Posted on February 11, 2008

What’s the best way to boost profits? For most of us, instinct says “grow bigger.” If you’re a retailer, reproduce your store through hundreds of chain outlets. If you’re a manufacturer, build big factories in China. If you’re a biking company, get acquired by a prominent global travel agency.

For Laury Hammel, founder and president of the Longfellow Clubs in the Boston area, growth has meant growing locally. Since 1972 he has created tennis programs, fitness and holistic health centers, day care programs, youth camps, and women’s health clubs – all together, the fifth largest independent health club organization in New England. Besides generating $15 million in revenue per year, Hammel’s businesses have become important and reliable contributors to the community economy.

Longfellow is hardly alone. The Business Alliance for Local Living Economies (BALLE), which Hammel helped found in 2001, has mushroomed into 55 networks with more than 15,000 small-business members, dedicated to the proposition that the best economy is one that is locally owned. In fact, in every community in the United States, one can find signs that say “Locally Owned Restaurant,” “Local Bank,” “We Sell Local Jewelry.” Nowhere does one find a sign that brags “Not Local – Buy from Us!”

Equally striking is that nonlocal businesses are trying, however disingenuously, to sneak into this movement. One of the largest British banks, HSBC, advertises itself as “The World’s Local Bank.” ROK, a construction company, boasts that it’s “The Nation’s Local Builder.” Not.

Even Time magazine, the bell weather of American culture, has noticed. Last spring, it’s cover said “Forget Organic—Eat Local.”

The growing passion of Americans to buy local, invest local, hire local, and think local represents a veritable revolution – what I have called “The Small-Mart Revolution.” Not only are consumers prioritizing price-competitive local goods and services, they are even willing to pay more for them. In fact, one study of residents in Maine, New Hampshire, and Vermont found that 17 to 40 percent of consumers in each state were willing to pay two dollars more to buy a locally produced five-dollar food item. A recent ten-state survey by the Leopold Center for Sustainable Agriculture found that when given a half-dozen premium features for fresh produce and meats, the number one choice—by 75 percent of consumers and 55 percent of food business proprietors— was “grown locally by family farmers.” Organic was far behind.

Consumers are going local for many reasons: for the better taste and healthfulness of local food; for the greater trustworthiness of local safety standards for toys; for the joys of seeing vibrant downtowns; and for the power of an economy filled with entrepreneurs and tourists rather than factory workers and workforce relocation specialists.

Sociologist Paul Ray, who pioneered the concept of “cultural creatives,” estimates that 36 percent of Americans (45 percent of voters) fall into what he calls the “Wisdom Culture Paradigm.” Among its characteristics are: an “anti-materialism . . . that comes partly from movements like voluntary simplicity and ecological sustainability”; an “emerging post-Eighties dimension [that] wants outright prevention of ecological destruction, a slowing of economic growth for saving the environment . . . and an anti-big business, anti-globalization position”; and “a mainstream concern for relationships, altruism and idealism.” Localness is one big characteristic of a product or business that clearly appeals to this group.

So how might you surf the tsunami of localism to improve your own bottom line? Here’s a checklist of ten ways to impress so-called locavores:

(1) Be Locally Owned – First and foremost, be – and remain – locally owned. Local ownership means that a majority of your owners live in your town, your county, or your region. You can be a sole proprietorship, a partnership, an LLC, an S-Corp, anything the keeps control in the community. Just about the only kind of business automatically excluded is a publicly traded corporation. Franchises are suspect, unless you can prove that you control your own sourcing, inventory, and advertising. Cookie-cutter chains are definitely out.

(2) Develop a Local Identity – Let your customers know you are from a place, and take pride in it. Everyone knows, for example, that Ben & Jerry’s ice cream comes from Vermont cows. The New Belgium Brewery is not shy about talking about its myriad connections to its hometown, Ft. Collins, Colorado.

(3) Behave Responsibly – Community-friendly also means being friendly to the environment and the workforce. Hypocrisy doesn’t cut it. That’s why Wal-Mart, despite its many sincere green initiatives, continues to be shunned for its abysmal labor and community practices.

(4) Give Back to the Community – Local businesses give a significantly higher percentage of their revenues to charity than nonlocals do, and so should you. Sponsor local sports teams, contribute prizes to local raffles, underwrite local events.

(5) Maximize Local Value-Added – Companies that keep their headquarters at home but manufacture in China are in trouble, as oil prices and transportation costs rise (far beyond the original labor savings) and as the next generation of democracy-hungry “tank men” revolt against the near prison-like working conditions. There is a growing payoff to producing locally is to boost the economy of your community. Eric Henry, President of TS Designs in North Carolina, represents a new generation of textile manufacturers that uses loyalty to local manufacturing as a way to win loyalty from consumers.

(6) Focus on Local Markets – Another mark of a community-friendly business is to prioritize local stores, so that local consumers know you’re catering to them. You can still sell nationally and globally, just don’t overlook your home base.

(7) Develop Local Partners — Include other local businesses in your success. Use local attorneys and accountants. Purchase office supplies and furniture from local stores. Bring in local partners for government contract bids.

(8) Grow Deep – Think about what a Longfellow growth strategy might look like for you. How might you diversify product lines and services for your local base that increase local consumer awareness of, excitement in, and price in your business? In Ann Arbor Paul Saginaw and Ari Weinzweig grew Zingerman’s Deli, not into a national chain, but into a bakery, a high-end restaurant, a catering service, a creamery, a coffee company, and a consulting business – all profitable local businesses.

(9) Avoid Predatory Behavior – Cold-blooded sharks are not welcome in warm community waters. Interstate banks, for example, have expanded this way, gobbling up local financial institutions and regurgitating automated banks that suck capital out of localities. A community-friendly business should be seen as nurturing other local businesses, not swallowing them.

(10) Exit Locally - One place where otherwise exemplary community businesses fall apart is when the founder “exits.” Will you sell into the community, or sell it out? When Tom’s of Maine sold out to Colgate, some customers crossed it off their community-friendly list. The alternative might be to sell your company over time to your workforce, as the founders of the Seventh Generation are now doing. Or you might create local stock. When Ben & Jerry’s first went public, you had to be a resident of Vermont to buy and own the stock. (Unfortunately, it abandoned this strategy with subsequent stock issues, which opened it up to a takeover by Unilever.)

While there are purists among the locavores, most are pretty pragmatic. So even companies that are not locally owned can adopt nearly all the practices above and reap substantial rewards. Whole Foods is clearly not a locally owned business, but after a widely publicized series of debates between CEO John Mackey and essayist Michael Pollan, has undertaken a serious commitment to sourcing local food.

Some of you may be thinking: “Sure, this is great, but I’m too small to benefit from these ideas. Heck—it takes all my waking hours just to keep the lights on.” This underscores the importance of joining – or starting – business alliances like those of BALLE. The spread of “Think Local First” campaigns has enable all kinds of local businesses to team up and market themselves affordably together. Around the country we’re seeing these alliances deploy dozens of tools – directories, coupon books, local debit cards, “Shop Local First Weeks” – that are improving the bottom line of participating local businesses.

The bottom line is this: Consumers are bored with the same old brands, chain stores, and shopping malls. Commenting on the new interest in independent boutiques around the country, Bob Michaels, president of General Growth Properties, an owner of 240 malls in forty-four states, offers advice the outdoor industry should heed, “[Business] is about change, and if you don’t bring in something unique, you’re going to miss the boat.”

By Michael H. Shuman

Editor's Note: A version of this piece was originally published in the Winter Outdoor 2008 issue of Gear Trends magazine.