There are many reasons to spend with and support local businesses - keeping them operational for continued use, competition, employment & purchasing in your local community...how about

Every $100 you spend in a local business boosts your local economy by $175

Today I want discussion on an often overlooked or underestimated feature of local economies.

How can spending $100 with your Local Business impact your local community (Family, Friends, Neighbours) by $175?

Consider the 4 different types of expenditure where we spend our income.

  • Local economy - local business who create their own products or manufacture them from predominately locally sourced purchases employing locally where required.
  • National retailers who source their products nationally. Includes national on-line purchases
  • International retailers who substantially source their products globaly. Includes International on-line purchases
  • Your Future Fund where you are paying off a mortgage (equity you can use at a later date), adding to investments in retirement planning or Superannuation for later use. Savings for a rainy day.
With some retailers it is not easy to establish if their corporate base is National or International however the origins of their products should be easily assessed. In addition some purchasers may utilise a retailer who offers both Nationally & Internationally sourced products but only purchase nationally sourced.

The more you know about your Retailers, Suppliers and their products the more accurate you can construct your spending model and the contribution to the economy. For my purposes I have constructed the following contribution averages that applies to me.

 

My Purchase estimates is 5% Local Business, 50% Corporate (National Products), 18% Corporate (International Products) & 27% Future Fund of Mortgage payment & Retirement funds.
My Contribution to the Local Economy from local business purchases is $5687.50 ($2437.50 Pot of Gold above the original spend of $3250). This is calculated on the basis that Local Business appreciates the benefit of local purchases and will spend 50% of their income on local purchases

With a review of my purchasing options to supporting local businesses I can realistically increase local purchases to 28% of my income reducing Corporate National products to 30% & Corporate International products to 15%

 

 

 

 

The power of my spending has increased from $69,753 to $80,405 thanks to the ripple effect of spending in my Local Economy

The Pot of Gold to the Local Economy is now $13,650 on top of my original spend of $18,200. There is an additional estimate $4095 added to the Local Economy from the Local content of purchases in the other expenditure types. (see below for further information on my estimates)

The contribution to the Local Economy lifts from $11,090 to $35,945 assisting my family, my friends, my neighbours within this community.

The Federal Government knows only too well that by injecting money by way of Tax cuts, a Cash bonus and/or spending into Australia (its local economy) the ripple affect boosts the economy; similarly, the State Governments will boost the its Local Economy with infrastructure spending. It is up to the local community to boost its local economy through purchasing; and the rewards are well worth it.

There are a number of other reasons to shop local with many small business also committed to care for the product and the environment (leading by example) and we will address these in a later Blog

 Apart from the allocation of spending which is clearly indicated in the tables – I have included the following estimates regarding contribution to the Economies

Local Economy

The Local Economy after the initial allocation (eg. Table2) $18,200 gets 50%* of that spending back in the local community (Business & Personal spend) $9,100 repeating to a third level $4550 (total contribution $31850). The Local Economy also gets 5% from the spend in the other 3 categories to account for local employee / business involvement eg Retail outlet
*50% spend is based on the knowledge small local business understand the importance of spending in the local community

National Economy

Receives 65% of the Corporation (National Product) spend to take into consideration the acquisition of National Products and other National Business Spend, 20% of the Corporate (International Product) spend to take into consideration their National Business spend and 5% from the spend into Your Future Fund to take into consideration their National Business spend.

Australian Produce (1)

Global Economy

Receives 30% of the Corporation (National Product) spend to take into consideration the International Business Spend, 75% of the Corporate (International Product) spend to take into consideration that the majority of their spend is International.

Future Fund

Your Future Fund contribution is 90% of your Future Fund spend as it has minimal impact on either of the domestic economies after the allocation of the 5% to both to allow for Local & National Business needs including employment

 

Everyone’s purchasing scenario will be a little different. If you have reasonable confidence in your knowledge of spending and/or contributions you could tailor your own table to better represent you.

 

 

Message me if you would like a working copy of my table

Would love to hear from any small business that would like their Journey to sustainability to be highlighted in future posts
Peter O'Connor
Journey to Sustainability
Recent Posts