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“What goes around comes around”: Small businesses reinvesting in local communities

For every dollar spent at a small business in Australia, 42 cents, on average, is reinvested back into their local community, according to a research report released by American Express to kick-start its month-long Shop Small campaign.

Running throughout November, the national campaign encourages the business community as well as governments and consumers to support small businesses.

The Shopping Small: Keeping it in the Community Report reveals what American Express describes as the ‘Boomerang Dollar’ effect – namely, small businesses return more than two fifths of every dollar they earn to their local community in the form of salaries for residents (27 cents), payments to local suppliers (12 cents) and contributions to local charities, schools and sponsorships (3 cents).

Although two in three consumers indicated they would choose a small business or recommend one if it supported other local businesses, just 29% reported increasing their small business expenditure over the past year – a drop from 37% in 2016.

Nevertheless, the research also found that 43% of small businesses had increased turnover in the past year, with a further 41% ‘holding steady’. Further, businesses with strong neighbourhood networks reported increased sales through referrals (53%), a sense of satisfaction from supporting neighbourhood economies (43%), and increased customer reach (41%). Relevantly,

Commenting on the findings, Katrina Konstas, Vice President for Small Merchants at American Express said, “What goes around comes around. Independent businesses have long been recognised as a source of employment and neighbourhood character, but the multiplier effect of choosing to spend money at small businesses is less well known.

“The ‘Boomerang Dollar’ effect shows that almost $38 billion** is reinvested into our communities every year through local spending – that’s a huge amount that’s going back into business’ tills, workers’ pockets and towards worthy community causes. Shopping small can have an enormous effect.”

Peter Strong, CEO of the Council of Small Business of Australia (COSBOA), observed: “Australia is a nation of neighbourhoods where we put down roots we keep planted for years, so we invest in the places we call home. Loyalty may be an old-fashioned concept, but when you consider that the majority*** of Australians have lived in their local area for three years or more, the longevity of local businesses is important. From years of supporting Shop Small, and the role I play every day at COSBOA, I know the importance of culture and community: which is why I encourage all Australians to join the movement this November.”

*Businesses were asked to break down the proportion they spent on local community rather than detail the entire range of their outgoings.

**Figure calculated using ABS’s data on average weekly household expenditures of $750.36 for a range of consumer goods and services and 9,270,000 households in Australia. Consumer respondents claimed 24.6% of expenditure is in small business, totalling $88,978,069,462 annual expenditure of selected consumer goods spent in local small businesses. Small business owners were asked to break down the proportion they spent on local community, which accounted for 42 per cent of turnover.

***82 per cent of the survey respondents claimed they have lived in their area for three years or more

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James Harkness

James Harkness

James Harnkess previous editor at Dynamic Business

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