I remember a professor in business school making the comment that a rising tide floats all boats. He was referring to how every business is affected positively when the economy starts to improve. The comment must have made an impression on me since I can still recall it some 35 years later. But, thinking about it today in an Internet environment where companies can seamlessly conduct business around the world I question whether a rising tide in India will float my boat in Colorado. The impact of revenue generated in the economy, the money multiplier effect, is $1 of spending will create $10 in revenue and spending as the $1 changes hands. How then will the Colorado market benefit from a $1 that I spend in India? It won’t.
Now don’t get me wrong, I’m not an isolationist who doesn’t want the United States trading with other countries. I do believe that there are some products and services that can’t be produced by companies in the United States and it does make sense to meet local demand by importing these products and services. I also believe there is some merit to the argument that a country should use its limited resources to achieve the maximum output. However, I don’t believe we should be purchasing products and services elsewhere when they are available in our own back yard. Yes, perhaps we will have to pay a slight premium to support local business but if this premium is viewed as an investment in the local economy isn’t it justifiable? Consider this premium as part of your marketing budget where you purchase products and services from local providers and the local providers in return spends the revenue generated from those purchases to pay overhead such as rent and payroll. The recipients of those funds in return use them to pay their obligations locally as well. With time that $1 changes hands 10 times, adding to the local economy and a slow rise in the economy will begin to occur. If enough people embrace this concept there wouldn’t be a slow rise in tide but an actual tidal way from the synergies caused by this local patronage.
I understand the need to be competitive in the marketplace requires sourcing out for the lowest prices and that in some cases the lowest prices aren’t available locally. However, would there be a problem if opportunities are presented to both local and remote suppliers and in the case of the lowest price being found outside the local market the local provider being offered an opportunity to match the remote providers bid? Yes, I’ve heard some individuals state they aren’t comfortable with offering the opportunity to match bids and that if the local provider wants the business they need to provide competitive pricing in their bids. However, the local provider’s overhead cost might be higher than the remote provider’s and while both providers may be bidding to gain the same margins the remote provider can do so while charging a lower price. Therefore I believe it is okay to give the local provider an opportunity to lower their margins to gain business.
For these reasons I choose to support local companies and support the local economy. What about you?
CEO, Employing Broker
Katchen Company, founded in 1962, is an integrated real estate company with its corporate headquarters inLakewood,Colorado. The company offers real estate development, redevelopment, property management, brokerage, consulting services, construction oversight and maintenance services to individual and institutional real estate investors throughout the greater Denver metropolitan area in Denver with satellite offices in Chicago, Las Vegas and Miami market areas.