About a year ago, I made a significant career shift and joined the U.S. Small Business Administration (SBA), now dedicating most of my time to assisting U.S. exporters. Previously, I spent seven years in the global energy industry and witnessed how innovation, science, and technology can reshape economies worldwide. It wasn’t until I started at the SBA, however, that I realized the tremendous impact high-growth small businesses have on creating groundbreaking innovations, jobs, and revenue — often exceeding those of larger, well-known companies. Small businesses have a huge potential, especially when it comes to international trade.
To understand this potential, it’s crucial to note that small businesses play a major role in the economy. In the U.S., they employ 53 percent of the workforce and have been responsible for three out of every four new jobs since 1992. If the American small business sector were a country, it would rank fifth in terms of output, surpassing both Germany and Japan.
Globally, small businesses make up over 95 percent of all firms, contribute to about 50 percent of GDP, and employ 60-70 percent of the workforce, according to the SME Competitiveness Outlook. Despite their already significant impact, these small businesses could boost their economic contributions even further by tapping into the global market. Globalization offers them an unparalleled growth opportunity.
Small businesses that engage in exporting tend to report higher sales, employ more workers, pay better wages, and are generally more productive than those that do not export. Considering that 96 percent of the world’s consumers and nearly three-quarters of its purchasing power lie outside of the United States, the potential for growth is immense. Yet, currently, only five percent of America’s small businesses export. For instance, in 2014, there were 297,519 identified Small and Medium-Sized Enterprise Goods Exporters, compared to 5,756,419 Small Employer Firms.
In other countries, small businesses are doing somewhat better in this regard, but there is still a significant untapped potential for boosting their national economies through trade.
Technological advancements are breaking down the traditional barriers to international trade for small businesses. Mobile internet allows for reaching distant customers through many small transactions, which together generate substantial revenue. Cloud-based solutions eliminate the need for extensive IT infrastructure, enabling small businesses to save costs and operate from various locations. Many of today’s large companies and global players started as small, innovative firms that leveraged technology and often SBA assistance to grow.
So, why aren’t more U.S. small businesses exporting? The main hurdles include limited access to information, insufficient capital, and barriers to market entry. The SBA and other U.S. Government programs are designed to bridge this gap. The State Trade Expansion Program (STEP) helps SMEs engage in overseas trade through services like matchmaking, trade missions, and trade shows. SBA offers several programs to provide capital for international growth, such as the Export Express program, the International Trade Loan, and the Export Working Capital Program. Additionally, SBA’s Trade Hotline (1-855-722-4877) connects businesses with experts to resolve trade barriers. Export.gov offers valuable market intelligence, advice, and tools to help U.S. companies expand globally. SBA also prioritizes international collaboration to help American small businesses commercialize intellectual property, form joint ventures, and engage in international trade.
An analysis by Fortune magazine highlighted that since 1995, Fortune 500 companies have grown nearly twice as fast as the U.S. GDP. The rapid growth of tech giants like Apple and Amazon partly explains this, but another significant factor is the advantages gained through international trade. Larger companies have been in a better position than smaller “mom-and-pop” businesses to expand abroad. Imagine the economic growth if more small businesses started trading internationally.
In summary, supporting small businesses in their international endeavors is not just beneficial but essential. To truly harness the substantial impact of small businesses, we need to strengthen support, policies, and programs that facilitate their growth through trade, thereby boosting revenues, creating jobs, and enhancing the U.S. economy.
