Running A Business

6 Ways Starting a Small Business Can Help the Economy

May 30, 2020 • 4 min read
Woman packing product for her new small business
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      Do you dream about starting your own company? Do you create business plans and product lines in your head, wishing for the day when you can quit your job and create something of your own? 

      Starting a small business isn’t just a dream that benefits you—it’s a step forward for your community. Small businesses benefit the local economy as a whole, even people who aren’t customers or employees. 

      Consider these 6 ways starting a local business helps the economy and why your dream of launching a business could have a positive ripple effect. 

      1. You employ local workers.

      The most visible benefit of opening a small business is the employment opportunities you create. Even taking on a few employees part-time can help them pay rent, cover basic expenses, and sustain themselves with a reliable income. 

      The coronavirus saw many talented people lose income through furloughs, layoffs, and pay cuts. Experts expect to approach the 25% unemployment rate that we saw during the Great Depression.

      By launching your business, you can help mitigate the unemployment levels and provide much-needed financial stability. Moreover, employing others will lessen the dependency on state programs (like unemployment benefits or food stamps), allowing your government to help others.  

      2. You create job vacancies in other companies.

      Even if you don’t hire other employees and only run the business yourself, you can still create vacancies at other companies. The full-time job you leave to start your business will likely need to rehire for your position. The vendors that you buy from and the marketing agencies you partner with may need to expand their team to accommodate you and other clients like you. 

      Small businesses opening means more people are getting hired across the board, beyond just your company.

      3. The money you earn stays in the community.

      When a large chain like Starbucks, Walmart, or Uber Eats opens in a community, a portion of the profits leave the city (likely the state) and contribute to corporate earnings. While local residents certainly earn salaries by working for these companies, most of the money doesn’t stay in the area. 

      Consider Uber Eats, which typically takes a 30% fee on most restaurant orders. Part of that money goes toward paying the driver, but most of it goes to Uber’s shareholders. 

      However, if a local business hires a few drivers and sets up its own delivery policy, it can provide the same service to customers while keeping 100% of the profits locally.

      The money earned by your small business goes back into the community. It is used to support local restaurants, builds up regional farmers, and gets donated to small nonprofits. Your dollar can stretch much further when it is spent locally because it’s compounded across partners, vendors, and employees.  

      4. You contribute to local taxes.

      When your customers spend money at your business, as opposed to a large corporation, they are investing in their communities through income and sales tax. The taxes you pay will support local schools, help improve the roads, allow the city to create parks and other community areas, and fund social service programs. 

      State and local tax revenues account for roughly 9% of GDP—so it has a significant effect on your local government’s budget. 

      By giving residents an option instead of Amazon or other e-commerce vendors, you can help your local government fund important improvements in your community.

      5. You make your city a better place to live.

      Local businesses are the lifeblood of communities. A dentist keeps teeth white and people smiling. A restaurant owner keeps residents happy and full. These small businesses aren’t just providing goods and services—they’re part of the ecosystem that is your town. 

      Small businesses are what make communities interesting. They are what attract people to live there. Your business, along with others in the area, will bring more residents to your town, attract tourists (and the money they spend on vacations), and encourage large-scale job creators to move in. 

      6. You help the environment.

      Did you know that buying from a local business also means going green? Shipping items from foreign countries or across the US has a significant carbon footprint. 

      According to Mike Scott, a business and sustainability expert, “The shipping industry burns the world’s dirtiest fuel to move cargoes and passengers around the world [and] is one of the biggest contributors to climate change.”

      If you can source items locally and customers can buy them from your small business, then you and your customers can both reduce your carbon footprints. You can cut down on emissions to make the environment healthier and the air cleaner.

      Everyone benefits from local businesses in your area, from kids enjoying the fresh air in parks provided by tax dollars to your employees who rely on you for a paycheck. Keep these benefits in mind as you begin planning your small business. If you do decide to take the next step and launch a business, consider a small business loan to help you get up and running.

      About the author
      Derek Miller

      Derek Miller is the CMO of Smack Apparel, the content guru at, the co-founder of Lofty Llama, and a marketing consultant for small businesses. He specializes in entrepreneurship, small business, and digital marketing, and his work has been featured in sites like Entrepreneur, GoDaddy,, and StartupCamp.

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