Here’s What Happens When Too Many Small Businesses in Your Community Fail

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Small business failures are not a good thing. Read on to see why. 

Small businesses don’t have the same vast financial resources as large businesses do, and they often struggle to get their hands on the capital they need to stay open. As such, failure rates among small businesses are pretty high.

The U.S. Small Business Administration says that roughly 20% of new small businesses fail within a year. And only about 50% of small businesses survive for five years or longer.

But small business closures don’t just impact the people who own those companies. They also impact communities on a whole. Here’s what happens when a large number of small businesses in your area fail.

1. It can become difficult to find a job locally

Local jobs are particularly important to teenagers without the ability to drive a car and parents who don’t want a lengthy commute because they have kids at home and want to minimize their childcare costs. But when too many businesses shutter within a given town, local jobs become harder to find. That could force a lot of people out of the workforce if they have commute-related constraints.

2. Property values can decline

Small businesses lend value to neighborhoods. When too many businesses close down, neighborhoods can become less desirable to live in. The result? Lower property values.

Now you may not have any near-term plans to sell your home, and as such, you may not be particularly worried about what your home is worth. But remember, as a homeowner, you have the opportunity to borrow against the home equity you’ve built in your property. And the less your home is worth, the less equity you’re apt to have access to.

3. Local services can decrease

Local businesses tend to generate tax revenue. When too many close, and your town isn’t collecting as much revenue as it once was, it can lead to a decrease in public services. Parks can become neglected, and other programs might disappear. These factors, too, can lead to a decline in property values, but they can also impact your quality of life as a local resident.

It pays to support small businesses in your neighborhood

Small businesses commonly rely on the support of locals to stay alive. So if you want to avoid the repercussions above, you should do your part to support the small businesses in your town.

Instead of buying your coffee from Starbucks, consider stopping into the local cafe down the block and purchasing one of their lattes instead — even if it costs $0.50 more. And rather than buy all of your books on Amazon, give your business to your local bookseller, even if it means spending $10.99 on a novel Amazon has for $9.99.

In many cases, you will, indeed, pay more money for the product or service you’re purchasing if you get it at a local business. But spending a few extra dollars here and there might spell the difference between your home being worth $30,000 more — or less — over time.

And if you can’t afford to spend extra at small businesses because money is truly tight, at least try to support those businesses by writing positive reviews if you’ve had a good experience and encouraging friends and neighbors to check them out. Although small businesses need financial support to thrive, if you can’t provide that right now, word-of-mouth advertising is a helpful close second.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com and Starbucks. The Motley Fool has a disclosure policy.

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