99.8 percent of New York Businesses are Small Businesses

By Deborah Kaufman

Many would have you think that the demise of small businesses in rural communities is inevitable, considering the tremendous pressure that e-commerce giants Amazon and Walmart place on ‘Mom and Pop’ retailers. At the same time, there is no doubt that there has been a shift in retail buying habits in recent years, especially when you add the pandemic, supply chain challenges, and a looming recession. But is that the whole story?

While the pandemic sent shockwaves through the economy and shifted retail buying habits for household essentials, it also created an unexpected and surprising surge in small business startups. According to the U.S. Bureau of Labor Statistics, 2020 was a record year for new business formation, with a 20% increase in applications. 2020 experienced the highest total number of applications by far, double the growth rate in any other year. The largest increases were in the non-store retail sector (accounting for 1 out of every 3 new businesses) and the personal services section. The findings cite the continuation of a gig economy with small businesses also selling their goods and services online.

Small businesses play a vital role in driving local economies as well as the New York State economy. In fact, a 2022 study by the U.S. Small Business Administration Office of Advocacy shows that 99.8 percent of New York businesses are small. That’s 2.3 million businesses that are not likely to go away anytime soon. They also employ 4.1 million employees, 48% of the State’s employees. Women comprised 48.5 percent of workers in these small businesses and owned 39.8%. Racial minorities were also a large portion of small business ownership, with 26.3 percent owned by this demographic.

So, why should we care?

Imagine the number of small businesses you interact with each week, including internet-based companies, contractors, plumbers, electricians, hardware stores, lumber companies, co-working spaces, healthcare, real estate, the meat market or bakery, the movie theater, lodging, hair salons and barber shops, boutiques, law firms, accountants, IT specialists, repair/refinishing shops, the bowling alley, liquor stores, gas stations, auto repairs, the car wash, restaurants, and bars. Now imagine your community without them.

Small business entrepreneurs offer communities economic sustainability and are not necessarily driven by passing national trends. They bring growth, provide employment opportunities to local residents, and innovation to rural communities. They also generate revenue that converts local taxes into community improvements such as schools, parks, public transit, and healthcare.

The Better Business Bureau’s national statistics show that when you spend $100 at a local business, roughly $68 stays within the local economy, compared to a non-local business where $43 of that $100 dollars stays in the community.

Most small businesses also participate in volunteer work, charitable donations, community festivals, local sports teams, and benefits. In fact, their data shows 52% of small businesses support charitable contributions, and 90% donate to local causes.

The vibrancy of any small town can be measured by the economic health of their small businesses. These community assets generate long-term economic development that meets authentic community needs. By supplying jobs to their communities, these entrepreneurs promote economic self-sufficiency to help reduce poverty, according to the National Community Reinvestment Coalition, which supports entrepreneurial efforts in low and moderate-income areas.

Local small businesses also provide character and individuality to a community. They are a community’s unique brand. Walking along a thriving business district can create a sense of value and identity for visitors. It’s an impression of vitality and wealth, producing a positive image of the overall community.

Building a Robust Small Business Ecosystem

Rural small businesses face several challenges when it comes to launching their startups, one of which is driving traffic to their door with low population density compared to large communities. This often requires creating a destination marketing strategy to draw customers from surrounding communities.

In an ecosystem model, local organizations interact with each other to create and exchange sustainable value. The collaborative nature of an ecosystem is that different entities come together to accomplish something beyond the scope and capacity of any individual entity.

Take, for example, a small community with a variety of restaurants and entertainment venues. In a small business ecosystem, these entities would cooperate to deliver goods and services to a target market, generating greater value for their community and visitors. For small towns, this cooperative relationship among businesses can be a competitive advantage for drawing people to their downtowns and providing opportunities for visitors and residents to spend more time in their business/entertainment districts.

While the restaurant and entertainment industry is just one example, one could easily imagine connecting lodging to this ecosystem as well. Creating an ecosystem of businesses can also be created in other industries, such as manufacturing, healthcare, arts and culture, recreational activities, etc.

Other advantages to creating an industry ecosystem are: attracting similarly skilled labor that is enhanced by workforce training opportunities and shared access to capital, technology, marketing, suppliers, and accounting resources.

Living the Dream

Could you be the next Apple, Google, Amazon, or Dell Computer that started in a basement, garage, or car? There is no question that these companies faced hurdles throughout their journey to success, but like most of our grandparents and great-grandparents who started businesses, they found the journey well worth it.

If you’ve been thinking of launching your dream business, the timing may be right to capitalize on the recent national surge of startup interest. And your community is likely to thank you. The impact that entrepreneurs have on their communities in terms of job creation, innovation, and productivity growth helps to revitalize rural communities. The USDA’s Economic Research Service found evidence that having a higher share of employment at small businesses with 2 to 99 employees was positively associated with local income, employment growth, and poverty reduction.

Nothing is more thrilling than coming up with a business idea and seeing it through amid all the unknowns. Suppose your inner entrepreneur has been quietly nagging at you. Why not explore the concept by talking to business owners about the opportunities and barriers to entering the market in your field of interest?

You’ll also want to research the mechanics of opening a business. At first, this may seem a bit overwhelming, but there are numerous websites, blogs, and videos to get you started.

For general information about launching a small business, here are a few sites with articles and resources that may be helpful to you: www.inc.com, www.score.com, www.allbusiness.com, www.entrepreneur.com, www.epiclaunch.com, www.crunchbase.com, and www.sba.org.