LETs Do Business
The following may be of help to business people trying to involve their business into
Galloway LETSystem
Galloway LETSystem
- Are the profits made by your business growing or declining?
- Can you finance your business expansion plans, check viability of your business ideas, or add new product lines at minimum personal or business risk?
- Is your business affected negatively by local, national, or international recession?
- Do the suppliers of your business, your workers and your customers feel you make a positive contribution to the community of which you are a part?
…at the large scale, by improving the economic health of your local community and …
at the small scale, by conferring real benefits to your business when it joins a LETSystem.
Community Economic Benefits of LETSystems
- Your survival in business depends upon your profitability, the cash flow surplus of income minus expenditure. Thus…
- income derives from the sales of goods and/or services to customers, which may be individuals or other businesses within the community. Equally…
- expenditure is made as payments to individuals or other businesses, also within the community, which supply goods and/or services to the organisation.
A Typical Community
Let us consider a typical community of 4,000 people. This would represent about 1,000 families. The typical average income is about £500 per family per week. So this community has about £500,000 of economic activity a week, nearly £2 million a month or £24 million a year.
Also typically, there is one business for every 20 individuals, or about 200 business enterprises in the community.
In such a community it is not uncommon that a basket of goods that would cost you £100 in a regional town, and in your neighbourhood would cost £120. It is in your interest, therefore, to not buy locally, but save, until you go to one of the regional towns to make all your purchases. Thus, for many communities, it is not uncommon to have 66p in every pound leave the community at the time of the first purchase. Of the 34p remaining, 22p leaves at the time of the 2nd purchase, leaving 12p and so on. At such a rate each pound spent circulates a maximum of 5 times through the local community before it has totally gone, and generates a maximum of about £1.50 of economic work for the residents.
To maintain a local economy of £24 million a year at this rate requires an input of £16 million each year, earned by local community members in its dealings with neighbouring communities. If more than £16 million leaves this community, it grows poorer, if less, then it grows richer. Thus the community as a whole has a balance sheet as does your business, and the continued profitability of your business depends upon the economy of your community as a whole. At a time of recession, with a record of high business failure and 7.8% UK unemployment (Aug ’09), more money has been leaving our community than arriving. As business recovers this will reverse.
Also typically, there is one business for every 20 individuals, or about 200 business enterprises in the community.
In such a community it is not uncommon that a basket of goods that would cost you £100 in a regional town, and in your neighbourhood would cost £120. It is in your interest, therefore, to not buy locally, but save, until you go to one of the regional towns to make all your purchases. Thus, for many communities, it is not uncommon to have 66p in every pound leave the community at the time of the first purchase. Of the 34p remaining, 22p leaves at the time of the 2nd purchase, leaving 12p and so on. At such a rate each pound spent circulates a maximum of 5 times through the local community before it has totally gone, and generates a maximum of about £1.50 of economic work for the residents.
To maintain a local economy of £24 million a year at this rate requires an input of £16 million each year, earned by local community members in its dealings with neighbouring communities. If more than £16 million leaves this community, it grows poorer, if less, then it grows richer. Thus the community as a whole has a balance sheet as does your business, and the continued profitability of your business depends upon the economy of your community as a whole. At a time of recession, with a record of high business failure and 7.8% UK unemployment (Aug ’09), more money has been leaving our community than arriving. As business recovers this will reverse.
Problems with conventional money
Conventional money therefore continually leaks from the local community to areas, perhaps overseas, where the return on investment (possibly through environmental destruction, exploitation of poorly paid workers, lack of responsible government control in such nations) is higher. This leakage leads to a reduction in all local business activity, not necessarily because a business is ineffective or inefficient, but because reduced availability of money in your community restricts business income. Everyone suffers…
Traditionally, businesses when faced by such dilemmas, argue for…
- sales decrease
- retrenchments of staff increases
- unemployment rises
- the need for welfare payments escalates
- government revenues fall, and
- the rate of business failure also grows
Traditionally, businesses when faced by such dilemmas, argue for…
- reduction of environmental safeguards
- reduction of worker's wages or working conditions, or
- reduced government controls
LETs improve community economic health
LETSystems create a simple yet powerful way of correcting these difficulties. A LETSystem creates an additional credit issued at the point of sale between the parties in a business transaction. It has two great differences from any conventional “money".
Each LETs pound continues to circulate back throughout all the participating members of the community as "a money back guarantee", increasing the total amount of economic activity throughout the community, creating opportunities for the establishment of new local businesses, generating a market for new product lines, and increasing possible profits for all local businesses.
Each LETs expenditure thus translates as a future sale, generating new income. This feedback loop between a business purchases and its future sales can only be achieved through a local money system like LETs. In this way, you benefit from a healthier local economic climate…
Each LETSystem pound spent is a new layer upon the "cake" of the local economy, improving the quality of life of all involved. Thus, rather than competing for a share of a shrinking pie, as in a general recession, local businesses have new opportunities in a LETSystem, no matter what happens elsewhere.
- The total amount of money in a LETSystem is always zero. As you buy your account moves to the negative, as you sell, it becomes positive. The issue of money is determined by those who go negative as these are the people who "create the capital" that makes a LETSystem work.
- LETs "money" cannot ever leave the local LETSystem community. Once created the money will continue to circulate in the community, creating work and business for everyone. A community "trade deficit" is impossible in a LETSystem.
Each LETs expenditure thus translates as a future sale, generating new income. This feedback loop between a business purchases and its future sales can only be achieved through a local money system like LETs. In this way, you benefit from a healthier local economic climate…
- sales increase
- purchases feed-back to increase returns
- business profitability is enhanced
- staff retrenchments diminish
- the welfare pressure upon the community tax base is reduced
- opportunities are created for new local businesses
- the rate of business failure falls
Each LETSystem pound spent is a new layer upon the "cake" of the local economy, improving the quality of life of all involved. Thus, rather than competing for a share of a shrinking pie, as in a general recession, local businesses have new opportunities in a LETSystem, no matter what happens elsewhere.
LETs in our community of 4,000
To illustrate how this works let us consider again our community of 4,000 people. In this community let’s suppose that 100 families (about 10%) join a local LETSystem, each spending about £50 in LETs Credits a month, or about £60,000 LETs Credits annually. At the same time these families are also spending £2,000 a month, giving the system an aggregated market value of £200,000 a month or £2.4 million a year. A business offering a 10% premium mark-up for LETs could capture a segment of this market, and so increase its overall profitability. A typical LETSystem, as described could probably increase the cash flow of about 5 participating businesses.
Let us suppose, that as a result of such measures the LETSystem thrives, and 50% of the families of the community join the system. The system also thrives to the extent that members start spending £1 in every £5 in LETS. These figures are not impossible. This amount would represent expenditure in LETs for the whole community of £50 per family per week, £200,000 per month or about £2.4 million a year. This is additional to the current £24 million, and represents a growth in the local economy of 10%, more than sufficient to absorb the current 7.8% unemployment affecting most communities. It would provide the possibility for starting about 10 new small businesses, and for major expansion of at least another 10. All business would benefit.
But it is at the level of individual businesses that LETs has the greatest effect. Imagine a business that, on the basis of a proper audit can shift 30% of its costs into LETs. If this business shifts only 25% of its sales into LETs, it immediately increases its cash flow, as measured in British pounds by 5%. For a business with a turnover of £200,000 a year, this alone would represent an additional £10,000. Equally, the basket of goods it sells to LETs customers for £120 now costs £90 and £30 LETs. It is now cheaper (in British pounds) for people to buy locally, and so less money will leave the community. It is now rational for more people to shop locally. The playing-field between local and regional business has now been levelled, and you get more customers as a result. Furthermore the £30 spent in LETs cannot leave the local area.
As the LETs component of any transaction can never leave the local community, so instead of 66p in every pound purchase leaving the community, now only 50p departs. Of the 50p remaining 25p leaves on the second purchase, 13p on the third, and so on. Each pound spent now circulates through the economy 7 times, and generates £2.10 of economic activity, an additional 60p on each pound spent.
For the community of 4,000 families, the size of the local economy, at this rate would grow from £24 million, to nearly £34 million, with no additional increase in the amount of money that this community has to earn from neighbouring localities. Everyone would prosper.
Let us suppose, that as a result of such measures the LETSystem thrives, and 50% of the families of the community join the system. The system also thrives to the extent that members start spending £1 in every £5 in LETS. These figures are not impossible. This amount would represent expenditure in LETs for the whole community of £50 per family per week, £200,000 per month or about £2.4 million a year. This is additional to the current £24 million, and represents a growth in the local economy of 10%, more than sufficient to absorb the current 7.8% unemployment affecting most communities. It would provide the possibility for starting about 10 new small businesses, and for major expansion of at least another 10. All business would benefit.
But it is at the level of individual businesses that LETs has the greatest effect. Imagine a business that, on the basis of a proper audit can shift 30% of its costs into LETs. If this business shifts only 25% of its sales into LETs, it immediately increases its cash flow, as measured in British pounds by 5%. For a business with a turnover of £200,000 a year, this alone would represent an additional £10,000. Equally, the basket of goods it sells to LETs customers for £120 now costs £90 and £30 LETs. It is now cheaper (in British pounds) for people to buy locally, and so less money will leave the community. It is now rational for more people to shop locally. The playing-field between local and regional business has now been levelled, and you get more customers as a result. Furthermore the £30 spent in LETs cannot leave the local area.
As the LETs component of any transaction can never leave the local community, so instead of 66p in every pound purchase leaving the community, now only 50p departs. Of the 50p remaining 25p leaves on the second purchase, 13p on the third, and so on. Each pound spent now circulates through the economy 7 times, and generates £2.10 of economic activity, an additional 60p on each pound spent.
For the community of 4,000 families, the size of the local economy, at this rate would grow from £24 million, to nearly £34 million, with no additional increase in the amount of money that this community has to earn from neighbouring localities. Everyone would prosper.
Immediate Benefits to Your Business
As a business, there are two possible strategies to use LETs to benefit your business…
1. Use LETs in the same way you would use a "discount scheme" or "sale", to capture new customers for your goods or services. The difference with LETs is that you are not discounting your profits, only transferring them into LETs Credits. LETs customers also tend to be loyal to those enterprises who support their community in such a fashion
2. You can also seek to minimise your costs, through purchasing goods or services for LETS before you start to shift your sales into LETs. If the costs of running your business is £10,000 per month, and you shift 10% of your sales, but 20% of your costs into LETs, your business will now be making an additional £1,000 every month
Your business has direct and immediate benefit from participating in such a LETSystem. Through offering goods to members of the system for a mixture of the British pound and local Cree (LETs unit), your business is now able to undercut non-LETSystem out-of-town competitors. Your customer base through operating in a LETSystem grows.
a. LETs captures the local market. LETs members have a disposable income of about £1000 per month. A 1,000 member LETSystem spends close to £2,000,000 a month! Capture a slice of this market to help your business maintaining its viability!
b. LETs increases cash flow and operating surpluses. Increased sales, in a mixture of LETs and British pound, means increased income. Your business can now pay LETSystem currency for local goods and services for which previously required conventional money.
c. LETs minimises your Tax. LETs pounds expended on legitimate business expenses, are recognised by the Taxation Office as legitimate business deductions. Because in LETs your business covers its tax liability through the traditional money component on any transaction, as your business increases the volume of its LETSystem transactions it prospers.
d. LETs give the security of risk protection. A business failure of a creditor in conventional money system threatens your business viability. LETs provides complete security as all debtors pay you in advance for any transaction!
e. LETs provide a money-back guarantee. All LETs purchases create LETs pounds, which cycle to increase demand for your goods and services, once again generating increased income from sales.
f. LETs give preferential benefit to local business. Your businesses can make the decision to join their local LETSystem without needing to refer to head office for approval. Local value adding means you can price your goods with a higher LETSystem component than can your rivals, undercutting externally owned enterprises. With a local source of supply, paid for in LETs, you no longer need to import expensive raw materials with a costly freight component from outside your local community.
LETs benefits everyone by reducing the local "balance of payments" deficit. It encourages local import substitution programs, simultaneously opening up new local business opportunities for yourself and other local businesspersons.
1. Use LETs in the same way you would use a "discount scheme" or "sale", to capture new customers for your goods or services. The difference with LETs is that you are not discounting your profits, only transferring them into LETs Credits. LETs customers also tend to be loyal to those enterprises who support their community in such a fashion
2. You can also seek to minimise your costs, through purchasing goods or services for LETS before you start to shift your sales into LETs. If the costs of running your business is £10,000 per month, and you shift 10% of your sales, but 20% of your costs into LETs, your business will now be making an additional £1,000 every month
Your business has direct and immediate benefit from participating in such a LETSystem. Through offering goods to members of the system for a mixture of the British pound and local Cree (LETs unit), your business is now able to undercut non-LETSystem out-of-town competitors. Your customer base through operating in a LETSystem grows.
a. LETs captures the local market. LETs members have a disposable income of about £1000 per month. A 1,000 member LETSystem spends close to £2,000,000 a month! Capture a slice of this market to help your business maintaining its viability!
b. LETs increases cash flow and operating surpluses. Increased sales, in a mixture of LETs and British pound, means increased income. Your business can now pay LETSystem currency for local goods and services for which previously required conventional money.
c. LETs minimises your Tax. LETs pounds expended on legitimate business expenses, are recognised by the Taxation Office as legitimate business deductions. Because in LETs your business covers its tax liability through the traditional money component on any transaction, as your business increases the volume of its LETSystem transactions it prospers.
d. LETs give the security of risk protection. A business failure of a creditor in conventional money system threatens your business viability. LETs provides complete security as all debtors pay you in advance for any transaction!
e. LETs provide a money-back guarantee. All LETs purchases create LETs pounds, which cycle to increase demand for your goods and services, once again generating increased income from sales.
f. LETs give preferential benefit to local business. Your businesses can make the decision to join their local LETSystem without needing to refer to head office for approval. Local value adding means you can price your goods with a higher LETSystem component than can your rivals, undercutting externally owned enterprises. With a local source of supply, paid for in LETs, you no longer need to import expensive raw materials with a costly freight component from outside your local community.
LETs benefits everyone by reducing the local "balance of payments" deficit. It encourages local import substitution programs, simultaneously opening up new local business opportunities for yourself and other local businesspersons.
Conclusion
In participating in a LETSystem your economic performance will be enhanced so that you may find yourself in a renaissance economy, even while other, conventional, non-LETs local businesses may be suffering a market contraction. There are also many more benefits to your business, which result from joining your LETSystem. For example…
can increase its services to members by charging a membership fee that is a mixture of both LETs and normal money. This enhances the range of services available to members, so increasing membership significantly.
- a Retail Traders Association or
- a Local Chamber of Commerce
- a service club (Rotary etc.)
can increase its services to members by charging a membership fee that is a mixture of both LETs and normal money. This enhances the range of services available to members, so increasing membership significantly.
The Cost of Your LETSystem Benefits
The cost of these benefits is incredibly low. Participating businesses are charged an initial, up-front cost in conventional money, (Galloway LETs membership is £5 (for 2010)) used in various ways…
The cost of recording transactions, for producing the directory and the costs of producing the local LETSystem newsletter and postage.
LETSystems are not-for-profit democratically organised community enterprises, controlled by their members. These people directly benefit from the low administration charges charged. Administration costs are therefore minimised.
The main difficulty for a business operating in a LETSystem is that merely joining the system is rarely enough to bring the benefits desired. Becoming an active LETs trader is required. LETs is a tool that needs to be worked with if it is to benefit you. Thus consider the following ideas.
1. Conduct a LETs audit, paid for in LETs Credits, which would allow you to assess what proportion of your costs you could currently pay for in LETs, and what proportion of your costs could be met in LETs if your major suppliers were to allow you to pay in LETs Credits. This could help you identify the immediate benefits open to you as a LETs member.
2. Contact the LETSystem, and let them know the name and contact details of your principle suppliers, who could be targeted by the LETSystem for enrolment, so permitting you more easily to shift your costs into LETs. As more and more of your suppliers are shifted into LETs, so your British pound operating surplus improves.
3. Advertise through the local media that you offer selected items for part LETs part British pound. In explaining why your business operates in such a fashion, you would be almost guaranteed to capture the interest of a local journalist for a human-interest story, or an article on the local business pages.
4. Use LETs to pay for the costs of business enhancement, promotion or expansion. LETs effectively gives you access to an interest free overdraft, and you should try to manage your loans in pounds and LETs so as to minimise your debt exposure and credit liabilities.
Finally, LETs works opposite to conventional money. Conventional money is hard to get but easy to spend. LETs by comparison, are easy to get but harder to spend. As a business person participating in LETs, you may have to put some of the effort you would normally expend in earning pounds into finding creative ways to spend your LETs Credits.
The cost of recording transactions, for producing the directory and the costs of producing the local LETSystem newsletter and postage.
LETSystems are not-for-profit democratically organised community enterprises, controlled by their members. These people directly benefit from the low administration charges charged. Administration costs are therefore minimised.
The main difficulty for a business operating in a LETSystem is that merely joining the system is rarely enough to bring the benefits desired. Becoming an active LETs trader is required. LETs is a tool that needs to be worked with if it is to benefit you. Thus consider the following ideas.
1. Conduct a LETs audit, paid for in LETs Credits, which would allow you to assess what proportion of your costs you could currently pay for in LETs, and what proportion of your costs could be met in LETs if your major suppliers were to allow you to pay in LETs Credits. This could help you identify the immediate benefits open to you as a LETs member.
2. Contact the LETSystem, and let them know the name and contact details of your principle suppliers, who could be targeted by the LETSystem for enrolment, so permitting you more easily to shift your costs into LETs. As more and more of your suppliers are shifted into LETs, so your British pound operating surplus improves.
3. Advertise through the local media that you offer selected items for part LETs part British pound. In explaining why your business operates in such a fashion, you would be almost guaranteed to capture the interest of a local journalist for a human-interest story, or an article on the local business pages.
4. Use LETs to pay for the costs of business enhancement, promotion or expansion. LETs effectively gives you access to an interest free overdraft, and you should try to manage your loans in pounds and LETs so as to minimise your debt exposure and credit liabilities.
Finally, LETs works opposite to conventional money. Conventional money is hard to get but easy to spend. LETs by comparison, are easy to get but harder to spend. As a business person participating in LETs, you may have to put some of the effort you would normally expend in earning pounds into finding creative ways to spend your LETs Credits.