Over the past few weeks, the emphasis on the ecosystem between big and small businesses and those both local and national has come into greater focus. While we often talk about personal financial topics or those current events affecting the national ecosystem, and therefore the markets more directly, this week we’re turning our attention to our small business community in Longmont and the area around. For those who don’t work for a small local business or own one, don’t worry, there are still plenty of valuable takeaways here that might affect both how you think about your own income and how it’s spent.
The Lifecycle of Dollars in the Community
A community like Longmont is often built initially with outside investment. For example, much of Colorado and its communities were built early on around either mining activity or trade and commerce in support of expansion to the west. As the state matured, it grew its tourism revenue through ski resorts and assorted wildlife and mountaineering events. Today, it enjoys a great deal of aerospace, technology, and defense investment in addition to these more traditional lines of business.
But why that matters now is in understanding the existence of “primary employers” in a marketplace; these are businesses, whether big or small, that predominantly bring revenue in from “the outside.” These include big employers in our area like Broadcom, Seagate, IBM, and Google, but also smaller employers like those that work in accounting or corporate legal functions that support larger businesses outside of the community.
As revenue comes into those primary employers, they, in turn, pay local employees and vendors. Those local employees and vendors then spend that money in the local marketplace for housing, utilities, and retail or consumer goods and services. Those expenditures generate property, sales, and use tax, which then are spent by the municipalities on infrastructure and public services. That infrastructure and public service spending increases the appeal of the community, which in turn attract primary employers to grow or establish their businesses in the community, which in turn attracts new outside revenue; and so on the cycle continues.
Great. So why talk about this?
A few weeks ago, MY Wealth Planners sponsored the Longmont Area Chamber of Commerce’s State of the City event, which invited civic and city leaders to comment and speak on the financial and organizational health of the city itself, the school district, and the community college. In turn, in my position of privilege as a board member for the Longmont Area Chamber of Commerce and in serving on its Public Policy Committee for the past decade-plus, a couple of trends of concern have arisen. Specifically:
- Sales and use taxes are down dramatically within the City of Longmont.
- Small business closures in unincorporated Boulder County and the City of Boulder have accelerated with the passage of aggressive minimum wage increases, such that the County is now considering rolling back some of the increases.
- A significant sample in a survey of local downtown and community businesses in Longmont indicates that many of the small businesses downtown anticipate they may not survive past Q4 if the holiday season doesn’t go well.*
- Sanitas Brewing, a landmark brewery in Boulder, is closing.
- Winchell’s is finally re-opening on December 1st (a clear sign of everything being upside down.)
*No link, these are not public reports.
And all of this to say, it’s an odd circumstance. The economy on a national scale seems to be trending positively, albeit we’re a bit behind on CPI, GDP, and unemployment reports due to the recent government shutdown. There have been no material or major closures or exoduses of business in Boulder County or the surrounding area. Heck, there’s even cause for localized economic optimism with events like the Sundance Festival coming to Boulder in the near future.
Yet, it seems to be a considered and serious trend that many small businesses in the area are struggling. Items like the decline in sales and use tax are clear lagging indicators of declines in the sale of retail goods in local businesses and a decline in the investment in new real estate and capital equipment purchases and installations in the local marketplace. The closure of businesses due to minimum wage acceleration is predictable, but clearly hit harder than city and county leaders in Boulder each respectively anticipated. And the closure of a popular brewery at the same time that a definitely-not-a-money-laundering-or-drug-front-donut-shop** in the local community is finally reopening after years suggests that there are more economic headwinds impacting the community than we’d expect.
People are not spending locally as much as they used to, and investment has slowed and otherwise declined locally compared to where it was. While we might look to the recent investment raise at a local landmark like Lefthand Brewing Company as being a desire to generate liquidity for some of the more senior investors, it’s no less likely that such an activity was undertaken to help weather some of the economic headwinds that are rather apparent in our local community.
**I have zero evidence that Winchell’s is actually either of those things so please take it as the joke it’s intended to be, but I also have no notion as to why any retail business would close for almost a decade while retaining all the property taxes and costs of ownership without reinvesting or otherwise trying to generate and recover revenue to cover said costs.
So, What To Do About That?
Remarkably, the answer is as simple as it is banal: “Shop local.”
I’ve never been a fan of “shop local” as an argument in and of itself. Being local is seldom a value proposition. While a Denny’s in Tampa isn’t going to win my breakfast business this morning, paying “extra” for a sweater or to source sour cream from a nearby farm instead of buying a cheaper “dollop of Daisy” has never really been much of an argument to me. Nor has the argument that big company CEOs or Billionaires have too much money ever really stuck; after all, most of our pensions and retirement plans live or die based on the success of those big publicly traded companies!
But, as an individual and a firm that loves Longmont and wants to see it thrive, I know I’ll be directing my patronage for the next few months exclusively to local businesses to hopefully help see them through the season. Yes, that means buying a little less on Amazon, and driving a bit more to go to a store other than Target or King Soopers for assorted sundries. And while I wish the value proposition of “local” was a bit more economical than cultural, I’d be devastated to see a landmark like Martini’s Bistro, Bricks on Main, or the Pumphouse go away. So that’s where my patronage will be for a good while, both for and around the holidays, and hopefully beyond.
The ecosystem of primary employer to local employees to local community to reinvestment in said community to attract more primary employers requires that we all be involved in one part or another of that cycle, and I know where I’ll be. Longmont Local, at least for the time being, even if it means stretching my dollar a bit more. Sorry, Jeff Bezos, your next yacht will have to wait.