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Why are small businesses important for the economy?

Why are small businesses important for the economy

It goes without saying that small businesses promote and encourage local entrepreneurship. But more than that, this article continues that, “Small businesses provide opportunities for entrepreneurs, jobs for neighbours and gathering places for communities. They’re rooted in the landscape where they grow, and they give back vitality and sustenance.” For many, small businesses are the local corner shops, or the homemade brownie side hustles the teenagers down the road are selling, but Pineapple Payments reports that small businesses are in fact any business with less than 500 employees. In this case, almost every business can begin to sound like a small business, from restaurants to marketing agencies. The impact of small businesses can then be considered major as they are continuously creating jobs and supporting other small businesses as vendors for products or services.

So, what makes small businesses so important

So, what makes small businesses so important?

Chron reports that a major reason why small businesses matter to local communities is the emotional attachment that they have to buying and selling with neighbours and friends.

This was more than true during the COVID-19 pandemic as we saw hoards of people looking to support local, small businesses instead of opting for the bigger chain stores around. Consumerism increased and so did the expansion of small business ventures throughout the world as people sought to make other

streams of income after being made redundant due to the pandemic (read more about that here). When looking at this, we can begin to understand the economic benefits of shopping locally are also attributed to stabilising the economy and ensuring people are paid, fed and healthy. Small businesses are often the only ones that can survive in towns and villages with a shrinking population the Chron report suggests. Small businesses in large cities however, are more likely to have a greater selection of products or to offer more unique or customised customer experiences.

small businesses so important

In summary then, we can pinpoint the importance of small businesses as follows:

1. Job creation for the local population and keeping the cycle of money flowing through the local economy

With small businesses growing and continuing to grow, especially with the easy access to wider audiences and the support from big tech like Instagram’s “support small business” button and Facebook’s marketplace, we can see the expansion of businesses occur quickly once a business has reached a wide enough audience or market. This in turn creates new job opportunities for locals who are unemployed or in some contexts, looking for part-time work. Further, when small businesses expand, they tend to take their peers with them. It’s common that small businesses will deal with other small businesses that can offer services and goods, creating a cyclic local economy.

Job creation for the local population and keeping the cycle of money flowing through the local economy

2. Having the niche and the will to make the consumer experience personalised and therefore more enjoyable and engaging.

What makes small businesses a lot more appealing and valuable than corporations are the minute attention to detail they give to the delivery of their service or product.

Personalisation of a service or product can make the experience of supporting a small business feel so much better. Consumers love to feel valued and important, and this is something in particular small businesses just seem to get right. From customer service to packaging to extra accommodations, small businesses are typically everyone’s favourite before having to deal with big corporates.

Having the niche and the will to make the consumer experience personalised and therefore more enjoyable and engaging.

Conclusion

Small businesses are important for the economy because it is what keeps the flow of money going. In the face of the COVID pandemic, we saw how small businesses reached record-breaking new feats in growth and expansion, despite many major businesses closing down. This is likely owed to the big campaign that was driven globally to support small businesses. They contribute massively to their local economies and without them, if an entire population depends solely on big corporations for jobs, the redundancy levels would have seen a way worse scenario for millions of families around the world. It’s in everyone’s best interest to support small businesses!

Small businesses are important for the economy

2020 could be the year of the entrepreneur in South Africa

2020 could be the year of the entrepreneur in South Africa

South Africa is home to many aspiring entrepreneurs and with the unemployment rate currently sitting at 29%, it may just be the answer to South Africa’s shrinking economy. Never before has there been such a dire need for entrepreneurs to positively impact and transform the community.

Small business represents the greatest opportunity this country has to grow the tax base and provide employment. In an effort to assist small business an economic policy paper titled Transformation, Inclusive Growth and Competitiveness: Towards an Economic Strategy for South Africa has been released and proposes the following steps to promote growth in small, micro and medium enterprises (SMMEs)

  • Reducing red tape by 25% over 5 years
  • Requiring government to pay interest on late payments to small businesses
  • Consolidating existing funds for SMME support into a single fund with a clearly defined mandate.
  • The creation of a subcontracting ombud

What makes a successful entrepreneur?

It takes a particular kind of person to become an entrepreneur, someone who is willing to step out of their comfort zone and take a calculated risk. Here are some characteristics often used to describe successful entrepreneurs:

  • Creative: Every business starts with an idea and, to be successful, that idea needs to be unique and creative.
  • Optimistic: Do you see the glass as half empty or half full? Entrepreneurs need to see it as half full in order to thrive.
  • Flexible: An entrepreneur needs to be able to adapt to different situations. For instance, if a project requires that they learn a new skill, they do it.
  • Self-motivated: Steve Jobs, the founder of Apple, once said: “I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.” A successful entrepreneur needs to be self-motivated and willing to put in the effort required to launch and run a successful new business.
  • Resourceful: Businesspeople don’t run away from a challenge – they face it head-on and find the most effective and creative way to solve it.
  • Decisive: Lastly, entrepreneurs need to be decisive, they don’t have the option to procrastinate. They need to know what needs to be done and how to do it without hesitation.

Entrepreneurship in South Africa – What the future holds.

According to the Allan Gray Orbis Foundation, entrepreneurship in South Africa is failing in one of the key areas where it is intended (and where it is sorely needed) to have the most impact: job creation. Young South African entrepreneurs are not receiving the support needed to be successful in the industry. Due to this lack of support, only 15% of our start-ups become successful.

One of the reasons for this failure may the gap between skills and ideas. Our entrepreneurs may be able to come up with fantastic business ideas, but they lack the knowledge and skills needed to develop those ideas and turn them into reality. On the other hand, it may be the other way around. While a solid understanding of entrepreneurship is vital, knowing which industries to focus on will increase your chances of being successful.

The top 5 industries in which small businesses are likely to succeed in 2020 are:

  • Agriculture
  • Manufacturing
  • Tourism
  • Information Technology (IT)
  • Infrastructure

Could 2020 be the you start your own business?

Starting a business isn’t for the faint of heart. It takes hard work, patience, and a solid understanding of business strategy to come up with a unique idea and turn it into a successful business plan. If you think you have what it takes to be the next Bill Gates or Oprah Winfrey, sign up for one of our business qualifications to make sure your business is built on a solid foundation. For more information about the courses we offer visit our website, or contact us at 0861 466 476 to speak to one of our skilled consultants.