Small Companies Make a Big Impact
It’s the 50th annual National Small Business Week, and organizations, officials, and communities across the country are taking time to publically herald the many benefits America’s small companies offer the nation. As with other groups and communities that enjoy annual commemoration, America’s small businesses are an integral part of the country year round. Yet, taking time to focus on just how important small business is to the United States is worthwhile, if but only to continue directing the national attention to the big drivers of job creation, innovation and economic growth.
“Small” can be a misnomer for business. While the staff and revenue may be less than the corporate giants of the world, in the aggregate, small businesses constitute a big impact on the country. Small businesses account for 64 percent of new private sector jobs, and nearly half of all private sector employment, according to the Small Business Administration. They make up 98% of companies that export goods to the world, and bring in one-third of America’s export value. With regard to innovation, high-patenting small businesses (that is, 15 or more patents over 4 years) yield 16 times more patents per employee than larger companies. When it comes to employment and innovation, America’s small businesses are in the driver’s seat.
The federal definition of what constitutes a small business often differs from state and local definitions, and any category based only on revenue or number of employees necessarily has some gray areas. When a company exceeds the official definition by one employee or $1 of revenue, they hardly find an easier time in the mid-sized company range. If anything, America’s mid-sized companies are more challenged to grow and succeed as, unlike small businesses, there is not as much of a focused effort on supportive policies and programs.
Regardless of an “official definition,” we know a small business when we see it. These companies are not just the sponsors of the Little League baseball team or the local Fourth of July parade. They are where many of the people in this country earn a living. They provide the local products and services that fuel everyday life. They are the beating heart of the American economy. It is important to remember that every large business with a brand and product we know as well as our local sports team started out as a small enterprise. World-leading companies like Boeing, Lockheed and GE were all once small enterprises. Even the international powerhouse Wal-Mart was once just a humble storefront in Bentonville, Arkansas.
As well as providing jobs for much of the country, small companies are critical in the larger innovation system. As larger companies grow, one key element to their success can been merging and purchasing small businesses. The innovations that arise in small companies often provide the missing piece of the puzzle for a larger system. Small business success is not only measured by growth and revenue; sometimes it is achieved when they become part of a bigger enterprise.
Yet, small businesses face steep challenges on the road to success. Fully half of all new companies close within five years; only one-third make it a decade. For that reason, those on the national stage who champion smaller companies need to do more than provide lip service to the ubiquitous talking point of promoting small business. America’s political leaders must always question what the policies and programs they support do to encourage business development.
For example, there is an appropriate role for regulations; however, what are not appropriate are rules that ultimately create obstacles for small business creativity and growth. Understanding that small businesses are a binding thread in the fabric of this country, any government action that makes it tougher for small businesses to succeed moves towards unraveling what made our country the greatest economic power the world has ever seen.
During this National Small Business Week, it is good for us to pause and reflect on all the benefits we enjoy because of the entrepreneurs and small companies that keep America running. Like so many parts of the United States, however, the small business community demands more than a passing annual acknowledgment. America’s companies operate year round, and it takes a collective effort and awareness to ensure they remain open for business.