An Economic Force – The Impact of Small and Medium-sized Businesses
In 2019, the U.S. Small Business Administration recorded a total of 30.7 million small businesses in the United States. This translates to small businesses making up 99.9% of American businesses. On the other hand, medium-sized businesses are making their own economic impact. The Government of Canada found that 21,926 of all Canadian companies (or 1.9% of Canadian firms) were medium-sized businesses.
While many may have their attention on Fortune 500 companies, these statistics prove that SMEs (Small to Mid-size Enterprises) help drive the economy of any nation forward. But what are the exact contributions of small and medium-sized enterprises? In this article, we list three specific impacts and how SMEs became an economic force to be reckoned with.
A job creation engine
The rise of SMEs provided employment to 59.9 million people. The Current Population Survey reported that the United States saw an improvement in employment rate in late 2018, and it continued to rise in 2019 as shown by the 4.1% unemployment rate in February 2018 dropping down to 3.8% by February 2019.
Another statistic proved that the size of the company does not always equate to how successful the business is. For example, firms who have fewer than 20 employees experienced the largest gains, providing 1.2 million net jobs.
As an average of 543,000 businesses are started each month, one can expect that the continued rise of new SME ventures will open doors for both unemployed and underemployed people to contribute their skills.
Cultivating international trade
Santander UK, a British bank, raises the potential of small and medium-size business when it comes to exporting, stating that these firms are the new face of international trade. SCORE, a non-profit association serving small businesses, found that 97% of the United States’ exporters are SMEs. This is mainly because exporting opens opportunities for these new firms. The fact that 26% of companies which trade internationally often outperform their competitors proves this, especially because extending their products beyond their borders also means that they are tapping a larger market.
These companies can also substantially change the way society does business digitally. In a Deloitte report, businesses which take advantage of the opportunities presented by technology are five times more likely to reach new international customers.
Drivers of economic growth
JP Morgan Chase & Co. states that small businesses are an anchor of the US economy. In 2010, these budding enterprises accounted for 45% of the country’s GDP growth.
In fact, in a survey conducted by Salesforce, 86% of the respondents said that they are willing to pay more when it comes to investing in small businesses. This gives some insight into how consumers interact with SMEs as 47% of those consumers answered that they are willing to go out of their way to shop in locally-owned businesses.
Other than its role in providing employment to millions of individuals, the reason why SMEs move economies forward is mainly due to their innovativeness. Small and mid-size enterprises have a higher and more active patent activity than their larger counterparts. This is a testament to their fresh and creative ideas, which can ultimately lead to a new type of demand, brought forth to society.
Small and medium-sized businesses have made their mark on the economy. The rise of digital opportunities will only push them further forward. SMEs proved this when 85% of surveyed businesses in a Deloitte report stated that digital tools have helped their company in some way.
As the small and medium-size sector starts to become even more competitive, businesses will find ways to get ahead. One thing is for sure – these budding enterprises will continuously be a major player in any country’s economy, and they are here to stay.
Business Catalyst Masterclass
To give back to the small business community, we have developed the Business Catalyst Program to help you retrench, move your company forward, and bridge the gap from where you are today to where you want to go.
We still have a few spots left for the catalyst program. Register through this link, then once we review your application, we’ll let you know if your business qualifies for it.