How Small Business Is The Backbone Of The Economy?

How Small Business Is The Backbone Of The Economy?

Hanna Flores
July 30, 2021

In the industrial world, small businesses don’t get a lot of attention. Small and medium enterprises (SME) have developed as a significant and active component of the country's economy in the previous decade. Small companies are the lifeblood of the economy and, as such, serve as its backbone. Small companies not only keep the economy going, but they also lead the way in innovation. Small businesses generate sixteen times the number of new patents per employee as major patenting enterprises. A substantial percentage of these patents are filed by small IT businesses with less than five workers. Furthermore, small enterprises represent the variety of the global population in a manner that giant organizations’ workforce base does not.

How Small Business Has Become The Backbone Of The Economy?

Despite offering an enormous amount of advantages to the economy, small firms do not receive the same level of government backing as major firms. Small businesses are not eligible for the same tax incentives as bigger enterprises. 

Small enterprises are often not eligible for the same municipal and state subsidies for things like manufacturing facilities and development research. In times of financial distress, large corporations can get federal bailout funds, but small enterprises do not have this choice. 

Despite the odds being stacked against them, small businesses continue to prosper. They contribute to local economies by providing jobs, purchasing local goods, paying sales and property taxes, and utilizing local suppliers and support services. Many factors contribute to the increasing rise of SMEs as the economy's backbone. 

1. Emerging new products and business

When we look at historical statistics, we can see how SMEs, particularly in tier II and III cities, had limited items and services to provide to clients. However, the sector is rapidly adopting industrial and commercial concepts due to its rapid growth. 

They are no longer confined to just one service or product but are now developing a number of them. If given the proper assistance, this sector has the ability to spread industrial expansion across the country.

2. Employee Opportunities

Most SMEs have created work possibilities for millions of people by expanding their services and goods on a regular basis. Many SMEs and their employees are at risk as a result of the current epidemic. However, as many nations gradually lift the lockdown restrictions, we will soon see a return to normalcy in the SME workplace.

3. GDP Contribution

Despite the fact that the SME sector faces several hurdles, its commitment to daily growth is admirable. According to a government study, about 36 million SMEs currently generate 80 million job possibilities, accounting for 8% of the country's GDP, 45 percent of overall industrial output, and 40 percent of total exports.

4. Acceptance Of Digitization And Technology

Technology advancements and digitization acceptance have aided SMEs in expanding their worldwide reach. From their social media presence to online company advertising, the industry has benefited by getting more clients and income. 

This year, the industry saw a 60 percent increase in business thanks to mobile applications, indicating that SMEs had embraced technology successfully. The transition from offline to online has opened up new opportunities for this industry, such as the recently launched digital payment mechanism.

 Providing clients with digital payment options, from card payments to QR codes, has considerably aided small and medium-sized company owners in growing their businesses.

5. Industrialization Of Rural And Backward Areas

Small and medium-sized industries, in addition to metropolitan regions, have made significant contributions to the expansion of rural communities in many regions of the world. Various industries have been formed in tier II and III of the country as a result of their presence and ongoing adoption of new inventive concepts. 

SMEs aid tribal people in disadvantaged regions by promoting businesses like handloom, agriculture, and tea, among others. In this approach, SMEs also contribute to the reduction of regional imbalances.

6. SMEs And the Millennial

With a 47 percent share of the working-age population, millennials are the largest wage earners in the world and are becoming important drivers of product and service demand. They have a significant impact on the consumer base of all firms. 

As a result, SMEs are choosing to cater to this segment, which has a completely different attitude and point of view, which is proving to be a significant milestone for the SME industry.

Final Thoughts

Small firms are also at the forefront of technological advancements and new product development. Despite the fact that small firms are growing at a slower rate due to credit problems, this imbalance has not tipped the scales. Realities are facts, and small business remains the economy's backbone.

Hanna Flores is a passionate blogger. She loves to share her thoughts, ideas, and experiences with the world through blogging. Hanna Flores is associated with WorthyToShare.

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