The current small business conundrum
Businesses have been working hard this year trying to figure out how to reinvent the way they do business during periods of pandemic with the new norms of social distancing and restricted travel.
Small businesses, especially local brick-and-mortar stores, have been hit the hardest with the new challenges to adapt. We don’t tend to have the capital reserves to weather these economic storms as much as the bigger national or multinational corporations. We don’t have a large and diverse investment in online and mobile infrastructure for sales, marketing and support options for customers.
90%. This figure varies slightly depending on what counts as a small business. But it is a significant generalization of both the percentage of small businesses and the percentage small businesses contribute to economic growth.
One point is crystal clear: the strength of our economy depends on the strength of our small businesses.
So what can small businesses do to adapt to new economic and social realities?
While one of the obvious solutions is to utilize more online tools for your marketing, sales, and customer support, I want to focus here on a solution which is not so obvious and has seemed to get overlooked by the media lately. I will post a separate article about the available online tools and methods soon. So be sure to subscribe to get notified of new posts as they get published.
Small businesses are most often local businesses
In the past 20 years, as large online businesses have seemed to dominate every market, and global import has challenged local manufacturing, there has also been a push back to shop local, buy local, and live local for a lot of good reasons. There have been many studies and reports demonstrating how going local is best for the economy, culture, families, and people in that community, as well as the foundation for future economic and social stability and growth.
In this article, I will survey just some of the top reasons supporting local businesses is good for our community is Surrey, and one of the main ways we can strengthen and revitalize our local community through difficult times like these.
As people’s livelihoods continue to be in jeopardy, the stakes have never been higher!
The good news is that the majority of small businesses are also local businesses as well. So as a consumer, by choosing to support a small business instead of purchasing from a larger company online, you are also helping to support the community in which that business is local, and vice versa.
What does it mean to shop local?
It means supporting businesses which:
- Are locally owned and operated
- Source local products and services when possible
- Staff local workers and hire local service people where possible
- Primarily serve the local business or consumer
Top reasons to buy local
The top 2 reasons given to buy from local businesses are economic and social. There are other really good ones as well. I will summarize them by the popularity of reasons generally given by studies. Keep in mind that they all tend to overlap and work together to vitalize communities and the people within them. So I don’t want to number them as in any rank of importance.
Buying local stimulates and enhances the local economy through the “multiplier effect”
Money spent at a local business can recirculate through the community over four times as much as money spent at non-local businesses, and even more than money spent through non-local online purchases. This community based multiplier effect is an essential to understanding how buying local is the fundamental basis of a strong, innovative and growing economy.
Here’s an overly simplified idealistic illustration of how it works. Mary spends $100 at her local grocer within walking distance instead of the big box store 30 minutes drive away.
| Local Grocer | Non-Local Box Store | |
|---|---|---|
| A | $50 to local farmers | $0 to local farmers |
| B | $25 to local employees | $12.50 to local employees if within community |
| C | $10 to building lease from local property owner | $0 to building lease from local property owner |
| D | $10 to local taxes supporting public works | $20 may go to local taxes (ignoring taxation loop-holes) |
| E | $5 to the local grocer owner to put back into her business improvements | $2.50 goes back into the branch to improve their store |
So far, we see an example of another common reason stated to shop local: the majority of money spent at local businesses stays within the community. In the illustration above, all $100 dollars spent at Mary’s local grocer stays within the local community. In contrast, of the $100 spent at the big box store, only $35 stays within the community.
For all the money which stays within the local community, that’s not the end of its life-cycle for that community. It multiplies.
- Of the $50 going to local farmers, most of that $50 goes back into the community again through similar means as the grocer, probably with higher percentage going to local labour as well as higher percentage going outside the community for specialized machinery and equipment. However, once purchased, most likely all the repairs labour is sourced locally. So for as many cycles as it takes, ultimately at least half of the total $100 spent goes home as work pay.
- Of the $25 going to local employees, as much as $5 could be lost to federal and provincial taxes in Canada, leaving $20 which could potentially go back into supporting local businesses and community services. Any of this amount spent on large online retailers never comes back to the community. All of this amount spent in local stores, restaurants, family and child programs, local taxes, and local real estate, goes back into the community and continues to cycle within the community to strengthen it further.
- Local property owners leasing their property tend to put all that money back into the community and more. Of the $10, much of that will go to local taxes for public services, as well as local labour for maintenance. If the money for the property has come from a local community bank, an additional $10 could go back into that bank to help it fund other local community business and support non-profit organizations helping family and child services, and others who may be economically disadvantaged. So the total put back into the community could be as much as $20 from after just the first cycle after the initial $100 spent.
- Add that to the $10 in taxes that the grocer pays, which in turn goes to public infrastructure like roads, electricity, clean water and sewage, as well as schools and other public programs to support families, children, and low income housing projects.
- Any additional business improvements help both the business and community grow, and create a better living space.
Already, we see that the second cycle of money Mary spends at her local grocer can double the total amount spent within the community. And if that money is spent locally as well, it will continue to add a multiplier to the amount which stays within the community, improving the economic prosperity of the community, small businesses, and individuals within it, supporting the public infrastructures and social services which provide the fundamental stability of that community, especially through difficult economic times like these.
Evidence of the multiplier effect and its economic impact
Several studies have been carried out across various communities in the US. Loco BC commissioned Civic Economics to produce a study of consumer spending with local businesses. Here are just a few of the highlights from that 2019 report on local businesses in BC (cf. https://www.locobc.ca/blogs/loco-bc-2019-study-on-the-the-economic-impact-of-local-business), as well as some similar results from US studies.
- Local businesses recirculate up to 4.6 times more revenue in the local economy than multinationals
- Local businesses recirculate up to $63 of every $100 in revenue in the local economy, compared to $14 for multinationals
- A Chicago study found that for every $100 spent at a local business, $68 remained in the city while only $43 of each $100 spent at a chain retailer
- Local businesses spend up to 31.4% of their revenue on B.C. products & services.
- According to the American Independent Business Alliance local businesses are more likely to support other local businesses.
More jobs and greater job satisfaction
Multiple studies of small businesses all produce the same data: small local businesses are the primary source for job creation and satisfaction.
- Local businesses produce up to 8.4 times more jobs per square foot and up to 8.1 times more revenue per square foot than multinational box stores.
- A 10% shift in B.C. consumer spending towards independent businesses would create 14,150 jobs & keep $4.3 billion in the B.C. economy
- From 2000 to 2017, 8.4 million net new jobs were created by small businesses
- 56% of small business employees have high commitment scores, while only 38.7% of workers at large corporations had similar scores
- Almost all employees of small businesses (91%) feel that employee happiness is important to company leadership. Additionally, 86% felt like their opinions were respected and listened to by company leadership.
- According to the U.S. Small Business Administration’s August 2017 Small Business Quarterly Bulletin, small businesses have created two out of every three net new jobs since 2014
- 65% of all new jobs over the past 17 years
- A thriving local small businesses community encourages more entrepreneurship and provides more support for greater chance of success.
- Employees of small businesses tend to be happier ―70% of small business employees reported their happiness level to be a 5 or higher on a scale of 1 to 10
Social impact on communities, families & children
While the economy is certainly on the forefront of every small business owner’s mind right now, the social impact of shopping locally has its own “multiplier effect” for the non-business aspects of its communities. Arts and cultural activities flourish. Non-profit support programs thrive. Community programs for families and children grow. These not-for-profit activities create more happy communities and people, and a stronger social network from which to weather economic crises.
- The Loco BC and Civic Economics report found that local businesses donate up to 24 times more per dollar of revenue to local charities than multinationals.
- Shopping locally creates more consumer choices, more innovation, and unique products or services.
- Thriving local communities improve quality of life by providing a better, more interesting place to live.
Environmental and personal health impact
Local small businesses communities are cleaner greener communities, and those living in them get more exercise, eat better, and are generally more happy and healthy.
- Shorter travel distances means less pollution from vehicle emissions.
- 66.3% of small business owners use recycled materials.
- Local shops tend to require less maintenance from a city, as well as fewer public services.
- Local businesses pay local taxes, bolstering the city revenue available for improvements to roads, schools, and area green spaces. When shoppers spend their money locally, the taxes they pay benefit their community and better their own lives. Shopping online, for example, may not keep tax revenue local.
People matter more to small local businesses
Small businesses are more dependent on their clients to survive, so they tend to give more personal attention to each individual client. So you get more benefits.
- You get more value for your money.
- You get more personalized services or products.
- You know the person behind the service or product, and they know you.
- So you get better customer service.
Campaigning for support of local businesses in Surrey BC
The Big Spend was a Canadian campaign to encourage spending locally on July 25th as a national strategy “to help the nation’s post COVID-19 rebuilding process.”
The potential economic stimulus injected into communities by the ordinary consumer through small businesses, and through small businesses supporting one another, is one of the biggest contributions we can make to transforming the economy from failed “trickle down” models to a community by community based “trickle up” model, while also building a more stable community and family based “social net” for future economic crises.
With the diversity of small businesses and local producers in Surrey, most of us have almost no need to shop elsewhere. And because of that, if we concentrate on supporting our local small businesses in Surrey, we could create one of the most thriving local economies in British Columbia, and perhaps all of Canada.
How you can be a part of rebuilding Surrey’s local communities
- If you are local, tell us about your business in the Comments section below. It’s a free SEO link back to your website while helping all of us gain more interest in shopping at local Surrey businesses.
- Post your business on Twitter, Instagram and Facebook with the hashtags #SurreyBuyLocal and #BCBuyLocal.
- Join and post to our Facebook Group: Local Business in Surrey BC Canada.
- Visit LocoBC for more research and resources for “buy local” campaigns in British Columbia.
- Contact Us at Allegra to find out how you can start your own Surrey Buy Local campaign!
Let’s continue to support one another to stimulate and grow our local economy in Surrey while improving our social impact on our communities, families and children!
Allegra in Surrey has been locally owned since it started in 1996. We live in and employ mostly local Surrey residents who live and shop in Surrey. We prioritize the sourcing of our products by location, first in Surrey if possible, then BC, and then Canada more broadly if Surrey and BC sources are not available. All of our paper is 30-100% recycled, and all unused paper is recycled. We continually support not-for-profit community organizations in Surrey with discounts, services, and donation programs. Our primary service area includes Surrey, Delta, and White Rock.
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