Is Economic Rebound For Local Communities Possible This Year?
This is an article “Is Economic Rebound For Local Communities Possible This Year?” by Marc Primo
Everyone knows that local businesses serve as the backbone of every developed country, making up around 55% of its gross domestic product (GDP). Around 30.7 million small businesses employ nearly 60 million employees in the US, with 89% of American businesses today employing less than 20 heads.
Of course, when the pandemic struck, these microbusinesses were the first ones to feel the catastrophic impact. Many found themselves left with no other solutions but to furlough employees, or worse, close shop. This year, as COVID-19 restrictions have begun to relax and the economy is starting to rebound, the small businesses worldwide that managed to survive rely on their local communities to revive their operations.
As a sustaining effort against poverty, governments have installed programs that center on entrepreneurial training, investment, and growth accelerators to regain economic stability for small businesses. While many aspects of the economy remain up in the air and new uncertainties loom on the horizon due to Russia’s war in Ukraine, local companies may face more insurmountable challenges.
The difference is in the cost of living
In less wealthy regions, bolstering entrepreneurial growth seems much harder than in thriving areas like Silicon Valley. Considering such factors as local issues or income gaps caused by emerging technologies, venture investments for startups and more incubator environments in impoverished regions need to be accelerated.
However, the real challenge lies in the fact that most investors tend to look for gold in areas where knowledge creation and technical innovation combine with regulatory freedom. Without the support of local consumers, small businesses cannot maximize the resources they acquire locally to achieve cost-efficiency in operations.
One research study showed that initiatives aimed to empower businesses in such countries primarily resulted in undesired outcomes, unless a company had reached a significant profit margin. Small companies in impoverished regions can only fuel the trip towards entrepreneurial stability when local companies start to support them.
Taking the Silicon Valley Approach
Speaking of Silicon Valley, one key point in its model shows us how it continues to thrive as opposed to how businesses in less wealthy regions are faring. Startups in the tech mecca of the world take on a ‘scale up’ approach, treating their businesses like living organisms that have the potential to grow in time rather than simply scaling deeper into the market.
Given that insight, governments should continue bolstering venture investments and entrepreneurship programs in impoverished countries to optimize financial growth and help small companies secure ample capital gains.
Companies that can secure venture investment capital will feel the pressure to scale up and maximize financial growth and returns as quickly as possible to retain investor trust.
Say, a local fashion retailer solely relies on sales from its brick-and-mortar shop. No small business can achieve significant growth over a short period without tapping into other possible channels such as eCommerce, which can scale its operations to broader markets.
Concerning these facts, an economic rebound is only possible for micro to small businesses if they ensure proper online inventory to help them scale upward. Unfortunately, most small companies with venture investment money are forced and pressured to rebuild and rethink their business models to appease investors.
Nonetheless, logistical transformations are essential these days. Local businesses should continue boosting their local sales by expanding via eCommerce. Targeting larger funding rounds from investors would mean scaling towards more tech-driven solutions, rather than driving employment opportunities locally.
Shifting investments for better returns
With over 23 million businesses in the US employing less than 20 employees, human resources is another crucial factor for small businesses in impoverished areas. For the first quarter of the year, 44% of companies plan to expand their workforce. But how can small companies scale personnel additions with limited investment capital?
The solution lies in developing entrepreneurial bricolage, or the repurposing and integration of resources that are readily available locally rather than pulling in funds from external sources. Partnering with enabled businesses within the community and being creative in forming logistical alliances can solve local retail problems faster and at lower costs.
Determining whether your small business can revive profits means studying your current models on scaling up and digging in deeper, locally. In most cases, entrepreneurial intuition is still vital in enumerating your business goals this year.
For example, if you’re a local pharmacy being offered investment capital to sell medicine via eCommerce, you’ll have to review your options before jumping into the online bandwagon. Most social media platforms have strict protocols when selling over-the-counter medication online, and it might be wiser to address the pain points of your local community first before expanding on a nationwide scale.
Knowing the precise time to scale up rather than empowering the local community depends on your projections and core competence as a business. Some small businesses can thrive locally by investing in location-specific solutions rather than jumping the gun on eCommerce.
Digging deeper into the community
Another excellent example of growth via local communities which emerged during the pandemic are startups that helped struggling restaurants gain access to locally licensed kitchen spaces, farm-to-table produce, and stalls on the local farmer’s market.
Planting your company’s roots deeper in the community and focusing your marketing strategies to lure local support can serve as your trampoline to scale up faster. This year, for most small businesses, branching out into the local ecosystem is the way to go towards significant growth. After all, more economic experts say that venture investments are not the only solution to alleviate poverty within a community. Businesses can also achieve growth by empowering local relationships and utilizing local resources, including the workforce.
In hindsight, businesses that aim to scale up can achieve financial success faster if they pull the right strings on venture investments. However, that success may be fleeting if they fail to create a significant impact locally and scale deeper into their grassroots. Just like things were before the pandemic, it’s unlikely that businesses in impoverished areas will ever emulate the Silicon Valley model. What small businesses in these areas need to do is combine investment and scaling solutions which, in the end, remain to be the only business models worth pursuing.