Business.com
Mark Fairlie
July 18, 2025
Many of today’s consumers like to “shop small” and support neighborhood businesses to boost the local economy. However, the impact of small businesses in the United States extends far beyond the economy. We’ll explain why small businesses are so important and how they empower communities. We’ll also share how businesses can partner with communities to everyone’s benefit.
Why small businesses are so important
Aside from the economic impact, small businesses contribute much to the communities and people that they serve. Here are 10 reasons small businesses are important and how they enrich their communities across the country.
1. Small businesses create jobs.
Small businesses promote self-sufficiency in local economies and their residents by providing employment opportunities to local workers. The U.S. Chamber of Commerce’s Small Business Data Center confirms that small businesses employ nearly half of the American workforce, representing about 43.5 percent of America’s GDP.
“America’s 33.2 million small businesses (99.9 percent of all businesses in the U.S.) are frequently referenced as America’s ‘economic engine,’” said Tom Sullivan, senior vice president of Small Business Policy at the U.S. Chamber of Commerce. “That’s because small employers have created more than three in five of all the new jobs since 1995, and they innovate at 12 to 15 times the rate of their larger business competitors.”
2. Small business revenue stays in local communities.
Small businesses employ local residents, directly returning some of the money they generate to community members. Additionally, small businesses often support other local small businesses as customers or suppliers. For example, a chef at a local restaurant might stop by the neighborhood farmers’ market to purchase fresh, homegrown produce for weekly specials and menu items.
3. Small businesses spark innovation.
In recent years, large companies nationwide have adopted the concept of thinking like a startup to prioritize innovation and gain a competitive edge. These innovations from small businesses can transform neighborhoods, towns and cities.
“Small businesses … [help] communities thrive [by] driving innovation and serving needs that otherwise would likely be unmet,” said Matt Wilcox, deputy head of financial institutions group and president of digital payments at Fiserv. “[They are] engines of growth, creators of jobs, builders of communities and the manifestation of technological advancement. Small businesses drive ideas, progress and opportunity.”
4. Small businesses create opportunities for women, minorities and immigrants.
Today, more women, minorities and immigrants are pursuing their entrepreneurial dreams as a path to financial independence and prosperity. According to the U.S. Department of Commerce, minority entrepreneurs generate nearly $2 trillion in revenue annually. When these business ventures succeed, their communities reap the rewards in the form of jobs, increased tax revenue, neighborhood leadership and more.
5. Small businesses increase the tax base.
Local businesses generate local taxes, including the property taxes they pay on buildings and the sales taxes they generate from selling goods and services. This tax revenue is reinvested into the community to improve roads, fund schools and keep parks in good repair. In contrast, taxes paid to e-commerce retailers or national companies typically don’t benefit local communities.
6. Small businesses become a part of a local community’s character.
One of the most charming aspects of small towns and cities is their unique small businesses that can’t be found anywhere else. Small businesses founded and owned by local residents tend to exude the character of their surroundings. They may reflect a regional flavor, share a coastal or mountain aesthetic, or utilize local ingredients that can be harvested nearby.
Over time, these businesses often become cherished parts of their communities, valued by residents and visitors alike. “SMBs are the stores, coffee shops and restaurants that we grew up with and love,” Wilcox said. “We know the owners and people who work there, fostering a personal connection beyond mere transactions.”
7. Small businesses contribute to the local tourism economy.
Unique and interesting small businesses can attract tourists and seasonal visitors to an area. Tourists often value shops, restaurants, hotels and other businesses with a local flavor and prefer them to generic offerings they can find anywhere. Many communities often include photos and descriptions of their small businesses in their tourism marketing materials to attract visitors.
8. Small businesses are more likely to contribute to local charities and initiatives.
According to the U.S. Chamber’s Small Business Index with MetLife, most small business owners (91 percent) believe that businesses should give back to their local communities. Eighty percent of owners believed their business’s mission includes giving back to their local community.
Small businesses are often eager to participate in charitable marketing opportunities, such as sponsoring a local Little League team, contributing to a river cleanup project or volunteering for community fundraising efforts. Their sponsorships and contributions benefit the community while generating goodwill and boosting brand awareness.
9. Small businesses can help minimize carbon emissions and contribute to a community’s sustainability goals.
Small businesses often work within intrinsically sustainable business models that benefit the environment. For example, small companies typically source materials from nearby suppliers, not large vendors with national contracts, reducing transportation emissions from shipping. Additionally, restaurants that source food from local family farms can support agriculture practices more beneficial for animals and the environment than factory farms. They also utilize in-season produce instead of shipping products from thousands of miles away.
10. Small businesses require less infrastructure investment.
Small businesses don’t need as much space as large corporations. They can often utilize vacancies in existing buildings. In contrast, large companies will likely build massive new facilities that require the community to pay for new roads, sewers, utility access and other infrastructure improvements. Additionally, a large corporation often must be lured to a community with expensive tax breaks or grants that small businesses don’t need or require.