
Additionally, Clement said that small businesses typically benefit from fewer legal regulations. “While all businesses must comply with the law, some specific laws apply differently depending on the size of the business, usually with additional requirements for larger businesses than for smaller businesses. This is especially true. When it comes to human resources, when specific responsibilities apply, a company grows to more than 20, 50 or 500 employees.”
Since small businesses usually work closely within their local communities, they have the ability to better understand the needs of their customers.
“The biggest advantage — and the one we’re often cited by corporate clients — is that small businesses tend to be hyper-responsive to their needs,” Revers said. “They can turn a dime, and in today’s world, agility is everything.”
In addition to keeping a finger on the pulse of what consumers want and adjusting their strategies accordingly, small businesses provide a more personalized experience for their existing and potential customers. This is important, as consumers are increasingly demanding personalized products and services.
How can small businesses work successfully with large businesses?
Small business owners should not fear large corporations, and vice versa. Both can work together; However, small business owners need to be aware of a few things when dealing with large enterprises.
Clement said larger businesses tend to have more internal processes and policies, which come with deadlines to honor, rules to follow, and requirements to be met. To counter this, he listed three strengths that small businesses need to be successful when working with corporate clients.
- Adaptability: Small businesses need to be able to make changes to products and services to meet the specifications required of their customers.
- Legal Expertise: To limit liability and protect their interests, small business owners need to consult with legal experts before signing contracts.
- Runway: To account for the longer sales cycles and payment schedules that larger businesses have, smaller businesses may need access to additional working capital to keep them afloat while they wait for payment. [Read related article: Small Business Financing Options Without a Traditional Bank]
Small companies have the potential to thrive in today’s market, as long as they remain vigilant. They are the lifeblood of the US economy and must use their resources and size to their advantage.
“There are more opportunities for businesses, both small and large, to flourish cooperatively in a competitive manner as well,” Hasler said. “It will be the continuing intent of both sides to see that the symbiotic relationship of today continues to flourish.”