Small businesses really are the backbone of America. They do the heavy lifting for the nation's economy and inject invigorating cash into their communities. Here's why you should pat yourself on the back:
According to the American Independent Business Alliance (AIBA), multiple studies have shown that each dollar spent at local independent businesses, on average, generates at least three times more direct local economic benefit than dollars spent at an absentee-owned chain.
While many shop local campaigns say that for every $100 spent at a locally owned business, $64 remain in the local economy, compared to only $43 of the dollars spent at a chain, it's actually a bit more complicated. The total economic impact of your shopping dollars is determined by three components: the direct, indirect, and induced impacts, according to AIBA.
- Direct impact is the spending done by a business in the local economy on all the things necessary for operating a business, including inventory or supplies, utilities, equipment and employee wages.
- This kind of spending also has an indirect impact, as those dollars spent at other local businesses begin to re-circulate in the local economy.
- The third way that the dollars you spend at one local business benefit your community is via induced impact--the additional consumer spending that happens as those employees and business owners spend their income in the local economy.
Despite the ubiquitous shop local campaigns, it's not only retailers who contribute to the health and wealth of their towns. Stacy Mitchell, of the Institute for Local Self-Reliance, explains, "One of the primary reasons that a dollar at a locally owned business goes so much further is that local businesses tend to rely on other local businesses for the goods and services they need. They bank at the local banks, hire a local accountant, a local web designer, and they advertise more in local newspapers and radio stations. They tend to be enmeshed in a web of economic connections."
Smaller, neighborhood-based businesses are even good for the environment, according to Mitchell. Big-box stores consume acres of real estate, usually on sites that were former farmland or wild, and they serve a larger area than the mom-and-pop stores. Because of the rise of large chain stores, she says, the number of miles logged per household for shopping has grown more than 300 percent, while household driving overall has expanded 75 percent.
In addition to hard dollars, local businesses also tend to be the charitable mainstays of a community. Indie businesses frequently act as ad hoc community centers, says Meg Smith, membership and marketing officer for the American Booksellers Association (ABA). She points to the way book stores are including cafes and hosting not only readings but also other types of events.
"The stores that are focused on keeping themselves at the center of the community are finding ways to sustain themselves," she says.
It doesn't take much local spending to have a big impact on a community, either. Civic Economics, an economic analysis and strategic planning consultancy, has run the numbers on communities including New Orleans, Austin, San Francisco and Grand Rapids. The researchers found that shifting just 10 percent of purchasing to local stores in Grand Rapids would generate more than1,600 new jobs and a payroll of $53.3 million dollars in new wages in the county.
"It's a dramatic change you can achieve," says Civic Economics partner Dan Houston. "Just move 10 percent of your shopping, one out of every 10 trips. It's totally doable."
The ABA's IndieBound program encourages independent booksellers to get together with other independent businesses in their community to build strong Main Street ecosystems that include not only retailers but also other small businesses.
When the ABA launched IndieBound, the goal was to cultivate community, not simply to increase store revenues.
"It's about the basic stuff that makes life good, makes life happy," Smith says. "The message is, 'I don't want people to shop here because they feel guilty. I want them to shop here because it makes them feel good.'"
Shop local campaigns can go only so far; it's business owners themselves who need to carry the ball, Houston says. If you want to find or found an Independent Business Alliance, contact the American Independent Business Alliance. Business Alliance for Local Living Economies also offers help with local business organizing.
Celebrate “Small Business Saturday” by visiting your favorite locally owned businesses on Saturday, November 27th. Learn more about this event and how you can show your support at facebook.com/smallbusinesssaturday.