One major advantage of local businesses to the local economy is that they typically employ a wide variety of supporting services that must also be obtained locally. For example, if a local business needs to add to its facilities, it will hire a local contractor. Local businesses, like newborn photography businesses, might also require the services of a tax preparer, cleaning service, or other local businesses, which increases the amount of work for everyone in the local economy.
Keeping Money in the Area
Another advantage of local businesses is that more of the money spent at a local business stays in the local area. A study done in 2003 in Austin, Texas, by the American Independence Business Alliance found that out of every $100 spent at a nationwide chain store, only about $13 stayed in the local economy. However, out of every $100 spent at a locally owned and operated business, about $45 stayed in the local economy. This provides a huge boost to other local businesses, workers, and families in the local area.
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 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 service.
Access to Services
Along with the standard-of-living increases inherent in raising local employment, the presence of many business types, like a local newborn photography business, 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.