By Tom Gangewer
Residents of Portland, Maine are constantly reminded about the benefits of patronizing local, independently owned businesses through the work of Portland Buy Local, a non-profit organization working to strengthen the local economy, preserve community character and create ongoing opportunities for local entrepreneurs.
Portland is one of many communities that have commissioned economic impact studies to measure what happens to money spent at local, independent businesses compared to big box stores. A study conducted by the Maine Center for Economic Policy and funded by Portland Buy Local concluded that each $100 spent at a locally owned business generates $58 in additional local economic impact, compared to $33 when purchasing from a chain outlet – a difference of 76 percent. [Note: the $59 direct return in Portland are higher than average among U.S. communities. Learn more and see national averages.]
The results of the Portland Buy Local study and others like it inspired me to take a closer look at my own business. I’m a partner in an independent payroll and accounting firm named Local Economy, so I decided to see how much of each dollar spent at our business stays here in Maine.
We found that 69 cents of every dollar spent at our business stays in Maine, breaking down like this:
- 27 cents of every dollar was paid as net salaries to employees. This is actual take-home pay that goes into employees’ bank accounts after all federal and state taxes have been withheld.
- 14 cents of each dollar was net profit that went to owners of our company — all of them local.
- 8 cents was paid to Community Health Options, a health insurance company headquartered in Lewiston, Maine.
- 6 cents went to our local Portland landlord for rent.
- 6 cents was paid to the state of Maine in the form of state income tax withholdings, state unemployment insurance, state payroll processing bond insurance and state business licenses.
- The remaining 8 cents that was put back into the local Maine economy went to independent vendors for office supplies, a locally-owned moving company (we moved our office last year), our local computer repair guru, our local electrician (who helped wire our new office), a local security monitoring company, a local paper shredding company, a local attorney, local restaurants and our local bank, plus a few others.
Compare this with buying from a business with a location in Maine but which maintains its corporate headquarters outside the state. Yes, the local office provides jobs for Mainers and possibly rental income to local landlords, but some portion of the dollars you spend with those companies pays for the salaries of out-of-state executives and corporate staff. Those out-of-state workers aren’t paying Maine state income tax, and goods purchased by the corporate office aren’t charged Maine sales tax which pays for our infrastructure and provides state services. It’s a good bet that much of their budget for office supplies, legal advice and many other services go out of state as well.
Now consider how much of your money will stay in Maine when you purchase from an online retailer with no physical office in our state. The answer is: pretty much zero!
The point is to keep local businesses in mind. Independently owned businesses are a vital component of what makes all of our communities tick. We understand that what benefits us benefits you – and just as importantly – what benefits you benefits us. We drive on the same roads, send our kids to the same schools, travel from the same airport and love the same city that you do.
All of us, the independent business owners and our customers, are what make our community unique and give it an incredible sense of place.
Tom Gangewer and his partner, Jim Belanger, own Local Economy, a payroll, income tax and accounting services provider. He serves on the Board of Directors for Portland Buy Local, and is the Accountant in Residence for Maine College of Art.
- The Multiplier Effect of Local, Independent Businesses
- Portland Buy Local Keeps the Soul in One of New England’s Great Cities