I know change doesn’t happen overnight, but witnessing Philadelphia be relinquished from its title of poorest major city in the U.S. cannot happen soon enough.
One major strategy to do so is to advance our local independent business community – the backbone of a vibrant, equitable, and resilient economy. A “Local First” economic development model is the most effective way to promote equitable economic growth and build wealth in our communities.
Thriving communities necessitate a thriving local economy.
The American Independent Business Alliance Reports: “More than one dozen studies over the past decade show locally-owned independent restaurants re-spend twice as much per dollar of revenue in our local economy than chain restaurants. And independent retailers re-spend more than three times as much of each sales dollar locally compared to their chain competitors. That adds up to a huge difference in creating local jobs and local wealth.”
This impact demonstrates the benefits of the “local multiplier effect,” which explains that money spent at locally owned businesses circulates through the local economy up to three times more than money spent at non-local businesses. This economic impact is not limited to retail and restaurants; it applies to all locally-owned independent businesses.
Most of our local economy might be comprised of small businesses (less than 50 employees), but their impact is huge.
Last October, Forbes reported: “Small businesses generate three-fifths of net new jobs, driving a big share of U.S. employment growth. In total, small businesses employ 58 million or 47.8 percent of all private-sector employees.”
One of the most impactful ways to advance local businesses and provide long-term positive economic impact to communities in the Greater Philadelphia region is to prioritize local first in all contracting, including in our procurement processes and policies.
Each year, Philadelphia’s “Eds and Meds” (aka anchor institutions) spend over $5 billion annually on goods and services, although unfortunately only about half is spent with the region’s local vendors.
Simply put, this is a huge miss for the local economy because “every $1 million spent by anchor institutions with local vendors actually represents $1.5 million in expenditures within Philadelphia and supports 10 additional local jobs” (Philadelphia, Office of the Controller Report, 2014).
If Philadelphia’s institutions increased their local contracting by an additional 25%, it would translate to about $1 billion in additional local expenditures each year, support an additional 4,400 jobs, increase annual labor income by $280 million, and increase annual tax revenue for the City by about $14 million.
If we zoom out and consider how many anchor institutions are in the entire Greater Philadelphia Area, it’s easy to see a more economically resilient future for the entire region (not to mention the positive social and environmental impacts that come with a thriving local economy.)
This influx of tax revenue and the greater economic impact that a “local first” economy bring will undeniably provide the City and region with more resources needed to address our poverty crisis.
Because of this potential, the Sustainable Business Network of Greater Philadelphia (SBN) undertook research to understand how we and others could help locally-owned, predominantly small businesses better access contract opportunities with local government and anchor institutions. Our research engaged nearly 200 local independent businesses, with an intentional focus on women, minority, and/or disadvantaged-owned businesses, to learn from them what barriers they faced and what their ideas were for solutions. Forty percent of the businesses engaged in this study identified as WMDBEs.
The report (link) includes seven Programmatic Recommendations and four Procedural Recommendations that identify capacity-building resources and other strategies that could help our local independent businesses community overcome barriers to accessing contract opportunities with local government and anchor institutions.
It is important to recognize that our local business community is not starting from scratch. Not only does our region have a storied past connected to the early days of the “business as a force for good” movement, but voters have already demonstrated their interest in rethinking local contracting away from lowest cost and instead towards highest value.
In May 2017, Philadelphia voters approved a ballot measure allowing “for the award of certain contracts based on best value to the City” allowing for important considerations beyond price when awarding contracts, such as local; women, minority, and/or disadvantaged ownership; workforce diversity and inclusion; and triple bottom line business practices of people, planet, and profit.
As we define and implement “best value” practices, a local-first approach to procurement is foundational given the proven value our local independent business community contributes to our economy, our communities, and our environment.
And then we can move away from being known for poverty, and instead towards our region’s position as the leader in the global impact business movement.
We can be known for our just, green, and thriving local economy.
This op-ed was first published on August 24, 2018 in the Philadelphia Business Journal.