Why Are Small Companies Important to Our Economy? What Are the Major Problems Faced by Small Companies?

Small companies are very important to our economy as they employ large number of employees in our economy and they are flexible and generally locally operated which means exchange of money stays in the community and they pay sales tax, business tax and wages which are spend locally. You take an example of locally owned restaurant business (Restaurants can also be considered as small companies) where restaurant purchases raw material from a grocery store or from a farmer locally and hires somebody local to serve/cook which creates job locally and most of the clientele are local as well. Many of the high tech companies are small companies where they come up with very innovative products which help the mankind. Some small companies in Silicon Valley succeeded in developing very high tech products with limited manpower and funding because they had limited manpower to manage. Small companies have lesser overhead as compare to larger companies so if managed well they can generate more jobs and revenue with less investment. Small companies help larger companies as they purchase machinery, equipment like trucks, fax, and phones produced by larger companies which creates jobs. Small companies hire people locally which generates employment as compare to larger companies where they procure globally as to cut their costs which does not generate much employment for the local communities. Smaller companies are flexible when it comes to qualification and experience when they hire people as compare to larger companies which help people with less qualification to get in the job market and acquire experience and small companies do provide better experience as employees have to wear different hats to do their job in small companies.

Small companies face problems like finance as it is difficult for small company to convince a bank or investors to provide loans or invest in the company as they are not famous and branded company.

Small companies also faces problems in hiring