Business Strategies

Recruiting, expanding, retaining and starting businesses continue to be the foundation of most economic development programs. When local businesses make products or provide services to the global marketplace, new money flows into the local economy. Money is retained when businesses sell products locally, employ residents and purchase local materials, supplies and services.

Magnetic Community business strategies differ from traditional economic development strategies in that success is measured in terms of money flow rather than capital investment and jobs. Capital investment and jobs are still important, but only to the extent that they affect the flow of money. The following illustrations show what can happen if the importance of new money, the money trail and money flow are not taken into account when evaluating the economic benefits of different business transactions.

In some instances, two very similar business transactions can produce two very different outcomes for the local economy. In the first transaction, local businesses earn $500 from the sale of $800 in goods and services. In the second transaction, local businesses also earn $500 from the sale of $800 in goods and services. What is not evident is that in the first transaction the local economy gains $500 and in the second, it loses $300. Now imagine the impact of $800,000 rather than $800.

Local Branch Businesses Sell Goods and Services to Customers Outside the Local Economy

When local branch businesses provide goods and services worth $800 to customers outside the local economy, customers pay $800 to the corporate headquarters located outside the local economy. After deducting $300 for overhead and profit, the corporate headquarters pays the local businesses $500. In this case both the local businesses and the local economy are $500 better off.

Local Branch Businesses Sell Goods and Services to Local Customers

When local branch businesses sell goods and services worth $800 to local customers, again customers pay $800 to the corporate headquarters located outside the local economy. After deducting $300 for overhead and profit, the corporate headquarters pays the local businesses $500. In this case, local businesses are still $500 better off and the corporate headquarters still collects $300 but because local customers paid the outside corporate headquarters $800 for the goods and services, the local economy, as a whole, lost $300 (-$800 + $500 = -$300).

Attract Money Strategies

  • Recruit, expand, start, and retain businesses that sell products and provide services to customers outside the local economy.
  • Expand, retain and start locally owned and operated businesses.
  • Add value to local products and services sold outside the local economy.
  • Expand markets beyond the local economy.

Retain Money Strategies

  • Identify local sources for raw materials, supplies and services.
  • Recruit, expand, retain, and start businesses to fill gaps in locally available materials, supplies and services.
  • Identify and hire qualified local workers.
  • Convert in-commuters to residents.
  • Request transferees and new hires to live locally.