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Why Are Small Businesses So Important? 10 Ways They Empower Communities

Becoming part of the neighborhood benefits everyone.

Mark Fairlie
Written by: Mark Fairlie, Senior AnalystUpdated Jul 08, 2025
Chad Brooks,Managing Editor
Business.com earns commissions from some listed providers. Editorial Guidelines.
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Many of today’s consumers like to “shop small” and support neighborhood businesses to boost the local economy. However, the impact of small businesses in the United States extends far beyond the economy. We’ll explain why small businesses are so important and how they empower communities. We’ll also share how businesses can partner with communities to everyone’s benefit.

Why small businesses are so important

Aside from the economic impact, small businesses contribute much to the communities and people that they serve. Here are 10 reasons small businesses are important and how they enrich their communities across the country.

1. Small businesses create jobs.

Small businesses promote self-sufficiency in local economies and their residents by providing employment opportunities to local workers. The U.S. Chamber of Commerce’s Small Business Data Center confirms that small businesses employ nearly half of the American workforce, representing about 43.5 percent of America’s GDP. 

“America’s 33.2 million small businesses (99.9 percent of all businesses in the U.S.) are frequently referenced as America’s ‘economic engine,’” said Tom Sullivan, senior vice president of Small Business Policy at the U.S. Chamber of Commerce. “That’s because small employers have created more than three in five of all the new jobs since 1995, and they innovate at 12 to 15 times the rate of their larger business competitors.” 

Did You Know?Did you know
The SBA and the U.S. Department of Agriculture provide government loans for entrepreneurs. Funding can help your startup get off the ground or expand your growing business in your community.

2. Small business revenue stays in local communities.

Small businesses employ local residents, directly returning some of the money they generate to community members. Additionally, small businesses often support other local small businesses as customers or suppliers. For example, a chef at a local restaurant might stop by the neighborhood farmers’ market to purchase fresh, homegrown produce for weekly specials and menu items. 

3. Small businesses spark innovation.

In recent years, large companies nationwide have adopted the concept of thinking like a startup to prioritize innovation and gain a competitive edge. These innovations from small businesses can transform neighborhoods, towns and cities. 

“Small businesses … [help] communities thrive [by] driving innovation and serving needs that otherwise would likely be unmet,” said Matt Wilcox, deputy head of financial institutions group and president of digital payments at Fiserv. “[They are] engines of growth, creators of jobs, builders of communities and the manifestation of technological advancement. Small businesses drive ideas, progress and opportunity.”

FYIDid you know
Communities with many small businesses often enjoy a business-to-business sharing economy, where they rent or share assets, equipment and services to reduce costs and increase efficiency.

4. Small businesses create opportunities for women, minorities and immigrants.

Today, more women, minorities and immigrants are pursuing their entrepreneurial dreams as a path to financial independence and prosperity. According to the U.S. Department of Commerce, minority entrepreneurs generate nearly $2 trillion in revenue annually. When these business ventures succeed, their communities reap the rewards in the form of jobs, increased tax revenue, neighborhood leadership and more. [Related article: Successful Businesses You Didn’t Know Were Run by Women]

Did You Know?Did you know
Small business grants for minorities, women and other marginalized groups help alleviate some of the challenges of starting and growing a business.

5. Small businesses increase the tax base.

Local businesses generate local taxes, including the property taxes they pay on buildings and the sales taxes they generate from selling goods and services. This tax revenue is reinvested into the community to improve roads, fund schools and keep parks in good repair. In contrast, taxes paid to e-commerce retailers or national companies typically don’t benefit local communities.

6. Small businesses become a part of a local community’s character.

One of the most charming aspects of small towns and cities is their unique small businesses that can’t be found anywhere else. Small businesses founded and owned by local residents tend to exude the character of their surroundings. They may reflect a regional flavor, share a coastal or mountain aesthetic, or utilize local ingredients that can be harvested nearby. 

Over time, these businesses often become cherished parts of their communities, valued by residents and visitors alike. “SMBs are the stores, coffee shops and restaurants that we grew up with and love,” Wilcox said. “We know the owners and people who work there, fostering a personal connection beyond mere transactions.”

7. Small businesses contribute to the local tourism economy. 

Unique and interesting small businesses can attract tourists and seasonal visitors to an area. Tourists often value shops, restaurants, hotels and other businesses with a local flavor and prefer them to generic offerings they can find anywhere. Many communities often include photos and descriptions of their small businesses in their tourism marketing materials to attract visitors.

8. Small businesses are more likely to contribute to local charities and initiatives.

According to the U.S. Chamber’s Small Business Index with MetLife, most small business owners (91 percent) believe that businesses should give back to their local communities.  Eighty percent of owners believed their business’s mission includes giving back to their local community. 

Small businesses are often eager to participate in charitable marketing opportunities, such as sponsoring a local Little League team, contributing to a river cleanup project or volunteering for community fundraising efforts. Their sponsorships and contributions benefit the community while generating goodwill and boosting brand awareness. 

TipBottom line
Charitable marketing efforts can strengthen your company's public image and reputation and help you attract new business.

9. Small businesses can help minimize carbon emissions and contribute to a community’s sustainability goals.

Small businesses often work within intrinsically sustainable business models that benefit the environment. For example, small companies typically source materials from nearby suppliers, not large vendors with national contracts, reducing transportation emissions from shipping. Additionally, restaurants that source food from local family farms can support agriculture practices more beneficial for animals and the environment than factory farms. They also utilize in-season produce instead of shipping products from thousands of miles away. 

10. Small businesses require less infrastructure investment.

Small businesses don’t need as much space as large corporations. They can often utilize vacancies in existing buildings. In contrast, large companies will likely build massive new facilities that require the community to pay for new roads, sewers, utility access and other infrastructure improvements. Additionally, a large corporation often must be lured to a community with expensive tax breaks or grants that small businesses don’t need or require.

Ways small businesses can work with local communities

Being a visible part of the neighborhood where your business is located creates closer bonds with community members who will be inclined to purchase your company’s goods and services. “Strong community ties are essential to long-term success for small businesses,” Wilcox told Business.com. “By investing locally, businesses can fuel economic growth, build brand loyalty, and strengthen relationships with customers and employees. Small businesses can build these connections both by engaging directly with their communities and using technology to better understand and serve local needs.”

Here are some meaningful ways to get your business more involved with the local community.

1. Encourage employees to participate in charity work.

Providing team members with paid time off to participate in local charitable efforts is a profound and impactful way to support your local community. Ask customers and employees which local charities they care about most and seek organizations whose aims match the values of your client base. Commit to supporting these charities regularly through volunteer work and financial contributions. 

Charity work also has business upsides:

  • Employees will appreciate the chance to give back to their community on company time.
  • Locals will view your business as a philanthropic organization. 
  • You can generate favorable press coverage. 
FYIDid you know
Generating local publicity and public relations should be a key goal of your small business marketing plan.

2. Offer a local sponsorship.

Consider sponsoring a charity drive for a local cause that resonates with your employees and community. You’ll include your name and brand image elements on donation forms and event publicity materials, helping get your business into the public eye. 

For example, supporting the local high school’s soccer or baseball team through a shirt sponsorship is an excellent way to reach families with children. You’ll market your business and provide funding for community events simultaneously.

3. Give presentations at schools.

Many young people dream of starting their own companies but don’t know where to start and your entrepreneurial knowledge is valuable. Contact the business studies teachers at local schools and offer to speak with students, answering their questions about starting and running a business. 

Presentations don’t have to be limited to your exact entrepreneurial footsteps. For example, if you run a local restaurant, show parents how to prepare healthy meals on a tight budget. If your business is known for upcycling, lead a workshop showing community members how to transform things they already own into useful new products. Sharing actionable information allows you to appear as a local expert while improving the lives of those around you.

4. Host internships for local students.

Seek out local students for summer internships, after-school work and weekend help. By regularly employing student interns from the neighborhood, you’ll demonstrate your commitment to supporting and developing the community’s next generation. You may also discover a future star or burgeoning leader. With the right mentorship, they won’t forget how you helped them and will likely follow your example of giving back.

5. Get involved in your local chamber of commerce.

Becoming a member of your local chamber of commerce can help small business owners and entrepreneurs build strong ties to their communities, as well as to other small businesses around the country. Sullivan stated that 90 percent of the U.S. Chamber’s membership consists of small businesses that belong to state and local chambers of commerce.

“Involvement in a chamber of commerce promotes growth, both economically and personally,” he said. “From an economic perspective, consumers are 49 percent more likely to think favorably about a business that belongs to its local chamber of commerce and 80 percent more likely to patronize [those businesses for] goods or services in the future.”

Julianna Lopez and Jennifer Dublino contributed to the reporting and writing in this article. 

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Mark Fairlie
Written by: Mark Fairlie, Senior Analyst
Mark Fairlie brings decades of expertise in telecommunications and telemarketing to the forefront as the former business owner of a direct marketing company. Also well-versed in a variety of other B2B topics, such as taxation, investments and cybersecurity, he now advises fellow entrepreneurs on the best business practices. At business.com, Fairlie covers a range of technology solutions, including CRM software, email and text message marketing services, fleet management services, call center software and more. With a background in advertising and sales, Fairlie made his mark as the former co-owner of Meridian Delta, which saw a successful transition of ownership in 2015. Through this journey, Fairlie gained invaluable hands-on experience in everything from founding a business to expanding and selling it. Since then, Fairlie has embarked on new ventures, launching a second marketing company and establishing a thriving sole proprietorship.