Local Matters 2022 | Spotlight on Service Providers

LOCAL MATTERS SPOTLIGHT ON SERVICE PROVIDERS A further comparative survey and data analysis detailing the impact of the independent and locally owned business community on Cape Cod

Presented by

Authored by Amanda Converse

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SPOTLIGHT ON SERVICE PROVIDERS

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INTRODUCTION If asked why small businesses are important to local communities, many consumers might point to anecdotal evidence like they make a place unique and contribute to its character. However, both national and local data show the importance of small businesses to local communities beyond feel good stories and the intangible. According to the Small Business Administration, small businesses have accounted for 66 percent of employment growth in the United States over the last 25 years, and on Cape Cod the Cape Cod Commission estimates small businesses with less than 50 employees make up 97.5% of the employers in the region. In addition to being important partners in the employment of the domestic workforce, small businesses are also valuable wealth generators for their communities.

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Since launching our Local Matters research series in 2020, Love Live Local has sought to demonstrate and emphasize this reality on Cape Cod. The first in the series, Local Matters: Measuring Impact, quantified and assessed the impact of Cape Cod’s independent and locally owned businesses on Cape Cod’s economy and demonstrated that dollars spent at locally owned retailers and restaurants generate more local prosperity. The data analysis performed by economics consulting firm Civic Economics found: local retailers and restaurants keep about 2-4 times as much money in the local economy as their national chain competitors; if Amazon’s online sales in Barnstable County had occurred in independent retailers, they would support 125 additional retail outlets and

SPOTLIGHT ON SERVICE PROVIDERS

1,739 additional jobs; and shifting 10% of spending to local retailers would put an additional $112 million in the local economy every year. These findings were consistent with similar studies Civic Economics has conducted from coast to coast over the course of two decades.

SMALL BUSINESSES HAVE ACCOUNTED FOR

66%

OF EMPLOYMENT GROWTH OVER THE LAST 25 YEARS.

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Local businesses have a higher local premium than large corporations due to: • Profits paid out to local owners who also live and play on Cape Cod • Wages paid to local workers who live and play on Cape Cod • Procurement of local goods + services • Charitable giving within the community

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Our 2021 research titled Local Matters: Investigating Influence explored why, despite their demonstrated importance to economic health and prosperity, small local businesses consistently face significant challenges in an increasingly corporatized global marketplace.

The report examined pharmacy benefit managers and how they manipulate prices on pharmaceutical drugs; the control that Google and Facebook have over the internet advertising business, negatively impacting local newspapers; the impact that vertical integration has had on small waste hauling companies as they try to compete with those who also own the landfills; and how the loss of local banks means fewer small business loans. It also provided context for how corporate thirdparty delivery apps are price gouging independent restaurants, and how consolidation in food and farming can lead to price increases. It explored how

SPOTLIGHT ON SERVICE PROVIDERS

the dominance of corporate retailers has cost many small businesses their livelihoods, and the detrimental impacts of two corporations controlling the broadband market and access to the internet.

Citing multiple economic studies, the report asserted that corporate control of the US economy causes supply chain disruptions, lower wages, and higher prices, stifles innovation, has led to fewer small businesses starting up, and means local businesses are not on a level playing field with their corporate counterparts. It also established that policy decisions made at every level of government have enabled these economic realities and have impacted small businesses nationwide and on Cape Cod, and made recommendations for what local, state, and federal policymakers can do to reverse these trends.

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PURPOSE Love Live Local has once again partnered with Civic Economics, to produce our 2022 report which has been underwritten by The Cooperative Bank of Cape Cod and the Horizon Foundation. The third report in our Local Matters series represents a novel addition to Civic Economics’ longrunning Indie Impact Study Series - for the first time the research focuses not on retailers and restaurants but instead on business and personal service providers and quantifying and assessing their impact on Cape Cod local economy.

In the first data analysis we conducted with Civic Economics, we definitively showed that independent retailers and restaurants outperform their corporate competitors by recirculating significantly more of their income back into the local economy.

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With this study, Love Live Local seeks to expand the “shop local conversation” to include business and personal service providers, alongside their retail and restaurant local business counterparts, since they too face challenges due to the proliferation of national chains and ecommerce giants. Local accountants and bookkeepers, printers, and information technology providers face competition from big box chains as well as online services. Fitness centers face national corporate competitors and a growing online marketplace that was intensified by the COVID-19 pandemic.

Local veterinary practices, dentist offices, real estate outfits and funeral homes are getting bought up by large corporations and private equity firms.

And the local travel, legal, continuing education, and insurance sectors have all been negatively impacted by the rapid spread of online commerce.

SPOTLIGHT ON SERVICE PROVIDERS

Local service providers like those listed above are an important contributor to the local economy, representing a $1.5 billion industry on Cape Cod and employing 9.1% of Cape Cod’s workforce.

Through local business surveys, we were able to gather enough data to analyze the impact of two personal and business service industries: fitness centers and accounting firms.

Local personal + business services

9.1%

EMPLOY OF CAPE COD’S WORKFORCE

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WHO WE ARE

LOVE LIVE LOCAL is a Cape Cod organization dedicated to community advocacy and educating consumers on the importance of shopping local. Our mission is to foster an economically sustainable, creative, and exciting future for the Cape and help all those who love this place participate in keeping it special.

Our aim is to work with local businesses to achieve their economic goals and communicate their importance to the sustainability of Cape Cod as a whole, as well as foster community connection among individuals and organizations to improve the overall health of our region.

We achieve this through collaboration with small local businesses and organizations, providing programs to foster continued business growth, producing community events, creating annual publications highlighting the local business community, and representing local brands and makers in our retail store.

CIVIC ECONOMICS is an economic analysis and strategic planning consultancy with offices in Chicago and Tulsa. Since its establishment in Austin in 2002, the firm has earned a national reputation for creative approaches to the problems facing American communities. Civic Economics utilizes state of the art analytical tools and has provided widely varied services across North America and Europe. They know their work matters in the lives of American communities because it has been cited in more than 50 books and countless academic papers and has earned the firm and their client’s regular coverage in the world’s leading newspapers and periodicals.

They are particularly invested in studying and communicating the enhanced economic impact of independent, locally owned businesses to the communities they call home.

To learn more, visit CivicEconomics.com

We also achieve our mission through research and evaluation of the challenges and issues impacting the small local businesses in our community.

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METHODOLOGY Since its establishment in 2002, Civic Economics has conducted several studies comparing the economic impacts of independent, locally owned businesses with that of their chain competitors. More recently, they have begun to include Amazon and their ecommerce site in their analyses as well.

This report is the first in the series to focus on the impact of personal and business service providers. Through local business surveys, we were able to gather enough data to analyze the impact of two classes of service business, both of which face growing competitive pressure from non-local providers: accounting firms and fitness centers.

For the purpose of this study, local and independent business is defined as a privately held business headquartered on Cape Cod whose owners control all the financial and business decisions.

For all the Civic Economics Indie Impact studies, in each participating LO C A L M AT T E R S

community, local organizers are responsible for recruiting businesses to complete a survey to quantify local recirculation of revenues. For this study Love Live Local reached out directly via email and direct mail to approximately 68 locally owned fitness centers, accounting firms, printers and insurance companies between May and August 2022 and asked for their participation in the analysis. Additionally, we included calls for participants on multiple occasions on Facebook, Instagram, Twitter and Linked In, as well as in our monthly email. We also reached out to every Chamber of Commerce and small business nonprofit provider across Cape Cod and asked that they share the survey with their networks.

In the end, 7 accounting firms, 7 fitness centers, 3 printers and 1 insurance company responded. The survey can be somewhat time consuming and requires an in depth look at a businesses’ books.

These factors will naturally impact the survey’s response rate. Unfortunately, we could not ultimately include in the

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analysis printing and insurance agencies because there was insufficient data.

The essential methodology for the survey is local and independent businesses open their accounting records and demonstrate the proportion of revenue expended five categories: 1. Profits paid out to local owners 2. Wages paid to local workers 3. Procurement of goods services for internal use 4. Procurement of local goods for resale, and 5. Charitable giving within the community For the chain competitors, the aggregate value of these is estimated from public records. The difference between these two totals captures the enhanced impact of the one or the other category of business.

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RESULTS + DISCUSSION According to the latest data from the US Census Bureau there are 45 accounting firms employing 536 people on Barnstable County in 2020. The seven accounting firms recirculated an average of 63.2% of their revenue within Barnstable County. This compares to 42.1% recirculation for the largest corporate owned accounting firms. This represents a 50% local premium for the local accounting firms.

According to the latest data from the US Census Bureau there are 48 fitness centers employing 576 people on Barnstable County in 2020. The seven fitness centers surveyed recirculated an average of 58.7% of their revenue within Barnstable County. This compares to 31.8% recirculation for the largest

national chain fitness centers. This represents an 85% local premium for the local fitness firms.

Based on the data from the survey local service providers recirculate 50-85% more of their revenue into the local economy than their corporate competitors.

This difference is largely due to the amount of labor that takes place at locally owned businesses compared to the larger national brands. This allows the local accounting firms to provide more specialized care for the local clients. This was especially apparent during the pandemic when these locally based accounting firms were able to help their clients navigate the varying COVID relief programs by knowing

the vast spectrum of local and state regulations with much more detail than their national competitors who were not as versed in these local and state plans. Additionally, it is clear from the labor costs for local fitness centers, the level of engagement and personal touch is much higher at the local fitness centers as compared to their corporate competitors.

Local personal + business services

RECIRCULATE

50-85%

MORE OF THEIR REVENUE into the local economy than their corporate competitors.

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ACCOUNTING FIRMS: NATIONAL CHAINS vs. INDEPENDENT NONLOCAL PROVIDERS

LOCAL FIRMS Profit & Labor: 55.2&

42.1%

63.2%

Local Recirculation of Revenue

Local Recirculation of Revenue

Charitable Giving: 2.4% Procurement for Resale: 1.2% Procurement for Internal Use: 4.4%

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FITNESS FIRMS: NATIONAL CHAINS vs. INDEPENDENT NONLOCAL PROVIDERS

LOCALLY OWNED PROVIDERS Profit & Labor: 46.8%

31.8% Local

58.7%

Recirculation of Revenue

Local Recirculation of Revenue

Charitable Giving: 2.8% Procurement for Resale: 2.3%

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Procurement for Internal Use: 6.7%

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The comparisons above are based on the premise of national firms that maintain a physical location in Barnstable County. When comparing local firms to a virtual or online service, the difference is even more dramatic.

There is virtually no economic benefit to Barnstable County when using a business service that is not located on Cape Cod. All that money is leaving the community with no economic impact at all. Local service providers not only generate needed local tax dollars and jobs, but they typically recirculate some of their revenue to other locally based businesses which, in turn,

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continue the virtuous cycle. This money eventually winds up improving the local community whether it is going to build schools, roads, parks and providing other essential services to Barnstable County a better place for to live.

Civic Economics has yet to encounter a situation where independents did not present a distinct local impact advantage.

This report is the first in the series to focus on the impact of service providers.

SPOTLIGHT ON SERVICE PROVIDERS

There is virtually

ECONOMIC BENEFIT to Barnstable County when using a business or personal service that is not headquartered on Cape Cod.

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CONCLUSION

Personal + professional services is a

$1.5 billion industry on Cape Cod

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With this study and its 2020 predecessor, Love Live Local and Civic Economics have painted a clear picture of the value of independent, locally owned retailers, restaurants, hotels and business and personal service providers in the distinctive local economy of Cape Cod and Barnstable County.

Together, with the 2021 Local Matters: Investigating Influence, these reports present a compelling image of the economic importance of Cape Cod’s local business ecosystem and the value of supporting it through purchasing decisions and policy choices.

SPOTLIGHT ON SERVICE PROVIDERS

While chains like H&R Block, Staples, Kinkos, Best Buy and Planet Fitness and online services like TaxAct, Vistaprint, LegalZoom, Geico and Peloton extract dollars from Cape Cod, at local businesses who provide a superior level of service, you get a reverberation of local spending. The extra dollars in the local economy produce more jobs for residents, extra tax revenues for local governments, more investment in commercial and residential districts, and enhanced support for local nonprofits, and contribute much more to community vitality.

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THANK YOU THIS IMPORTANT RESEARCH WAS UNDERWRITTEN BY THE COOPERATIVE BANK OF CAPE COD AND THE HORIZON FOUNDATION

OUR THANKS TO THE FOLLOWING LOCAL BUSINESSES FOR COMPLETING THE FINANCIAL SURVEY ON WHICH THIS STUDY IS BASED: BizChecks Payroll Inc. Boardwalk Business Group CRM Bookkeeping & Consulting CrossFit Nauset Daniel A Schwenk CPA LLC Dennis Port Yoga Elite Nation Wellness

Fitness Directions Mid Cape Athletic Club Nove Yoga Orleans Yoga Rodericks Payroll Inc Steven M. Garran, CPA

And special thanks to Kerry Insurance, Lady Slipper Stationery, New England Reprographics and Sunderland Printing for your valuable input to this study.

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