10 Ways Small Businesses Benefit Their Local Communities

Imagine your hometown or local community. Go to the main street or shopping district in your mind. Now imagine it without any small businesses. Instantly, the area loses everything that makes it unique and brings charm.

Small businesses provide character and individuality to a community. It is neighbors helping neighbors ― friends helping friends. However, small businesses are more than that. They benefit their local communities in many concrete, quantifiable ways.

Small businesses are the backbone of their local communities. More specifically, if you spend $100 at a local business, roughly $68 stays within your local economy.

Create a Unique Community Identity

Locally owned restaurants reflect the fresh foods of different regions. For instance, local farm-to-table establishments showcase fresh vegetables, fruits, and locally raised meats and game. These places lend a distinct character to their communities, showcasing the chef and owner’s unique appreciation for the area. Small local businesses, from shops to professional services, reflect the personality of a town.

Walking down a row of businesses downtown creates an opportunity for visitors to explore the community, getting a sense of its values and identity. From a cozy coffee shop to the banking, legal, and municipal services that are necessary for daily life, walkable local business enclaves invite shoppers to stay longer and interact with their friends and neighbors. A thriving shopping district creates an impression of vitality and wealth, producing a positive impression of the community overall.

Greater Community Involvement of Business Owners

Volunteer work, charitable donations, or participating in community festivals and events are all common for small business owners. You may see a local car service sponsoring a youth sports team or a group of downtown merchants organizing a community trash pick-up day. 52% of small business owners donate to charity, and of those that donate, 90% donate to local causes.

Small business owners live and work in their communities, taking pride in making their towns a little nicer. Building the reputation of your small business through volunteer work and community involvement, no matter what goods or services you’re providing, may be the most effective advertising that you can do.

Fostering a climate that encourages small businesses isn’t just about donations. Sometimes, quality time and passing along knowledge can build up communities just as much. Some small business owners may guest lecture at the local community colleges or high schools, fueling a new generation of entrepreneurs.

Increase Community Economic Health

Local businesses tend to support other local businesses. An area eatery may need cleaning services, legal assistance, or an accountant to reconcile bills and process payroll. Many times, a localized company will deliberately patronize other local businesses to create a thriving local economy. Bolstering sales of their friends and neighbors creates strong community bonds and keeps money in the community, instead of sending it to corporate shareholders.

Shopping local also means creating more jobs in the community. These local workers will spend their money in town, promoting the economic cycle. Additionally, employees of small businesses tend to be happier ―70% of small business employees reported their happiness level to be a 5 or higher on a scale of 1 to 10.

Need more evidence of the benefits of working for a small business?

More small businesses, from coffee shops to bowling alleys, keep a community’s economy more sustainable and less at the whims of national trends. Small business spending creates what’s known as a “multiplier effect,” and it’s vital to creating vibrant, healthy communities.

Promote Environmental Friendliness

Many locally owned businesses are part of an overall downtown revitalization process. Older downtown buildings have been remodeled and repurposed for different businesses, and the structures themselves don’t typically lend themselves to a big box retailer occupant. These smart growth places also reduce environmental damage from the new building projects, especially multi-acre corporate warehouse stores with enormous parking lots. A compact building can also help protect ecologically sensitive areas of the community and reduce urban blight common in downtown areas where shopping malls have taken over.

The Environmental Protection Agency (EPA) has reported that clusters of small businesses in a walkable area, or near residential areas, may reduce car usage and encourage biking and walking for shoppers. Areas of the city designed for walking and outdoor shopping help reduce emissions from vehicles, improving the air quality. Traffic congestion is lessened, making the streets safer and a better experience for those driving in the community.

Small business owners looking for a storefront can take advantage of older, historic buildings that give a sense of charm and uniqueness to their shop. Additionally, 66.3% of small business owners use recycled materials. Protecting the environmental health of your community is an indirect way that small businesses can improve their towns.

Increase Local Tax Base

Local businesses pay local taxes, bolstering the city revenue available for improvements to roads, schools, and area green spaces. When shoppers spend their money locally, the taxes they pay benefit their community and better their own lives. Shopping online, for example, may not keep tax revenue local.

Small business owners also spend their money locally a majority of the time. The taxes that they pay for raw materials to create their products help bolster the city’s economic health. As a small business owner, you can do your part by supporting fellow small business owners. Mixed-use downtown areas tend to have a greater return than sprawling big-box shopping centers — in some areas, hundreds of times more.

Maintaining the infrastructure that sprawling suburbs require, and adding developments of strip malls and warehouse stores can actually tax the resources of a city. Downtown areas, especially those that have the structure to create live-work-play environments, already have city infrastructure, and as a result, wouldn’t strain city budgets with development.

Create Local Jobs

According to the U.S. Small Business Administration’s August 2017 Small Business Quarterly Bulletin, small businesses have created two out of every three net new jobs since 2014. This is more than most people would think, but every local job that’s created means that more people are able to stay in their community. An overwhelming majority of people leave small towns and mid-sized cities for better job opportunities. A city with a thriving small business environment encourages people to stay, making it economically feasible to do so.

Local workers may shop locally, as well, maintaining the cash flow throughout a town. Rather than commuting to a neighboring city, people are able to work closer to home, improving the quality of life for many. Many people choose to shop and dine near their workplace; for those working in their own town, this may mean running errands in local shops, grabbing lunch or after-work drinks at a local pub or eatery, and patronizing local shops for clothing or hobby supplies. Money stays local and the community vibe becomes tight-knit.

Encourage Entrepreneurship

A community with successful small businesses inspires others to take that leap and develop their own passion. Starting a small business means that the owner is taking charge of their future through innovation and prosperity. Other like-minded individuals may follow suit, seeing the success of small businesses. In towns where business regulations and tax credits are beneficial to small businesses, it’s easier for those with drive and perseverance to succeed.

Small business development can also be part of a local high school or community college curriculum. This may help students who want to take charge of their own destiny have the tools needed to succeed.

Community credit unions often have favorable loan terms to small businesses starting in the community; these are another locally owned business and part of the local business cycle. For those small business leaders in the community, fostering entrepreneurial activities helps develop a climate favorable to small businesses.

Innovation and Healthy Competition

Many small businesses start with a new approach to a common problem, whether by providing services to help others or in developing new products. Innovation is a hallmark of a successful local enterprise, and healthy competition drives the marketplace, improving the goods and services that small businesses offer and ultimately benefiting shoppers. In a city’s economy, buyers with choices force business owners to stand out with better service or a better product.

As small businesses strive to make themselves unique, the community itself develops more personality and character. Locally owned businesses have a personal relationship with their clientele. It’s not unusual to see a small business owner serving customers at the counter or performing the professional services themselves. With this kind of one-on-one interaction, owners can get open and honest feedback directly from their customers and make changes quickly, responding to the demands of their niche market. Engaging with your customers on a regular basis can give you valuable insight into the shopping experience and your customers’ desires.

Lower Maintenance and Less Need for City Infrastructure

Large shopping malls and retail giants require more of a city’s resources. For a small business, a small storefront or office may be all that’s needed. Local shops tend to require less maintenance from a city, as well as fewer public services. Many times, small, local businesses establish themselves in city centers, using repurposed downtown buildings and taking advantage of existing infrastructure such as street parking and garages, water and sewer lines, and presence on the electrical grid. Refurbishing existing structures has a much lower environmental impact than clearing land to make new ones, especially those larger shopping areas situated on the outskirts of a city or suburb.

Many small businesses may also operate out of the owner’s home, at least at the outset. Professional services like tax planning or legal advice may easily be in a professional office space inside the owner’s house. Lower infrastructure demands can make a big impact on a city’s budget. In addition, out-of-the-home small businesses tend to require less overall maintenance. Absent the necessity for following a corporate-approved floorplan, small businesses can do much more with less.

Diverse Products, Locally Made

Most large retailers have certain items that they are required to carry, regardless of their popularity in the community. While larger stores have some control over what they sell, local retailers have a more flexible inventory and a quicker response time to customer requests. A customer wanting a variation of an item in a small boutique, for example, may be able to order it directly from the owner — or the owner might discover a market for that type of item and carry it in the store.

Larger shops may not have the ability to special order a unique request for one customer out of thousands. Big box and department stores have a set selection of wares that are relatively uniform across the board. Products are selected based on a national sales plan with some regional variance, but these low price stores keep prices low by volume purchasing, where every store in the group purchases the same items.

One benefit of local businesses is that their products tend to be locally made, or selected to suit local tastes. As members of their communities, with plenty of customers eager to give suggestions, smaller boutiques offer more unique wares, clothing, and accessories that are popular with shoppers in the community. These specialty store owners also tend to have more in-depth knowledge of their products and are better able to guide shoppers toward items that will fit well and suit a personal aesthetic.

Small businesses have a greater community impact than many realize, and the sum is often greater than the individual parts. That is, a community of small businesses can impact the local economy greatly, forming merchants associations, investing in their community through volunteer work, and working hard to provide local jobs in a sustainable manner. As a small business owner, the best advertisement for your business is to become involved in your town, listening to your customers and being responsive to the vibe of your community.