Four Reasons Small Businesses are Important to the Local Economy
The Role of Small Businesses in the Very Local Economy
By Jeff Bardos, CEO, Speritas Capital
July 17, 2020 – Greenwich, Connecticut
Call or text Jeff at 203-247-4358
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In the USA, the Small Business Administration’s (SBA) size table standards defines ‘small business’ very specifically. First by revenue - from $1 million to over $40 million), and also by employment - 100 to over 1,500 employees. The levels are also industry dependent - based on the NAICS (North American Industry Classification System.)
In the world of the SBA, the classification of ‘small’ determines whether a business is eligible for SBA and Federal contracting programs.
But if you think about the very local economy, say in small towns of 5 to 100 thousand people, even smaller businesses drive those economies.
SBA loan programs are a critical lifeline to those ‘extra-small’ businesses as well.
The VERY LOCAL Economy & the Importance of Local Government Support
A town with many empty storefronts has a vibrancy deficit that can quickly throw the town into a downward spiral - creating even more vacancies. Once a town enters that downward spiral it can be hard to recover economically.
Empty storefronts reflect just the surface of a weak local economy. The vibrancy deficit of empty real estate ultimately affects other entrepreneurs. Startups slow due to lack of confidence and perceived increased risk. Fewer residents are willing to risk investing in a new business.
The downward trend continues.
Town governments must carefully manage and support existing & startup businesses. This inspires confidence and helps attract entrepreneurs because the town is viewed as business friendly.
Providing support requires resources. It is a careful balance and not all communities are good at this, or can (or will) invest in the infrastructure and staffing that aggressive local economic growth efforts require.
For example, in Fairfield County Connecticut, the town of Fairfield, CT recognized the need to support their very local economy in 2002 - nearly 20 years ago. This town of 63,000 people invested in a fully staffed business development office. The town is thriving.
Most towns have only a volunteer ‘economic commission’ which has no paid staff and does not assist businesses through the process of setting up ‘shop’ in town.
Even in Greenwich, CT (where Speritas is based) a town with 63,000 residents, there is no business development office. The town website business page instead links to the Chamber of Commerce.
Imagine that an entrepreneur is choosing between two nearby towns with a similar demographic profile. Town A has an accessible and active business development office and staff and Town B is known to be somewhat difficult to navigate. We all know which town has the competitive advantage.
The presence of a staffed business development office sends a message - ‘We want you’. Hands-on assistance lowers a start-up’s risks and increases the chance of success. Many entrepreneurs would opt for Town A.
While not a replacement for local support - state support should be in addition to local support - there are often statewide resources to support small businesses.
When a town is too small to finance an economic development office, or chooses not to, entrepreneurs can access these state sponsored resources and programs.
Connecticut, for example, offers a wide range of support for local CT businesses, from biotech to women-owned and other diverse businesses.
Questions? Schedule a call with the author Jeff Bardos, email, or call/text him at 203-247-4358.
Four Reasons Why Very Small Businesses Sustain & Build the Local Economy
Big businesses may seem to form the bedrock of our nation’s economy and wealth creation, but in reality, small businesses are just as important, if not more so to the local economy and to the country’s overall economic health. Here’s why.
1) Local Jobs
Big businesses provide some local jobs, but it’s really the small, resident owned businesses in the area that provide the most local employment. For every Walmart, there are hundreds of smaller shops and service businesses employing local area residents.
These smaller businesses can provide flexibility that today’s workers need to balance work and family responsibilities.
2) Alternatives and Competition
Another reason that small business owners are critically important to the economy is that they provide both alternatives and competition to big companies.
For example, a local farmer selling at a roadside stand, on his property, or through a farmers’ market could set lower prices and offer fresher products than grocery stores, because she doesn’t have to pay to ship.
A local hardware store provides an alternative to Amazon, and better customer service.
Small businesses provide local residents with a different choice of suppliers, and ensure that money goes directly to the local economy.
3) Failure Leads to Eventual Success
Entrepreneurs often fail - sometimes more than once! Why is failure important for the local economy? Business owners who fail end up learning important lessons they missed the first time around.
Failure helps to build a more robust local economy and fosters stronger growth. It might sound odd, but failure ultimately builds a stronger local business network and more successful small business owners.
4) Diversification – Different Goals & Methods
Small businesses differ from the big boys in quite a few ways. They have different budgets, different operating methods, and focus on different aspects of their industries. They can drill down into a specific niche or product and flourish.
They can focus on a more specific, smaller audience and still succeed by marketing creatively to a local audience. Small business can innovate more freely than larger businesses, try new things and approaches. The best ideas and innovations can come from a small business meeting a local need.
This diversification results in better economic stability. The more diversification within the economy, the better it can withstand fluctuations and changes.
Small businesses have special financing needs and often need more help than larger companies on figuring out their financing options.
As debt advisors and SBA specialists, Speritas Capital Partners has helped many small businesses get funded. However, we have a loan cutoff amount of around $500K- $750K. That leaves a lot of very small businesses below our minimums.
That said, we will often help a local CT business whose funding needs don’t meet our minimums - diverse business or one referred to us by one of our partners - Economic Development Offices, bank managers, accountants, business advisors etc.
If we can’t help we’ll point businesses to the specialized resources within their own states. These are pretty easy to find with a simple google search. The SBA is a great place to start, there are SBA district offices in most states. SCORE, which provides business mentoring, has 320 local SCORE offices across the USA.
Since we’re located in Greenwich, CT we provide a comprehensive list of CT business resources on our website.
If you have questions, schedule a call with the author Jeff Bardos, email, or call/text him at 203-247-4358.
Additional Related Reading:
About the Author
Jeff Bardos, CEO, Speritas Capital Partners
Jeff has over 30 years of experience in the financial services industry. After graduating from the Columbia Business School, he joined the New York Federal Reserve Bank as a senior staff member in Bank Supervision, leading the Bank Analysis department. From the nation’s central bank, Jeff moved into the private sector, working at senior levels in commercial banking, retail banking and risk management. He has also played senior founding roles in several start-ups. Learn more about Jeff.
CONTACT INFO
Jeffrey Bardos
CEO Speritas Capital Partners
Call/text Jeff at 203-247-4358
Email Jeff with your financing questions
Schedule a call with Jeff using our online scheduling tool.
Speritas Capital Partners specializes in complex credit, collateral and cash flow situations and we never take upfront fees.
Because Speritas Capital is a debt advisory firm, we have access to a wide variety of lending structures. We’re not beholden to any one lender or structure so we can use our creativity and experience to design a structure that truly fits the needs of our clients.
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