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The Power That Small Businesses Wield

Skye Schooley
Skye Schooley

Small businesses significantly impact big businesses. As a small business owner, learn how to use that influence to your advantage.

  • Small businesses are the lifeblood of the U.S. economy and account for 99.7% of all employers.
  • Small businesses work with large enterprises as vendors, customers, competitors or partners.
  • Large businesses can learn from small business ingenuity, innovation, agile management, customer service, workplace culture and diversity. 

Small businesses are often seen as the little guys, but they actually make up the majority of the U.S. economy. As a small business owner, it is important to know the value of your business and how you impact those around you – including big companies. 

According to the U.S. Small Business Administration (SBA), small businesses account for 99.7% of firms with paid employees, and they make up more than one-third of known U.S. exporting value. What's more, from 2000 to 2017, small businesses accounted for more than 65% of net new job creation. 

With such a large footprint in the U.S. economy, it's clear that small businesses are the backbone of America. 

Why are small businesses important?

Small businesses are important for many reasons – job creation, exports, innovation and more – but perhaps the biggest effect they have is on their local communities. Leslie Hassler, a small business scaling strategist, explained how successful small businesses leverage their resources within their communities. 

"As small businesses continue to scale, their impact on the economy strengthens as they hire more people and build more connections with other small businesses and nonprofits, which knits an ecosystem of personal connections," Hassler told Business News Daily. "Today's small business owner is not only concerned with their personal success, but the success of their team and their communities." 

In fact, the AMEX 2018 Small Business Economic Impact Study found that approximately 67% of every dollar spent at a small business stays in the local community. This cycle stimulates the economy. 

Why is the presence of small businesses important for large businesses?

Although it may seem like large companies hold the power, small businesses are a key element to their success. Thibaud Clement, CEO of Loomly, listed five different ways that small businesses can represent significant opportunities for large businesses. 

  • Vendors: Small businesses may provide solutions to specific needs or edge cases that larger vendors do not offer – yet. This is often true when a rising tech startup closes a deal with a Fortune 500 company, for instance.

  • Customers: There were more than 30 million small businesses in the U.S. in 2015, so it's no surprise that small businesses represent a significant chunk of many large businesses' total addressable market or significant growth potential.

  • Competitors: Small businesses can signal emerging trends and needs to large businesses.

  • Partners: Small businesses can offer synergies to large businesses by combining their respective offerings and delivering unique value to customers.

  • Acquisitions: In some cases, a small business complements the existing offer of a large business so well that it makes business sense for the latter to acquire the former. 

Without small businesses, large companies would not be able to thrive the way they do. Small businesses provide many essential opportunities that cannot be overlooked. 

How do small businesses influence big businesses?

There are several ways small businesses influence big enterprises. For example, Hassler said that many large businesses learn from the ingenuity, innovation and agile management of a small business. Since big businesses are often blocked by red tape, they watch small business trends to see what's working efficiently in the market in real time. Then they use those pivots to make quicker data-driven decisions. 

"Because small businesses are more agile than big businesses, the decision-making process is much faster," said Hassler. "That means smaller businesses can test new technologies, processes, systems and marketing methods much faster than big businesses." 

In addition to spearheading innovation, Angelique Rewers, CEO of The Corporate Agent, said that small businesses act as competition to big businesses in the war for talent, which is impacting the standard for workplace culture and diversity. 

"Smaller companies are able to more easily create workplace cultures and work-life integration programs that employees today are looking for," said Rewers. "But I would argue this is good for big businesses, because it's pushing them to do better on diversity, leadership programs, wellness and more." 

What advantages do small businesses have over large businesses?

Due to strength and resources, large corporations have many advantages over small businesses; however, the opposite statement can also be made. For example, small businesses benefit from a higher threshold for risk tolerance and speed. They can freely innovate and change, as needed, since they aren't blocked by as many protocols, guidelines, office politics and management that hinder big businesses. 

Additionally, Clement said that small businesses typically benefit from fewer legal regulations. "While all businesses must follow the law, some specific laws apply differently depending on the size of a business, usually with additional requirements for larger businesses compared to smaller businesses," said Clement. "This is especially true when it comes to human resources, with specific responsibilities applying when a company grows over 20, 50 or 500 employees." 

Since small businesses typically work closely within their local communities, they have the ability to better understand the needs of their customers. "The biggest advantage – and the one we hear most often cited by corporate customers – is that small businesses are hyper-responsive to their needs," said Rewers. "They can turn on a dime and, in today's world, agility is everything." 

In addition to keeping a pulse on what consumers want and adjusting their strategies accordingly, small businesses offer a more personalized experience for their existing and potential customers. This is key, as consumers are increasingly demanding personalized products and services. [Read related article: How Personalized Customer Experience Can Define Your Business] 

How can small businesses successfully work with big businesses?

Small business owners shouldn't fear large corporations, and vice versa. The two can work together harmoniously; however, there are a few things that small business owners should be aware of when working with large enterprises. 

Clement said that large businesses follow internal processes and policies, which come with time frames to respect, rules to follow, and requirements to meet. To combat this, he listed three strengths that small businesses need to succeed when working with corporate clients. 

  • Adaptability: Small businesses need to be able to tweak products and services according to meet the specs their clients require.

  • Legal expertise: To limit liability and protect their interests, small business owners need to consult with a legal expert before signing contracts.

  • Runway: To account for the longer sales cycles and payment schedules that big businesses often have, small businesses may need access to additional working capital to keep them afloat while they wait to be paid. [Read related article: Small Business Financing Options Without a Traditional Bank] 

Small firms have the potential to thrive in today's marketplace, as long as they stay vigilant. They are the lifeblood of the U.S. economy and should use their resources and size to their advantage. 

"There exist more opportunities today for both small and large businesses to thrive, even in a cooperatively competitive way," said Hassler. "It will take continued intention from both sides to see that today's symbiotic relationship continues to flourish."

Skye Schooley
Skye Schooley,
Business News Daily Writer
See Skye Schooley's Profile
Skye Schooley is an Arizona native, based in New York City. She received a business communication degree from Arizona State University and spent a few years traveling internationally, before finally settling down in the greater New York City area. She currently writes for business.com and Business News Daily, primarily contributing articles about business technology and the workplace, and reviewing categories such as remote PC access software, collection agencies, background check services, web hosting, reputation management services, cloud storage, and website design software and services.