In the United States, small businesses create two out of every three net new jobs and have generated 65% of all new jobs over the past 17 years.1 In addition, small businesses represent 99.7% of all employer firms.2
So, it’s no wonder that small businesses are the backbone of the American economy. But what exactly is a small business?
The Small Business Administration (SBA) defines a small business as “a for-profit enterprise that is independently owned and operated and not dominant in its field.”Â3
The SBA further breaks down small businesses into two categories:
Small businesses: 500 employees or less
Very small businesses: fewer than 100 employees
Keep in mind that these are only guidelines. Some industries have different standards.
Now that we know what a small business is, let’s take a closer look at how they create jobs and grow the economy.
How do small businesses create jobs?
There are a few ways small businesses create jobs:
By starting up
When a new business opens its doors, it brings new jobs to the community. The owner, of course, will need to hire employees to help run the business. And as the business grows, it will need to hire even more employees to keep up with the demand.
As a small business grows, it will need to add more employees to keep up with the demand. This could be in the form of new stores, new products, or simply more customers.
By hiring more employees
As small businesses continue to grow, they will naturally hire more employees to keep up with the demand. This can happen organically as the business expands or through specific initiatives to add more employees.
By training employees
Many small businesses offer training programs for their employees. This helps to ensure that the employees are qualified and capable of doing their jobs. It also helps to retain employees, which is important for small businesses.
By promoting employees
As small businesses grow, they will need to promote employees to higher-level positions. This creates new jobs and helps to retain employees.
By reinvesting in the business
Many small businesses reinvest their profits back into the business. This could be in the form of new equipment, new stores, or simply more inventory. This reinvestment helps to create jobs and grow the economy.
By doing business with other small businesses
When small businesses do business with other small businesses, it helps to create jobs and grow the economy. This is because the money that is spent by one small business will likely be recirculated back into the economy through the other small businesses that they do business with.
By supporting the community
Many small businesses support their local community in a variety of ways. This could be through donations, sponsorships, or simply by being active in the community. This support helps to create jobs and grow the economy.
By paying taxes
All businesses, including small businesses, pay taxes. These taxes help to support the government and the various services that it provides. This, in turn, helps to create jobs and grow the economy.