The Benefits for Governments to Contract with Startups and Small Businesses

09/07/2021 By Nancy Leidelmeijer

The COVID-19 pandemic has resulted in economic suffering worldwide. The consequences of the pandemic have affected sectors, but none like smaller and start-up companies. Smaller companies typically have fewer resources than larger companies and corporations.


While the federal and state governments have responded to the economic turndown by providing financial assistance in the form of loans and grants, many governmental agencies are still reluctant to contract with startups and small businesses to provide services. In this article, we focus on the main reasons why governments should support these businesses and how that benefits the economy and local communities.


Job creators

Startups are small but they are big employers. According to the US Census’ Business Dynamics Statistics (BDS), without startups, there would be no net job growth in the United States. In fact, startups hire 3 times more employees than other sectors and create approximately 50% of all new jobs. Lockdowns placed local economies in a standstill and unemployment skyrocketed. If governments want to create and maintain job growth, turning to the biggest job creators would behoove communities across the United States.


Start-ups are innovative

While startups tend to be more fragile, they are the drivers of innovation. While the COVID-19 pandemic brought entire economies to a standstill, it also provided a breeding ground of opportunity for innovation. Throughout history, startups have been the main actors in finding solutions to alleviate crises. Startup entrepreneurs have a proven track record for being the most flexible and adaptable. They are not stuck in old habits and are not in the business of repeating history. That means governments will almost always get something new that challenges current models. They have a vision of how things should and could be, and they tear down barriers to reach it. In times of crisis, they bring solutions to the table. By supporting startups, governments will give the economy the jumpstart it needs to find innovative solutions towards healing the economy. Innovation leads to new markets and opportunities which leads to creating more jobs and improving economies. 


Cost Efficiency and Commitment

Startups typically operate with limited resources and have to be innovative in order to reach financial stability. Their internal processes are as cost-effective as possible. That results in better prices for their customers and governments because they don’t end up paying for inefficiencies that are hidden in the price of the product.


Startup entrepreneurs and their employees are not looking for an easy job where they can complete given tasks and then go home. People who work at startups are hungry for change and results. They are committed problem-solvers who want nothing more than to succeed. They commit to solving your problems and value each customer as their highest priority.


Startups create leaders for the future

People grow in startups almost by definition. They learn battle-readiness skills and develop into future leaders of larger organizations. Startups are the schools where the future leaders grow and develop leadership skills. Startups offer the space for learning and flexibility in an unstructured environment for their employees. This lends to opportunities to learn about every side of a business. This cultivates problem-solving skills that are key to leadership. 


Final thoughts

The COVID-19 crisis had the potential to wipe out almost an entire startup generation. Governments can support startups financially, but rather than providing grants and loans for business, a better solution is to take a chance on doing business with a startup. The risks are relatively small and you will receive a product that suits your specific needs. Startups are hungry for business, so they want to hear your ideas, know your needs as a customer, and will build their product based on that. And they’ll keep building on that to keep their customers happy. When you buy from a startup you can be a part of that development process without carrying out the work, and enjoy using a product developed for your needs. You’ll be a frontrunner. Governmental agencies have reputations for lagging with regard to innovation and technology. Startups can help build your image as a trailblazer. This will help governments attract like-minded talent within their employee ranks. Ultimately, this will better serve your clients, local economies, and build better communities.