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Buy Local, Eat Local – Invest Local?
May 29, 2012 - Ernest Hohmeyer
My father was a proud entrepreneur.
He believed if you worked hard, provided a product at good value and treated your customers with respect, your business would succeed. As an immigrant, entrepreneurship was the American dream. It was the American way to give anyone a chance to succeed if they worked hard.
Like many crusty entrepreneurs that came from nothing, he also believed you made your own way. He did not pay for our college tuition. His donation was giving us the opportunity to make money by working at the family business.
Entrepreneurship vs. Hand-outs
He did not believe in “government handouts.” Businesses should stand on their own merit. Those that required subsidies or tax incentives would not survive in the long run. Or, as he used to say, “They’ll leave as soon as the freebies stop.”
Some of that thinking still carries over to this day. Government loans, tax breaks, non-profits and “cooperatives” are sometimes looked at as blatant socialism that would not survive the entrepreneurial creed.
On the other hand, today we are being asked to “buy local” and to “eat local.” Support your local businesses and farmers, reduce the carbon footprint, are all things that few would argue with.
Circle of Community Life
Part of this justification is the “circle of life” otherwise known as sustainability. If you support your local business and farmer, they in turn have more money to support your business.
There seems to be a missing link here however, that does not quite make the circle complete.
We live in a tough economy and even in the best of times a seasonal one. New York State still ranks in the bottom half for the cost of doing business. Overall as I reported last week self-employment has been in decline for nearly a decade in New York State. Our school populations are declining and our population aging. It is hard to find workers.
While our communities have had some success, there has been no substantive economic growth. My jaw nearly dropped the other day when I saw all the new activity in the Albany area with their high technology initiatives.
And that gets to the other rub. It’s not that we want a lot of change in our communities, just solid economic sustainability. We become overjoyed when several “micro-businesses” open up shop.
If its Broke….
Economic success does not seem to be happening the old way. As we celebrate May as National Small Business Month, perhaps as a community we need to become entrepreneurial ourselves.
Perhaps to truly create a local sustainable environment we need to complete the circle of life by: “Eat local, buy local – and invest local.”
But hold on, these are not handouts or another request for donations.
There is an exciting new world out there where community people are investing in local businesses – and yes dare I say – to make money.
We have all heard of tightening credit. How many times have seasonal cash flows made many a strong business look weak? How often does a good idea from a local entrepreneur get shot down because they do not have the cash to come up with the down payment?
If we are to “buy local” and “eat local” for all the right sustainable reasons, then why not consider investing local?
There is a book by Amy Cortese that has coined an interesting term in her title “Locavesting.” But this book is not about handouts, it’s about the “Revolution in local investing and how to profit from it.” It’s filled with tons of examples. While not all of the ideas are new, there is a new attitude about using these investment tools to both support the community and to make money while doing it.
We’ve come a long way from the black and white model of private investment versus government handout. In many of these “locavesting” models the government has nothing to do with it – it is solely based on community and business initiatives. Local people are seeking to fill a community need or to spur business growth by investing in local opportunities.
In nearly all of the examples cited, local investors expected some type of return. As a community we have taken strides to invest locally. The Saranac Lake Community Store, mentioned by Cortese is one example. The work done by the community for development projects in Tupper Lake and Saranac Lake are others.
But this is just the tip of the iceberg. Other communities too have struggled to survive and they have reached into their own entrepreneurial spirit to make things happen. In true self-directed fashion, they are not waiting for government handouts or for someone else to make things happen.
Old & New Ideas
And it does not always take money either. We can do simple things such as:
• Economic Profile This would help developers understand what our capacities were in terms of infrastructure, labor, land and incentives
• Business Ambassadors Otherwise known as a “Red Carpet Team” appropriate community representatives would meet with prospective new businesses. These would be broken up by key industry sectors such as a biotech team and a tourism group.
• Business Mentoring Here networks are formed of existing businesses sectors mentoring new businesses.
• Economic Charter This partnering network suggested in last week’s article as a means to provide a coordinated approach to business and community development.
• “We Are Open for Business” Simple marketing materials that directly target the specific types of businesses we want. It talks about the many fine resources such as our local business parks.
• We Have Shown our own Spirit We also have a great deal of resources mentioned in “Locavesting” such as a “community development financial institution,” micro-loan funds and “cooperatives.”
But there are other interesting “Locavesting” examples that Cortese details and again some of them are not new:
• Local Investment Opportunity Networks (LION) Cortese defines these as locals who “facilitate investment by bringing together local investors with local businesses…”
• Direct Public Offering (DPO’s) Used to start Ben and Jerry’s, a DPO “raises capital by selling shares to the public.” Cortese goes on “The difference is that the company raising the money handles the marketing of the offering itself… Eliminating the middleman reduces costs, making the public markets more accessible to smaller companies…”
• Cooperatives This is an old model that has received a new facelift with new investment possibilities including a “multi-stakeholder approach.” Instead of “organizing around just one group, such as producers or workers,” a broad base of businesses can participate. An example cited is bringing together farmers with “institutional buyers such as hospitals and schools.”
• Local Stock Exchange Yes, you heard this right. I was reminded in reading this book, that before the big stock exchange, local ones existed throughout this country. A local stock exchange “handles all of the functions of a stock market… but for a specific region.”
Not all of these ideas may make sense for our region and in some cases we are investing locally already.
But perhaps there is an opportunity to get more of our local community involved. Many of us would like to do something but by ourselves have very little “cash.” Perhaps together, in a more organized fashion we can leverage our resources.
You no longer have to be rich to be an investor. As a community small investments can make a big difference.
Perhaps it is time to start an official community investment effort and consider our own “Local Investment Opportunity Network.”
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