Building Main Street, not Wall Street: The financial case for small business
Albert Einstein made the following observation, “The world as we have created it is a process of our thinking. It cannot be changed without changing our thinking.”
As a community determines how to spur growth during these challenging times, there are many things they should consider as they strategize their future. Some communities are great at tackling the usual issues, but many are unaware of many hidden expenses and stresses that will ultimately determine their future.
Decisions made today will impact their community for generations to come. Let’s discuss a few considerations needing to be part of every community conversation regarding growth, strategy, and the future. Here are four that are oftentimes missed:
1. A study by Tischler & Associates a few years ago had some interesting findings. They found that specialty retail establishments made up of primarily locally-owned small and medium sized businesses generate a net yearly return to their local community of $326 per 1,000 square feet of store space. They also found that local business parks, office complexes and hotels also generated net revenue gains for the community.
On the other hand, they found the infrastructure and maintenance costs borne by the community and tax-payers for big boxes outweighed the tax revenues, costing taxpayers $468 per 1,000 square feet each year. It also found fast-food outlets are the most-costly, costing taxpayers $5,168 per 1,000 square feet.
2. In a study by Oregon State University conducted for the Small Business Administration, Dr. Patricia Frishkoff, of Oregon State University, analyzed charitable giving by the size and makeup of the business.
She found small and midsized companies with fewer than 100 employees gave an average of $789 per employee in cash and in-kind donations throughout the community. The study also indicated larger businesses with more that 500 employees averaged $334 per employee or nearly 60% less than those at smaller and mid-sized businesses.
3. There was another study done by Pennsylvania State University, led by Stephan Goetz and David Fleming, analyzing 2,953 counties across the country representing various demographics and lifestyles. After taking into account many factors, they were able to show that counties with a greater number of smaller and mid-sized locally-owned businesses actually enjoyed greater per capita income growth.
As would be expected, it also showed that the greater preponderance of large absentee-owned businesses such as big boxes, nonlocally owned chains and so forth, were associated with lowered incomes. This makes absolute sense as most of the big boxes and chains only provide wages at the lower end of the income spectrum.
4. In the Cambridge Journal of Regions, Economy and Society, researchers studied 3,060 counties and parishes throughout the United States and established that counties with a greater proportion of small and mid-sized businesses had lower rates of mortality, obesity, and diabetes.
Additionally, Walter Goldschmidt, in As You Sow: Three Studies in the Social Consequences of Agribusiness, made some interesting observations. His study compared two small adjacent agricultural communities in California. One of the communities was made up mostly of large agribusiness corporations, the other community consisted of small and mid-sized owner-operated farms.
The latter enjoyed a more vibrant, diverse economy and higher quality of life.
These studies drive home the value of locally owned businesses. I can’t stress enough the need and priority smaller and mid-sized communities need to place on growing their local business base. Your future literally depends upon it.
Half of economic development dollars should target locally owned businesses. This need will only intensify moving forward as the internet continues to suck communities of their much-needed tax dollars.
Communities and their local media companies need to educate the entire community to the advantages of a truly-local small business DNA. Both the community and their media companies need a solid business base to not only survive, but to thrive in way that benefits future businesses as well as generations.
— John A. Newby, author of the “Building Main Street, Not Wall Street” column assists communities and their local media companies combine synergies allowing them to not just survive, but thrive in a world where truly-local is lost to Amazon, Wall Street chains and others. His email at: john@360MediaAlliance.net.