The Importance of Small Business in the American Economy

The backbone of America

If you pay attention to the news, you will hear people talk about the importance of small business to the American economy. In fact, small businesses are so important that they have been described as the backbone of the American economy.

The deference paid to small businesses is an interesting phenomenon and, in many ways, unique to America. Other countries have a highly developed economic and social infrastructure that includes huge numbers of small businesses. However, no other country can compete with the United States when it comes to the regard shown to these entrepreneurial enterprises.

Small business is big business

business owner

The importance of small business to American society should not be underestimated. They are important on both sociological and economic levels. When analyzed in quantitative terms, they pack a mighty big punch.

Here are a few statistics that demonstrate the size of the small business market in America.

  • There are approximately 400,000 small businesses started each year in America.
  • Small businesses comprise 99% of the total number of businesses in America.
  • It is estimated that in 2018, there were approximately 32 million small businesses in the USA.
  • Approximately 1.5 million jobs are created each year in the small business sector.
  • Experts estimate that small businesses employ nearly 49 % of America’s workforce.

Freedom and independence

Small businesses are part of the American ethos. They are seen as embodying the attributes of what it means to be American. For example, in 2008, the International Entrepreneurship and Management Journal conducted a global survey of small business owners. In this survey, the most common reason cited for starting a new business was independence.

Independence was equated with freedom, and many of the respondents cited the importance of being their own boss. They were answerable only to themselves rather than following the dictates of others, plus they decided when, how, and where they would work.

Wealth Creation

The creation of wealth is the second most cited reason why people decide to start their own businesses. In just about every society, people are taught to admire the creation of wealth. Attaining wealth is held up as a goal for us all to aspire to, and running your own business is seen as a means of attaining that goal.

With that said, it is also important to note that society not only idolizes wealth but also idolizes the process by which wealth is achieved. For example, when commenting on Jeff Bezos, it is often noted that he started Amazon as a small online book store and ran it from his bedroom.

Coming from humble beginnings and acquiring great wealth has been referred to as a rags-to-riches story, and it is a quintessential part of the American ethos. Interestingly, in other countries, different reasons are cited. For example, in Brazil, the most commonly cited reason for starting a business was to create employment, whereas in China, it was to ensure the future prosperity of the family.

A sense of accomplishment and a source of pride

Female using her laptop

Overcoming the hurdles associated with starting a small business is a source of pride and accomplishment. Rising to the challenge and the sense of accomplishment this creates is often cited by small business owners as a motivating factor in their endeavors.

Legendary NBA star Magic Johnson has been quoted as saying, “In life, winning and losing will both happen. What is never acceptable is quitting.”  In saying this, Johnson succinctly sums up the importance of perseverance.

Building a successful small business takes time and requires perseverance, which is highly valued in American culture. When that perseverance pays off, it becomes a source of pride and accomplishment.


With such a huge diversity of small businesses in the American economy, specialization and target marketing are key elements for success. Some have argued that specialization is niche marketing and therefore limiting. In contrast, others have pointed out just the opposite, in that there are dangers in trying to be a jack of all trades and ending up a master of none.

Examples of specialization can be found in the sports and recreation field.

With the onset of Covid19, there has been a reduction of the bigger sports venues and an increase in home-based sports and recreation.  This, in turn, has given prominence to specific niche businesses, such as building tennis courts and lap pools and installing home bowling alleys.

Due to the vast number of small businesses, the huge employment numbers they create, and their beneficial influence on communities, it is obvious that in America, small business is big business.

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