Small businesses form the backbone of our economy and job market. And over the past five years, they have been whipsawed by the pandemic, the rush of recovery funding that followed, sudden shifts in our industrial support and trade policies, and now a spike in fuel prices and huge economic uncertainties tied to global conflicts.
The resilience and success of our nation’s small businesses have never been more important, and that’s why it’s a big, missed opportunity that we don’t invest smarter in what works to support them: building local small business ecosystems to spark and accelerate entrepreneurial growth. Thankfully, this is a fixable problem, even as resources are constrained—and local leaders, especially at the county level, are showing the way.
Small business matters, in more and less visible ways
With more than 36 million firms employing over 59 million workers, small businesses account for 99.9% of all U.S. businesses and almost half of private sector employment.
Nowhere is this more visible than in the communities that make up the real economy that most Americans experience day to day—on Main Street, not Wall Street. But small businesses, and the local “ecosystems” in which they succeed or fail, also play a unique role in economic transformation and growth. They are a primary source of net new job creation, which happens when firms grow, as well as a uniquely important pathway to wealth creation for their owners, a source of innovation in products and services, and a cornerstone of strong communities. Rigorous analysesconsistently show that a dollar spent at a locally owned small business is much more likely to recirculate in a community than a dollar spent, say, at a chain store. Small businesses are the most likely to spend locally, employ local people, and model pride of place. They are the fabric and the weave.
We now have an opportunity to energize local places in ways that can restart the nation’s sluggish job market and expand the ownership economy, empowering millions of entrepreneurs and making them more resilient to shocks. But only if we’re clear-eyed about how inadequate our traditional approach to small business development really is.
The urgency of this moment
Over the past several years, trillions of dollars in public and private investment have been committed to expand and modernize energy, transportation, and other critical infrastructure, as well as manufacturing and other strategic sectors. If one includes massive capital investment in data centers to support AI deployment, that figure is even greater. Crucially, many of these investments are anchored in domestic supply chains and “Made in America” commitments, creating significant new demand for what small businesses (as well as larger incumbent firms) can offer.
Small businesses and local economies don’t entirely depend on those “strategic sectors” for growth, but making the most of them while also enabling as many promising Main Street businesses to survive and thrive is essential. And the success of those Main Street businesses depends in part on the success of the strategic, export-oriented enterprises that act as the engines of a regional economy.
The key lies in how that range of small businesses get the support they need and how communities build high-functioning small business ecosystems that collectively support the creation, survival, and growth of small businesses in a given place.
Developing an effective small business ecosystem is very different from America’s fragmented approach, wherein time-starved small business owners must navigate a maze of well-intended but disconnected (and sometimes irrelevant) “assistance” programs.
Looking ahead
Building a strong small business ecosystem is foundational to transforming local economies for growth as well as for resilience to shocks. Doing that at scale will require prioritization, collaboration, patience, and innovation, as these examples show. But above all, it requires seeing small business not as peripheral to growth, but as one of its most important drivers—and at the same time recognizing how inadequate our traditional approach to small business support has been.
Read the full article by Charisse Conanan Johnson and Xavier de Souza Briggs / Brookings
