The Importance of Local Business

Local businesses are vital to creating and sustaining a strong sense of community, and to the economic well-being of that community. While big-box stores provide the appearance of value to the consumer, they degrade the character and economic potential of the community as a whole.

The value proposition of chain retail and big-box stores to both the consumer and to cities is apparent. The consumer can buy more at lower prices, increasing their standard of living at the moment. Cities can get an infusion of jobs and the promise of increased property and sales tax revenue. It is this immediate and, more importantly, easy to articulate gratification that makes big-box stores, chain retail, and the regional shopping centers they often inhabit so popular.

The argument for small, local business is much more difficult to articulate, and even when it is well articulated people often don’t want to wait for the rewards a vibrant local business community has to offer. But those rewards can be prodigious for a community.

Businesses generate wealth. Businesses put together the capital, labor, and materials required to produce additional wealth. Big-box stores and chain retail take that wealth and move it out of a community, either reinvesting it into expanding into other communities or paying it out as dividends to shareholders. The only wealth that actually stays in the community is in the form of wages paid to the store employees. While we can’t discount the importance of jobs to a community, there is the potential for both those jobs and retaining the created wealth in the community.

Locally owned businesses work in the exact same way as the chains and big-box stores. The wealth they create is paid out to the business owners. The real difference is that instead of the business owners being distributed around the world or concentrated in other cities, they live right in the community that created the wealth in the first place.

In addition to local businesses growing a community’s wealth, a vibrant local business community enables members of that community to go from somebody paid for their labor, to an entrepreneur who is able to grow their own and the community’s wealth through starting and building their own business. In most places, a strong local business community is a necessity for somebody starting and growing a small business to find the required capital.

Growing a community’s monetary wealth isn’t the only advantage to a vibrant local business community. Local businesses also contribute to a community’s character and community spirit. Local businesses serve to differentiate one community from another. Local businesses create a destination within a city that can draw residents from out of town, which has the added benefit of bringing additional tax revenue into the city. Chain stores don’t have that ability, since each community tends to have an identical set of chain stores, which provide no draw or differentiation between communities.

A community that wishes to embrace and encourage local businesses need the land use patterns, municipal policies, and local institutions to support those businesses. This includes the creation of walkable communities, an elimination of burdensome requirements for new businesses, and local financial institutions that provide both debt and equity to small and growing local businesses. With these land use patterns, policies, and institutions in place communities can create a vibrant local business community.

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