© 2017 Michael
Swickard, Ph.D. It happens
often that a local business closes. We have enjoyed years of that business in
our community but now it is closed. Rarely do we understand what happened.
There is a
popular show, “The price is right” where contestants must know the correct
price of items. When a local company goes out of business one explainer is that
they didn’t charge enough for their products. Not always. There are other
explainers.
Restaurants
are one type of business I notice when they close because several have closed
even though I was a regular customer. Businesses come and businesses go. It is
a natural happening in our free enterprise model of capitalism.
The
popular notion is that anyone in business for themselves are rich. Nothing
could be further from the truth. The one commonality is most local businesses
are started by risk-takers. They put up the money and their own time to see if we
will vote for their ideas with our wallets.
The first
danger for sustainable businesses is that their prices are too low for the cost
of doing business. So, they can be in business for a while before they run out
of money. If that happens then they go out of business.
The most
important issue is the return on investment for someone in business. There are
ways to change the bottom line such as quality and efficiency. But ultimately
the buyer is the judge and jury of that success. Except for when the government
gets involved.
The
government regulations are a component in the price and bottom line. They
require the business to do things they may not want to do such as pay more for
employees than would allow for a profit. At times.
This is
not good for either the employees or the customers when businesses close. Then
the businesses that are left leave less choice and price pressure to support
customers.
Sometimes
the loss of profit is obscured by inventory only to eventually kill the
business. The patron of the business pays the asked price or they go somewhere
else. The lure of going to a bigger town means that money leaves which does kill
businesses.
The
economic pressures on local businesses include competition, cost of goods and
the changing needs of our population. In the computer business, it used to be a
value-added store where the customer knew little and the store experts were
needed to walk customers through getting a computer up and running.
Then it
all changed and those stores closed. The new online option for purchase makes
it harder to be in local business if you sell some items. The same is true for
local restaurants. But there is one thing that local businesses do that the big
ones do not.
The local business
owners spend their money in the local economy. The nationals ship the money out
of your town quickly. Will losing money out-of-town close local businesses? Of
course. That price is always wrong for your town.
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