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.
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.
“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, Director,
Neighborhood Associates Corporation
The symbiosis between local business and their neighborhood
[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, and charities, higher rates of social stability.”
Strength in numbers
[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.”
Female and minority-owned businesses are setting new standards
[16:18] "What we've seen with investment crowdfunding is that 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."
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