There are 32.5 million small businesses in the United States, employing 46.8% of all U.S. employees. 

And of those 32.5 million small businesses, 31.9 million have less than 20 employees.

Small businesses comprise 99.9% of all businesses in the country, according to the United States Small Business Administration’s 2021 Small Business Profile.  

Let that sink in for a second. 

Small, entrepreneurial businesses are, in fact, the backbone of our economy. These businesses are your families and friends, representing livelihoods and personal dreams realized. 

It’s no wonder that there are so many resources to help small businesses grow and thrive. All levels of government have made it a priority to support small businesses, especially now in light of the pandemic.

Besides the many programs supporting small businesses through loans, grants, and business education, governments support small businesses everyday by contracting their services. 

The United States government is the largest consumer in the world and has the ability to purchase over $650 billion worth of goods and services per year. 

As of July 2021, the federal government reported that they have already awarded over $145.7 billion in contracts to small businesses, which accounts for a little over 26% of the fed’s total spending. 

The Biden administration has committed to increasing the federal government’s spending power to contract with small disadvantaged businesses by 50% over the next five years.  

Many local governments have similar, codified contracting goals in order to create opportunities for small or minority-owned businesses in their own communities.  

In fact, several localities including Boston and Philadelphia have recently set higher percentage goals to hit when it comes to contracting with small and minority owned businesses.  

The benefits to the small businesses that contract with governments are well documented.

Often the opportunity to contract with the government allows a small business to grow and scale due to the consistent income and demand of government work. Not to mention the extended socio-economic benefits to the immediate community.

But what is less discussed are the benefits local governments enjoy by contracting with small businesses. 

Here are 7 ways local governments can benefit by working with small business vendors. 

1. Small businesses have the ability to pivot quickly.

Typically, small businesses are more nimble when it comes to changing direction and making big decisions in a hurry. 

Compared with large businesses or corporations that may have to get changes approved through a leadership hierarchy, changes can be made more quickly due to easier access to top business leaders. 

Not only that, but smaller businesses can quickly re-allocate resources to support a given effort versus waiting for corporate approval, which can sometimes take weeks or months to finalize. 

The ability to change direction and adapt quickly to unforeseen obstacles is critical when working for a local government. When beginning a project, there are likely a plethora of unknowns that neither the client or vendor can predict. 

Possessing the flexibility to navigate unknowns and adapt to new a direction can serve both the small business vendor and the local government client well.  

2. Small businesses are better positioned to take innovative risks.

As small businesses are more able to adapt and pivot when encountering unknowns, they’re also more inclined to take the necessary risks that spark innovation. 

According to the U.S. Senate Committee on Small Business and Entrepreneurship, small businesses employ close to 40% of our nation’s scientists and engineers. Small businesses also generate more than 14 times the number of patents than large corporations or universities do. 

If this tells us anything, some of the brightest minds in the United States are small business owners. 

More and more frequently, problems in local government are requiring new and innovative solutions. Simply put, the status quo is no longer working and the entire organization must be willing to make progressive changes anywhere that it makes sense.

Contracting with nimble businesses that are willing to try new things in order to solve difficult problems should be a critical attribute of any small business vendor that a locality should look out for.   

3. Contracting with small businesses increases equity. 

Equity and inclusion have become frequent topics of discussion and a top priority of local governments especially after the events surrounding George Floyd’s murder and the inequities brought on and highlighted by the pandemic. 

As a result, local governments are re-envisioning how to not only provide equitable and inclusive services to communities, but also to ensure that policies and codes are written equitably. This includes ensuring procurement processes create an equal and accessible entry point for all contracting opportunities. 

A local government is often the largest employer and consumer of goods and services in any given city. By extending these business opportunities to local, small and disadvantaged businesses, localities can directly address wealth gaps in their community. 

By creating processes that allow all businesses to enter and compete, local governments increase equity in their community.  

 

4. Contracting with small businesses strengthens the local economy. 

Contracting with local governments can often be a life-changing financial opportunity for a small business. But the financial benefits don’t always stop with the prime local vendor.   

Local government contracts with local, small businesses carve out the opportunity for vendors to subcontract with other local businesses, thus extending the economic opportunity deeper into the local community. 

Contracting with small businesses recirculates tax payer dollars into the community creating safer, more vibrant communities. Investing in local small businesses can also directly impact where city resources are needed and diverted. 

5. Contracting with small businesses strengthens community trust in local government.

When a small business contracts with a locality, there’s potential for a strong connection to be formed between the locality, the contracted small business, and the community where the small business originates. 

Providing critical services to a local government strengthens a businesses’ ability to advocate for local government in their communities. This advocacy combined with the familiarity and trust of the small business can often result in a community that’s more receptive and open to work with their local government.

A community’s trust in local government can strengthen when local small businesses get involved with their government. Advocates like small businesses are critical for a localities’ ability to engage with a community, receive their feedback, and provide appropriate services to meet their needs. 

6. Small businesses are more accessible and responsive to local government issues.

It may seem counterintuitive for a small business with fewer resources to be more responsive than a corporation, but when a local government client has an urgent request, having direct access to small business leadership can mean all the difference in getting the issue handled within 24-48 hours. 

Large businesses or corporations on the other hand may respond in that timeframe, but may route the request to the correct department who then dispatches help. Now, this isn’t the universal truth of large business operations. In fact, many have streamlined their customer service to respond quickly and efficiently to customer issues. 

The benefit in working with a small business really comes down to the fact that small businesses care about the local government organization in a different, more personal way than a large corporation. 

Small, local businesses are invested in the success of the organization because it’s their organization. 

7. Small, local businesses understand local issues and context. 

Local governments benefit from contracting with local businesses because they’re likely already familiar with the nuances and history of the locality. Small business owners may have personal friendships or are already acquainted with local government employees, which makes their working relationship that much easier.

Not only that, local small businesses will likely have a better grasp of local politics and the players influencing decisions and outcomes. Depending on the service, this familiarity with process and policy can be beneficial.   

More than anything, local, small businesses have a sense of loyalty in working for their government that large out-of-state businesses do not have. Many local businesses act as an extension of local government service as if they were public servants. 

Local governments benefit dramatically by contracting with local, small businesses. While many localities are making it a priority to contract with more small businesses, challenges with equity still exist in the majority of local government procurement processes. 

The processes are typically confusing, layered and not accessible to all eligible small businesses. Many small businesses that are eligible to contract with their locality either don’t bother entering the process due to its complexity or don’t know an opportunity exists. 

There is so much opportunity for small businesses to thrive by contracting with local governments and equally as many benefits to the locality by choosing to contract small.

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