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10 Ways Small Businesses Benefit the Local Community

by Paul Nugent

At some point in time, you’ve likely seen a statistic or statement by a politician or economist stating the importance of small business to local communities.

While small businesses generate new jobs and, according to the Small Business Administration (SBA), employ more than half of the working class in the United States, they’re also a valuable asset to the local community. Here are 10 ways that small businesses make a profound local impact:

1. Community Identity

Take a stroll down Main Street and you’ll likely notice that your community has its own unique character and charm. From the mom-and-pop shop, the local CPA and dog grooming business, to an antiques emporium, coffee shop, yoga studio and beyond, small businesses contribute to a community’s identity. Many municipalities and tourism boards have prioritized preserving the unique character a vibrant small business community creates– transforming that character into an advantage.

2. Community Involvement

Small business owners are an integral part of the communities in which they live and work. Thus, they tend to be cognizant of how their decisions may impact their neighbors. In addition, local small business entrepreneurs tend to be involved in the community. For instance, they may sponsor local Little League teams, donate to the city’s homeless shelter, join the chamber of commerce, participate in community charity events, or contribute to a local non-profit organization. It’s also not unheard of for successful business owners to guest lecture at the local community college, technical institute, or small business center.


3. Community Health

In addition to contributing to the local community’s unique identity and being involved locally, small business owners help to build a sense of community. Their businesses tend to be people businesses. Small business owners are more likely to build personal relationships with their customers, knowing many of them by name. When was the last time you walked into a large chain store and were greeted by name?

Many small business owners band together, forming casual or formal relationships, such as a merchant’s association or one-on-one counseling and mentoring relationships.

These relationships leverage the expertise of the participants to contribute to the business community’s long-term success.They are also often a key tool for engendering goodwill between business owners, so that as foot traffic to one business increases, other nearby businesses benefit through increased exposure and word-of-mouth referrals.

4. Environmental Benefits

Pedestrian-friendly town centers have their own unique vibe — and demonstrable environmental benefits. For example, small businesses clustered near residential areas may reduce automobile use and traffic congestion, resulting in better air quality and less urban sprawl.

In a research report by the United States Environmental Protection Agency they refer to compact, walkable downtown centers as smart growth places, noting “that business that locate in smart growth places can help protect environmental resources—for example, by reducing air pollution from vehicles by encouraging walking, bicycling, or taking transit; building more compactly to protect ecologically sensitive land; or incorporating natural ways of collecting and filtering stormwater runoff.”

The report also notes that smart growth places, in turn, deliver significant economic advantages to businesses, including:

  • Increased productivity and innovation

  • Improved ability to compete for labor

  • Stronger retail sales

You can learn more about Smart Growth by visiting the EPA’s website.

5. Increasing the Tax Base

When local residents shop at small businesses within their communities, their tax dollars stay within the local economy,

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helping to improve their community as a result. Likewise, local small businesses tend to buy locally as well, pumping more of their profits back into the community than their chain store counterparts, helping with economic development.​

6. Local Jobs

Small businesses are job creators, and most of those jobs are local jobs. Rather than having to commute to another city, employees work closer to home. Supporting local businesses also helps your fellow community members who work at them. When a community has a vibrant commercial center, it also creates ample opportunities for these workers to shop at other local small businesses. They grab lunch or dinner from local restaurants, run errands on their break, and grab drinks from local bars. This keeps money local and further creates a tight-knit community vibe.

7. Entrepreneurship

Small businesses are the product of the business owner’s entrepreneurial spirit. By starting a small business, the business owner is taking charge of his or her future. Entrepreneurship fuels America’s economic innovation and prosperity and serves as a key means for families to move out of low-wage jobs and into the middle class.

In a bid to further invest in local job creation some communities have gone so far as to create a small business development center that teaches entrepreneurial skills to the local populace. There may even be special arrangements with a community bank set up to provide would-be entrepreneurs with a small business loan to get their operation up and running. The goal with all of these initiatives is to inspire entrepreneurship and encourage continued small business development in the local community.

Smiling Young Businessman

8. Innovation and Competition

Small businesses, like any business, need to stand out from the crowd in order to survive. They must serve a legitimate need in the community and do it better than their competitors. Having multiple small businesses all striving to be unique, innovative, and better can result in a healthy marketplace and well-served consumers.

9. Less Infrastructure and Low Maintenance

Compared to shopping malls and chain stores, local shops tend to require fewer public services and less infrastructure. While a new music store owner may require a business license and occupancy permit, the process of opening a shop is much less demanding on the city planning department than building a new department store would be.

10. Diverse, Locally Made Products and Services

One-of-a-kind and locally made products can attract customers to a community, bolstering tourism and contributing to the local vibe. Locally made goods are also attractive to residents who want to minimize their carbon footprints, support local businesses, and keep their tax dollars close to home.

These are just a few examples that describe the importance of small business to our local communities. Supporting small businesses isn’t just about shopping on Small Business Saturday. These establishments benefit our local economy, personal relationships and help build the community. So next time you’re considering heading to a large chain store, remember local matters.

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