Quantifying Local Startup Impact

When talking about the virtues of entrepreneurship for local communities, my two favorite benefits are transference of personal growth and high quality job creation. The faster people grow at work, the more abilities they have to help their community. The more high paying jobs, the more taxes and economic impact to help their community.

Startups have much greater opportunities for personal development, being growth focused organizations at their core. Fast growth translates into more leadership training, more pushing the limits personally, and more overall personal growth. Values and lessons developed in the startup spill over into the local non-profits, community organizations, and religious organizations. The faster people grow personally, the greater everyone around them benefits.

High quality job creation is a real challenge for most communities. Large companies, like the Fortune 500, are the business of doing more volume with fewer employees, and have seen their payrolls shrink. Alternatively, startups, while having a high failure rate, also create a tremendous number of jobs when they hit the growth and scale up stage.

Take for example a startup that’s created 100 jobs. In the non ultra expensive parts of the country, a growth stage startup might have an average salary of $125,000. At a 6% state income tax, that’s $750,000 of annual tax dollars to the state. Add in all the other regular expenditures like food, housing, transportation, local sales taxes, and it’s likely that the startup is contributing $6+ million to the local economy (e.g. half of the total salaries). Hosting a Super Bowl is estimated to bring $100 million of local impact, depending on who you ask. Only, a big event is a one-time impact. Startups persist indefinitely and contribute to the economy year after year. Put another way, adding 20 different 100 person startups to a city is the economic equivalent of having the Super Bowl every single year.

Quantifying local startup impact is difficult. Identifying areas like the benefits of greater personal development and general economic impact begins to outline the value of the startups in local communities.

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