Joe Biden Says Starting a Small Business Is an 'Act of Hope.' Here's Why He's Right

Small businesses are an important part of the economy.

Small businesses are something most of us encounter all the time. But do we really stop to think about how important they are to the U.S. economy?

In his recent State of the Union Address, President Biden announced that 10 million Americans applied to start a small business over the past two years. And he also called small businesses an "act of hope" for good reason.

An important part of the U.S. economy

It's easy to think of large corporations -- the ones we might buy stocks in -- as the backbone of the U.S. economy. But between 1998 and 2014, small businesses accounted for 44% of total economic activity in the U.S., according to the Small Business Administration (SBA).

Just as importantly, the SBA has found that small businesses are responsible for creating two-thirds of new jobs. And given the millions of people who have applied to start a business since the pandemic, that might help explain why today's labor market is so strong.

Important to communities

Small businesses don't just strengthen the broad economy. They also do a lot for local communities.

For one thing, the presence of a thriving small business community can lead to an uptick in property values. That can benefit homeowners not only in terms of when they're ready to sell their homes, but when they might need to tap the equity in their homes for borrowing purposes.

Plus, small businesses tend to lend a lot of support to their local communities and help them thrive. Not only do they commonly create local jobs, but they tend to collaborate with each other and use each other's services when possible to keep money flowing locally.

A local restaurant, for example, might seek out produce from the farm down the road rather than one in another town. That restaurant might then hire people in the community to work there.

Also, small businesses tend to be charitable within their means. Those school fundraisers that happen all the time? Often, there's a small business donating products for basket auctions and events. And if you've ever seen a local soccer or baseball team in new uniforms, well, chances are, a local business made a donation or sponsored them.

Do what you can to support your local businesses

All told, small businesses are truly essential at both the local and broad level. And that's why these businesses are truly worth supporting. So the next time you're tempted to buy clothing or books or gifts on Amazon or at your nearest Target or Walmart, think about whether you're better off supporting a local shop in town instead.

Doing so might mean paying a bit more money. After all, small businesses don't have the same seemingly endless resources as giants like Amazon and big-box retailers like Target and Walmart, so their prices may not be as cheap. But the amount of good these businesses do makes it worth spending a few extra dollars here and there to keep them afloat.