If you’re thinking about starting a small business, there are many benefits that you might not be considering. Small businesses have been said to have multiple positive effects on the economy, community, and society as a whole, and these points will be explained in detail below. If you’re still not convinced that owning your own small business is the right choice for you, consider the following benefits of being your own boss.
- How Small Businesses Contribute to the Economy
- How Small Businesses Help the Community
- How Small Businesses Grow
- Why do small businesses fail?
- How Small Business Owners Pay Themselves
How Small Businesses Contribute to the Economy
You’ve probably heard that small businesses are the backbone of the American economy, but what does that really mean? While it’s true that these companies account for over 50% of all new jobs created each year, their contributions to our national economy go far beyond job creation alone. Small businesses are responsible for nearly half of our nation’s gross domestic product (GDP), so our economy would quickly grind to a halt without them. However, government assistance aimed at helping small businesses keep the lights on doesn’t stop there.
Small Business Owners Are Innovators
While big businesses spend a lot of time researching and developing new products, small businesses are more likely to launch a product or service on a whim, either because they get tired of waiting for someone else or because they have an idea that strikes them at just the right moment. These same qualities make small businesses better at turning around trends quickly. After all, they’re less bureaucratic and more able to take risks than large corporations. Small business owners also tend to hire more local workers, which helps fuel a local economy.
Many Small Businesses Are Family Owned
If you were born and raised in a certain part of town, you probably know most of your neighbors. And they probably know who you are, too. That’s because most businesses with fewer than 100 employees (about 90 percent) are family-owned or closely held. When it comes time to order office supplies, such as pens and paperclips, they’re more likely to buy from a small business in their community than from an impersonal behemoth like Staples or Office Depot. While more prominent companies can provide economies of scale through bulk purchasing and other efficiencies, there’s simply no substitute for local knowledge and customer service when it comes to ensuring that your company is buying top-quality products at competitive prices.
Small Business is the Heartbeat of Any Community
Small businesses make up more than half of all businesses in America, and they account for over half of all non-farm private-sector jobs. The Small Business Administration (SBA) defines a small business as having fewer than 500 employees. It’s not only big corporations that give communities their vibrancy. If you want your town or city to thrive and grow, it’s essential to promote entrepreneurship and its many benefits – including job creation. You never know: that barista who makes your latte in the morning could be looking for a storefront location and dreaming about opening his or her own coffee shop one day! In fact, those two words – dreaming and entrepreneurship – have always gone hand in hand.
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How Small Businesses Help the Community
Small businesses are playing an increasingly important role in the communities they serve. Small businesses are often more connected to their local community, giving them more opportunities to give back to the community in numerous ways. Whether it’s partnering with local schools to provide supplies, hiring local workers, or providing goods and services that are only available locally, there are many positive ways small businesses help communities thrive. With so many benefits to helping the community, it’s no wonder that small businesses do so much! This blog will discuss three of the most essential benefits of helping the community through small business efforts.
Small businesses help communities by creating jobs
When individuals choose to spend their money at local stores, they contribute to strengthening their community’s economy. By spending money on locally-owned businesses, you can take comfort in knowing that your hard-earned dollars are helping support other hard-working individuals in your community. Those dollars are also helping pay employees like cashiers, bakers, and carpenters—all of whom live in your neighborhood and may attend school with your children or worship alongside you at church. Supporting small businesses is one of many ways that every person can help strengthen his or her community’s economy.
Small businesses help community members save money
Small businesses usually offer lower prices than their larger counterparts. This is because they don’t have as much overhead to deal with, which means consumers can enjoy cheaper prices for items and services, such as clothing, food, and home repair. On top of low prices, small businesses also often provide better customer service to their clients. Small business owners tend to be personally invested in their company’s success since they work there every day. They will likely know a lot about a certain service or product, whereas a large corporation may outsource that information to other departments or rely on scripts given by head office employees. Knowing your company’s products inside and out is essential to providing good customer service – something many big businesses lack.
Small businesses support local organizations
Did you know that 75% of all purchases made by consumers are from local businesses? In fact, local businesses account for 64% of all sales instead of 12% by national chains. This means that small business owners have a direct impact on charitable organizations and how they’re funded. The bottom line is that if you care about your community, it’s a good idea to shop local whenever possible. Supporting local businesses will give back more to your community than a non-local store ever will!
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How Small Businesses Grow
In order to grow from a small business into a big business, you have to do the things that the big businesses do in ways that work best for you and your small business. As your business grows, it may be tempting to forget the days when you were just starting out and falling over yourself to make sales, but looking back on those days can be helpful in sustainably growing your company with lasting results. Here are some of the best practices of successful small businesses that you should incorporate into your own business growth strategy.
Study Market Demand
You may not have a business plan or a business partner, but you have to start somewhere. For a new company, it’s easiest to begin by getting inside your customers’ heads. Think about your market’s particular problems and what they really want. If you don’t know who your customer is—or what problem you can solve for them—you’ll never get started with growing your small business. Once you know exactly who needs what from you, determine how much they need it and how much they can pay for it. You also need to think about whether that need will grow over time.
The first step to growing a small business is analyzing your weaknesses. To increase productivity, you must figure out what could be better and by how much. You should begin with a comprehensive overview of your entire operation. Analyze everything from marketing campaigns to customer service strategies. Once you’ve done that, take stock of where your company needs improvement and think about ways you can fix those issues. For example, if you aren’t reaching enough customers or selling enough products, then it may be time to start hiring more staff or ramping up your advertising efforts.
Create Growth Strategies
Once you’ve identified opportunities to improve sales, it’s time to figure out what strategies you can put in place that will allow you to take advantage of those opportunities. When identifying ways to grow your business, it’s useful to start with an idea about where you want your business to be and then focus on identifying strategies that will help drive your company there. To begin brainstorming growth strategies, we recommend taking a step back and looking at all of your options. If you haven’t created a marketing plan yet (what? haven’t we told you already?), now is a good time.
Choose Marketing Channels
As a small business owner, you probably already have your strengths in mind. But, if you haven’t figured out where to focus your efforts yet, it’s time to start brainstorming. Where are your customers spending their time? Where do they hang out? The answer to these questions will help guide your decisions on where to spend marketing dollars and which social media channels you should be present on. Once you know where customers are hanging out online, it’s time to get involved! There are tons of small business opportunities that exist across each social channel.
Although they’re not strictly a necessity, partners can be valuable in helping you launch and grow your business. Whether you choose to go it alone or join forces with others, you’ll need to identify and contact people who share your interests and goals. Once you’ve found potential partners, have a frank discussion about how each of you might help drive the growth of your business. Don’t overreach by asking for more than is reasonable—you might alienate yourself from valuable allies if they feel too burdened by expectations. In some cases, partnerships dissolve amicably as new goals emerge or parties change their minds about committing themselves fully to a project. For more on partnering with others successfully, check out our comprehensive guide.
Why do small businesses fail?
A new small business owner’s biggest concern is whether they will stay in business long enough to make a profit and pay their employees on time. There are many different reasons why businesses fail. A lot of them have nothing to do with the quality of the product or service being offered, but rather with the way business owners handle finances, market their companies, and provide customer service. Here are some of the most common reasons small businesses fail that every entrepreneur should keep in mind when starting up a new company.
They don’t understand their customer
Small business owners are experts in their niche, but they often lack broad knowledge of their industry or market. That’s why it’s so important to understand your customers. What are they looking for when they make a purchase, and how can you provide it to them better than your competitors? Successful small business owners ask themselves these questions constantly and continually strive to improve their product offerings based on what they discover.
They lack focus on growth
Most successful entrepreneurs have a strong understanding of their target market, and they know how to market to that group. When a business begins to lose focus on its original niche, it risks alienating existing customers, as well as losing touch with those who might be interested in trying out your product or service. If you’re trying to start a business from scratch, remember to establish focus early on, so you don’t waste time or money. In addition, if your startup loses sight of what it does best and focuses more on what competitors are doing (or what you think will make you more money), it’s likely that your company will eventually go belly up.
They’re slow to innovate
In order to stay ahead of their competition, entrepreneurs have to stay on top of new trends and market forces. That means staying in touch with customers and their needs, but it also means being aware of new technology and changes in business practices. In today’s fast-paced world, failing to innovate quickly enough can be a death sentence for a small business. It’s no secret that large companies have more resources at their disposal—they can more easily invest in research and development, for example—but small businesses have some advantages as well: they’re quick to adapt to changing conditions and can move faster than a multinational corporation.
They’re overly optimistic about what they can accomplish
You’ve probably heard that entrepreneurs are optimists by nature. Well, that’s true. Research shows that successful entrepreneurs tend to have higher levels of confidence and more positive outlooks about their future. A new entrepreneur may underestimate how hard it is to start a business and how long it will take to make money or achieve success. When things don’t go as planned, they get discouraged and give up on their dream—or worse, they start digging themselves deeper into debt because they can’t pay their bills. If you’re thinking about starting a business, be realistic with yourself about what’s ahead and set some reasonable expectations for your new venture. Staying optimistic will help you power through challenges instead of throwing in the towel.
How Small Business Owners Pay Themselves
The more successful your small business becomes, the more you’ll face questions like How do I pay myself? or When do I pay myself? This post will give you an overview of your options and some guidelines to help you make decisions that best suit your company’s finances and your long-term growth strategy.
How small business owners pay themselves by profits
Making a profit is an important milestone for any small business owner, but there are many other reasons to celebrate. Earning a profit can help you build your business’s value, help you retain control over it, and even convince you that what you’re doing is worthwhile. You might have to pay taxes on your profits or put them toward funding future growth—but whatever you do with them, they’re yours. If there’s one way to reward yourself for all of your hard work, paying yourself by profits is it.
How small business owners pay themselves by bringing on employees
One way small business owners can pay themselves is by bringing on employees. This means they’re able to delegate certain tasks and focus more of their time on other areas of their business. Not only will an employee help bring in revenue, but it’s likely that they will also perform more of your administrative duties too. Using an outsourced virtual assistant is another great way to free up some extra time to work on what really matters (i.e., growth strategies). At first glance, hiring a few virtual assistants might seem like it would cost you more money than working for yourself; however, small business owners often overlook how much money their employees makeover time by not hiring someone outside of their company.
How small business owners pay themselves by dividends
If you have a small business and it’s profitable, then there are several ways that you can pay yourself. One of these is through dividends. Dividends are a portion of your business’ profit given to you in cash, usually on a regular basis. When you own shares in a company, they might have dividends paid out regularly so it makes sense for self-employed business owners to get paid similarly through their businesses too—as long as they’re profitable.
Other ways to pay yourself
Even if your business isn’t successful right away, you still have to take care of yourself. You can do that through other means besides taking a paycheck out of your company—like staying on unemployment. The downside is that if you take money from one source, say unemployment insurance, to pay yourself for working in your business (or for living expenses), you’ll lose access to those benefits. Another option is to use savings or investments to help pay bills and keep food on the table—but keep in mind any cash withdrawn from these sources will be taxed as income.