The Advantages of Businesses in the Local Economy

Local economies realize distinct benefits from the activities of local small businesses. Small businesses, in turn, can realize competitive advantages by employing a local focus in their service and marketing activities. Major benefits of business in the local economy include a boost in employment and discretionary income in the community, tax income increases for local governments and a loyal customer base for businesses.

Local Employment and Income

One of the most personal advantages of businesses in the local economy is the boost in employment in the region. Employment levels influence a range of other standard-of-living metrics, such as disposable income, home foreclosure rates and new small business startups. Employing people in the local community can stimulate word-of-mouth advertising for a company as well, assuming the company treats its employees well enough to get positive mentions. Local employment also cultivates a sense of community, which can enhance the brand of a local business.

Local Tax Income

Businesses pay a significant portion of all taxes in the United States, including income tax, property tax and employment tax. Having more businesses in the local economy can boost tax income for local governments, bringing in more money to repair roads, develop schools and improve public services.

Access to Services

Along with the standard-of-living increases inherent in raising local employment, the presence of many business types can raise the standard-of-living further by providing a wider range of services and amenities in the local area. Adding a movie theater to a small town, for example, can add an entertainment option to local residents while bringing in money from outlying communities.

Community-Focused Political Advantages

Businesses with strong ties to a local community can lend a hand in community-focused political actions. Businesses can help to fund and organize campaigns for lobbying, letter-writing and other political activities to influence legislators on issues that affect the local community. A local business can help to convince a presidential candidate to hold a campaign speech in the town, for example, by making sizable campaign contributions.

Cultivating Loyal Customers

Businesses with a local focus have the advantage of cultivating a loyal customer base, especially when their services are not threatened by big-box chain stores in the area. While this may not influence company growth, it ensures a certain level of financial sustainability, and helps to ensure the company maintains a positive reputation in at least one region. It may also help small businesses get through tougher economic times, at least temporarily.