How Small Businesses Impact the Local Economy

Most people underestimate small businesses, deeming that their value and contribution to the local economy is meager at best. However, the truth is quite the opposite. Despite their modest scale, small businesses have an enormous impact on both the local and national economies. How, you might ask? Find out below!

Boosted Employment Rate

Among the most visible benefits small businesses have on the local economy is increased employment and income. Building, financing, and cultivating small businesses creates new job opportunities that raises the number of employed individuals within the local community. This in turn influences other standard-of-living factors like home foreclosure rates, disposable income, and what-not. Small businesses also have a knack for stimulating informal word-of-mouth advertising among community members (assuming the business treats its employees well), further enhancing its reputation.

Increased Tax Revenues

Local economies also benefit from small businesses from the tax paid by the latter. These government dues include income taxes, property taxes, and employment taxes, among others. By supporting and even lending money to help start local businesses, governments would be able to raise the funds necessary to improve public services (i.e, repair roads, build schools, etc.).

Better Access to Other Services

Aside from indirectly improving public services, the presence of small and startup businesses can make other forms of services available and accessible. For example, by giving the go signal to an entrepreneur to build a modest mall with a cinema to its area, local governments would be able to provide their constituents with more entertainment options.

Political Advantages

Also, if local governments allow small businesses to build strong ties with the community, they can help the former undertake more community-focused political actions. For one thing, small enterprises can help provide additional funding should the local government have need to organize campaigns to introduce or revise laws. Well-connected businesses can also help promote political candidates, even convincing them to make speeches in this or that area.

Cultivated Customer Loyalty

Lastly, good small businesses have a tendency to cultivate a loyal customer base in the community. This not only benefits them, but the local government as well. That’s because thriving businesses can create a sense of financial sustainability that can help the economy get through tough times.


As you can see, small businesses and the local economy have a symbiotic relationship which benefits both parties. So if you want to make a positive impact on your community, the best way to start is by opening up your own business.