Everybody Loves Main Street, Part Two

By Emily Adelman.

PART 2: The Multiplier Effect

Maybe you’re thinking, “How is buying the same roll of dental floss at an independent pharmacy instead of a big-box chain store going to save the world?”

Well, I’m not promising it’s going to save the world, but the economic relevance of locally-owned businesses should not be underestimated. The Small Business Administration consistently reports, most recently in September 2008, that small businesses:

• Represent 99.7 percent of all employer firms.
• Employ about half of all private sector employees.
• Pay nearly 45 percent of total U.S. private payroll.
• Have generated 60 to 80 percent of net new jobs annually over the last decade.
• Create more than half of nonfarm private gross domestic product (GDP).

It gets better. Let’s say that it’s lunchtime and you have ten dollars in your wallet. If you spend those $10 at a locally-owned, independent establishment, $6.80 of your ten bucks will stay in your community. The owner of the café where you just ate lunch will pay those dollars forward by, let’s say, using a local print shop to print the menus, purchasing local produce and ingredients, donating food for the local elementary school’s fundraiser, and paying local property and state income taxes. This is called the “multiplier effect”. Each dollar you spend at a local, independent business will circulate several times within the local economy, and over 2/3 of it stays in the community. (See the Andersonville Study of Retail Economics, 2004.)

That’s not all. Of all the businesses located in a determined geographic area, those owned by local residents and operated independently of a non-local corporation are also the most likely (and sometimes by default) stewards of the local environment. Studies show that local businesses use other local firms as suppliers and vendors, reducing the environmental impact of long-distance transportation. We have some local business leaders in Montgomery County who are setting the example in many ways:

• Local businesses by their very nature have the autonomy to choose their own suppliers and are more likely to carry locally-produced agricultural and manufactured products. (For example: Jackie’s Restaurant; My Organic Market)
• Local businesses are making efforts to further green their enterprises by converting to renewable energy sources and eliminating “dirty” processes. (The Gazette recently published an article on Wheaton businesses taking advantage of wind power.)

It makes sense to support these home-grown companies that have a triple bottom line business model (people, planet and profit). When they do well, their profits stay contained within the local economy and achieve a ripple effect.

Is it sounding good yet?

...Stay tuned for Part 3: Growing Pains...

Emily Adelman is currently working with Local First Wheaton, an alliance of independent businesses, to produce the Wheaton Shop Local Guide that will debut in May 2009 at The Taste of Wheaton. She also is working on the Buy Local Silver Spring campaign and helped produce a guide to over 200 locally-owned establishments in downtown Silver Spring.