Swickard: When the price is wrong

© 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.