The Hardware Man - Economic Benefits of Supporting Local Small Businesses

Hello folks,

With a small suggestion and an idea, I have decided to begin writing down some of my musings and observations as I am able to flesh them out. Maybe they will cause discussion or thought, both are acceptable responses.

As a small business owner, a topic that is near to my heart is the Value of Small Businesses in a local economy. We are constantly attracted to the ease of online shopping, the variety found in big box stores and the low prices advertised to condition consumers to the perception of best pricing. However, in the reality of the geographic area this paper covers, big box options are a distance to drive, online purchases may have additional delays in delivery and those sale prices really are strategic loss-leaders to get you in the door.

During my college days, we did a project researching the local economic multiplier effect of an organization in the local community. It was an interesting topic that helped confirm to me the argument that a dollar spent locally at a small business is worth more to the community than that dollar spent at a big box store. The local economic multiplier is calculated by how many times the dollar is spent in the local economy before it leaks out. Studies have shown that dollars that are spent at a local business have greater impact in the community versus a non-local business. To simplify, spending $1,000 at a local business can create over $3,000 in economic benefit to the region over the ripple effect of the transaction versus $400 with a non-local business.

Using these numbers, that $1,000 initial purchase goes to the inventory purchased, payroll, rent, utilities and other overhead. The employee takes that paycheck and in turn purchases groceries and other goods and services. The landlord reinvests the rent into improvements or employees. While the effect of that transaction diminishes over several waves (like a ripple on a pond), the cumulative effect multiplies and raises the benefit for all involved. Conversely, a similar transaction made online may only benefit the delivery driver locally with a much smaller ripple effect.

When we consider our individual impact on the local community, we control how large of a benefit we will make for our area. Local businesses as well as residents can reinvest in their community by supporting other local businesses. Decisions such as supporting our local restaurants, retailers and service providers give opportunity to reinvest to the good of the region, the success of those pursuing a dream in their hometown and often a deal that can’t be found by accident – A Healthy Local Economy.

Daniel Karns and his wife own Clintonville Hardware & Rental along with other businesses. Join the discussion by contacting him at info@clintonvillehardware.com.