#30: Local Economy Multipliers | Michael H. Shuman
Shop local is a mantra we’re hearing – and hopefully practicing – more often these days. Did you know we can also invest local? Michael H. Shuman is an expert in local economies. He’s a lawyer, economist, entrepreneur, author and activist when it comes to local. We cover the positive social and economic impact of local investment and talk about challenges and new solutions local business owners face. Hint: those that innovate – teaming up with like-minded small businesses in their vicinity, crowdsourcing, engaging their customers – are more likely to thrive.
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“Local businesses spend more of their money locally, and with those local relationships, what happens is that money stays in the economy. And you get the multiplier effect, which generates more income, wealth and jobs.”
– Michael H. Shuman
Home-growing a local economy
Around the holidays we often hear the rallying cry to “shop local.” We also hear that it boosts the local economy. Michael H. Shuman is here this week to share the true magnitude of just how important this is for local communities. He also clarifies what constitutes a local business and how they interact with and enhance their environments.
Local businesses have new sets of challenges that also require new solutions. Those that innovate – teaming up with like-minded small businesses in their vicinity, crowdsourcing, engaging their customers – are more likely to thrive.
Finally, the ability to invest in local businesses through self-directed IRAs and solo 401(K)s is becoming easier and provides a bridge between investors and local business owners.
All indicators rise with more local businesses
[10:06] “Regression analysis of communities across the United States [shows] that in those communities with the highest density of locally owned business, there’s the highest per capita job growth rate. And another study from the Federal Reserve in 2013 shows that when you look at counties across the United States and those counties with the highest density of locally owned business, there’s the highest per capita income growth rate.”
[11:03] “They are part of [communities] through volunteering, working through schools, supporting schools, etc. And it shows that in communities with a high density of locally owned business, there are higher rates of volunteership, higher rates of voting, higher rates of engagement in charities, higher rates of social stability.”
Collaboration is key
[12:46] “My biggest piece of advice to a local business proprietor is, stop acting alone, you don’t have the bandwidth to do everything you need to do to succeed. What you do need to do is bring in partners…partners in your ownership. I would bring in some of your customers as co-owners of your business, and also as helpers in the decision-making of your business.”
[28:16] “It’s pretty hard for one local business, especially a small one to take this initiative on his or her own. But if you have a collection of 20, or 50, or 100, businesses working together, these are problems that can be solved. The COVID-19 pandemic has been an invitation to local businesses who’ve been struggling to think about how to pursue their business model a little bit differently, a little bit more collaboratively.”
Partnering with other businesses can take many forms, such as collectively buying foodstuffs and equipment if you’re in the service industry, to bring down unit costs and become more competitive – establishing themselves as a mainstay in the business arena.
Female and minority-owned businesses are setting new standards
[16:18] “What we’ve seen with investment crowdfunding is that a half-million Americans put about $370 million into 1500 businesses. The most disproportionately successful businesses have been those run by women and people of color, those are the ones who have welcomed in grassroots ownership, grassroots partners. And also it represents the people who were locked out of the conventional capital markets. All of these outgroups are innovating in a different and exciting way.”
Michael H. Shuman’s website and more resources:
By purchasing through Bookshop you’ll support local, independent bookstores. Rise Leaders is an affiliate and may benefit from your purchase.
Put Your Money Where Your Life Is: How to Invest Locally Using Self-Directed IRAs and Solo 401(K)s:
The Local Economy Solution: How Innovative, Self-Financing “pollinator” Enterprises Can Grow Jobs and Prosperity
Local Investing Groups & LIONs:
Interview with Turn’s founder Lauren Clarke:
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