Why it’s important to support small and local businesses

Statistics show that Australia’s small businesses employ more than five million people and contribute more than $500 billion to the economy. These businesses are the lifeblood of Australian communities and the economy.

It’s essential to support these businesses because they stimulate the local economy. When you buy from a smaller, locally-owned store, the money gets spent and redistributed within the local community.

According to research, for example, when you spend $100 at a locally-owned business, $68 will stay within the community. In comparison, if you shop at a big chain store or organisation, only $43 stays within the local area.

Locally-owned businesses tend to support and source goods/services from other local businesses. This can cause a positive ripple effect for economic growth in an area, and even lead to increased job opportunities.

There are so many different ways you can support small, Australian businesses. For example, shopping at your local retailer or using local services, such as working with an agency for website design in Melbourne, if you need new visuals for your business.

What counts as a small business?

In Australia, there is no one definition for what counts as a “small business”. Small businesses can come in all shapes, sizes and structures depending on the industry. They can operate as sole traders, trusts, partnerships, or companies.

For example, the Australian Taxation Office (ATO), Fair Work Australia, Australian Securities and Investments Commission (ASIC), and the Australian Bureau of Statistics (ABS) all define a small business differently. Below, we’ve outlined the different definitions.

• The Australian Taxation Office defines a small business as one that has an aggregated turnover (excluding GST) of less than $10 million.
• Fair Work Australia defines a small business as one with under 15 employees. This number includes any part-time, full-time, and casual staff.
• The Australian Bureau of Statistics defines a small business as one employing fewer than 20 people.
• According to ASIC, a small business must have no more than 50 employees, have an annual turnover of less than $25 million, and hold assets under $12.5 million.

The Australian Small Business and Family Enterprise Ombudsman reports that there are currently more than 2.5 million small businesses in Australia, according to the definition laid out by the ABS.

The same statistics also reveal that more than 97 per cent of all Australian businesses were small businesses in June 2024. Data also shows these businesses play a crucial role in every sector, from financial services to hospitality, retail, transport, and healthcare.

Defining a “local” business

While there is a major overlap between local and small businesses – with many being both – they aren’t the same. While “small” refers to the size and scope of a business, local typically refers to who owns the business and where they provide their goods/services.

As defined by Study.com, a local business usually has a physical presence and operates within the boundaries of a particular community/location. They sell goods and/or services to the immediate surrounding community(s).

Similar to small businesses, there is no universally accepted definition for what constitutes a “local” business. There are generally a few common traits between local businesses, regardless of the industry (e.g., hospitality or retail).

These common traits are that the business is usually locally owned and isn’t part of a larger chain (e.g., Woolworths or Coles). Many local businesses are also small businesses, and more often than not, family-owned.

Why you should support these businesses

There are so many reasons you should support local businesses and contribute to strengthening your surrounding community. These include:

• Supporting small businesses nurtures innovation and growth. For these businesses to stay afloat and compete with larger chain stores/franchises, they have to provide better products and services, driving innovation.
• Studies show local businesses are more likely to recycle their revenue back into the local economy compared to chain stores. They are more likely to promote other locally-owned businesses and buy products from them – strengthening the local community and services.
• Supporting local businesses is also better for the environment. If you’re an eco-conscious shopper, buying local is more sustainable. This is because small, local businesses tend to make more local purchases, reducing the need for transport and lowering their overall carbon footprint.
• Small and local businesses are usually better with customer service. Because these businesses are run by owners who typically live in the same area, this allows them to better understand the needs of the community and adds a level of personal connection to every sale and/or service provided.
• If you run a small business providing goods or services aimed at your local area, supporting other businesses in the community can be beneficial, too. It can help you build your connections within the community and find new ways to promote your business. For example, a local florist could partner with other retailers in the area and sell their products there.
• Statistics have found that small businesses are vital to economic growth. For example, the value of small businesses to the economy surged by 15 per cent from 2021 to 2022. They also account for one-third of Australia’s GDP.
• Small businesses are also driving the job market. Currently, they employ more than 5.1 million people in Australia.

How to support small and local businesses

Beyond choosing to shop at your local businesses instead of larger chain alternatives, there are different ways you can support them. Some of them don’t even cost a cent – there are so many ways you can support a business without having to directly buy from them.

Below, we’ve outlined different ways you can help support small businesses in your local area. These include:

• Follow and promote local businesses on social media. Whenever they upload a new post, share it with friends. Word of mouth can help increase engagement and sales for local businesses.
• Reviews, especially on platforms like Google and Facebook, are critical for small businesses. Whenever possible, leave a review for local businesses you like. This can also help them rank higher on Google, so potential customers can find them more easily.
• Whenever possible, prioritise purchasing from local businesses over any larger chains. When you buy local, more money gets redistributed into the local community and boosts its economy.
• Advocate for policies and parties that support local businesses, for example, grants for small businesses. Similarly, promote any “buy local” initiatives and encourage others to do the same.
• When it comes to gifts, consider purchasing gift cards from local businesses to support them.