by Susan Paul, Georgia SBDC Do you know what your local economy has in common with an old-fashioned wooden bucket? The answer is leakage. Similar to the way water spills and leaks out of a bucket, money is constantly "leaking" out of your local economy. Economic growth occurs when "new" money flows into an economy. Conversely, economic growth is stunted when money leaks out. Money leaks out of a community in several ways. Money leaks out when goods and services are purchased out of town. For example, when a dollar from a local employer is being paid to a local worker, the worker may spend part of that dollar at a local business and part of that dollar at a business outside the community. The local business spends part of that dollar at another local business and at a business outside the community, and so forth. Money can also leak out when local resources are invested on ventures that don't pay off or investments are made in outside ventures instead of local business opportunities. Below are five actions that citizens, businesses, and economic development entities can take to minimize the leakage and help keep money in "the bucket." First, improve local linkages to increase the flow of dollars between local buyers and sellers. In other words, create opportunities for local firms and households to buy their goods and services locally. Within a community, local business owners can think of their stores as integrated parts of a local shopping system. Small town merchants can highlight local attachment through extensive friendships and quality service. Personalized service differentiates local stores from those in larger cities. A community might consider identifying the reasons products are purchased elsewhere, work towards minimizing the reasons, and offer products locally. Second, retain and expand existing firms. In his "Entrepreneurial Climate Test," David Birch (Entrepreneurial Hot Spots: The Best Places in America to Start and Grow a Company) asks the question, "does a city's economic development department spend more time helping local companies grow than it does chasing after branch facilities of out-of-state corporations?" Think of your local businesses as a crop. In order to grow, it needs to be nurtured. Chambers can nurture by supporting local businesses through activities such as workforce development initiatives or the development of a local business council. These actions can help create a business-friendly community. A third step is to create an atmosphere for new business development. Again, using the crop analogy, for crops to grow and prosper, there must be a fertile environment. For local entrepreneurs to consider starting a business, land, labor, and capital need to be available in the community. Birch again asks, "Is there decent, affordable office and industrial space available for new businesses in the central business district?" and "Are innovative companies able to recruit nearly all their professional work force from the local area?" Location and labor force availability are two considerations for new business formation. hotel rooms Lloret de MarAnother strategy is to retain tourism dollars. Do you remember the "Stay and See Georgia" advertising campaign? This advertisement encouraged Georgians to vacation in Georgia. Tourism is the second largest industry in the state of Georgia. If tourism is important to your economy, provide opportunities to keep those tourist dollars at home. stay overnight TartuAction number 5 is to use civic institutions to support the local economy through their activities. Civic institutions (hospitals, police stations, churches, schools, parks, and libraries) can play a role in investing in the local economy. They engage in some of the same activities as citizens or business owners. A few of these activities are purchasing locally, hiring locally, and supporting local business development (retention, expansion, and creation of businesses). Everyone who lives and works in a community can do something to help "plug the holes" in the economic bucket in an attempt to keep money from flowing out of the local economy. To obtain small business assistance contact a consultant at a Small Business DevelopmentCenter.
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