The Money Trail: Measuring your impact on the local economy using LM3

New Economics Foundation

Author +
Justin Sacks

Year: 2002

This workbook is for you if you are concerned about your local economy and want to prove how effectively different parts of your economy are working. Perhaps your community is not thriving, and you are beginning to wonder if the usual approaches to economic development are working at all. You need a way of really understanding what is currently happening in your economy: how money enters, the path it then takes in the area, and how it leaves. You want a tool with a concise and comprehensible result so that you can understand whether or not a particular part of your economy is working well, and if not, what action you can take. Such a tool must also be able to persuade others to take action, so it needs to be fairly engaging.

Download The Money Trail

The New Economics Foundation (NEF) has developed just the tool to help you do this. It is called LM3, which stands for ‘Local Multiplier 3’. In the next chapters we’ll explain in more detail how to use LM3 and what this tool can help you achieve. And rest assured, we’ll explain all about ’local multipliers’, too!

Perhaps you’re a business person with a desire to strengthen local linkages in your area, not only because you want to see your community thrive, but because a strong network of businesses in your area will make your business more profitable as well. But before you go about making changes, you want to see how much it’s worth to the local economy and to you.

If you are involved in regeneration, then perhaps it seems obvious to you that if more local people could actually win the contracts for the work that is being delivered through the regeneration programme then it would be better for the community. What you need is a clear, simple way to demonstrate the positive impact that can be gained in a regeneration area through greater local circulation of the regeneration funding. And to do this you need to look at how the regeneration funding is currently entering and leaving the community and, more importantly, to identify how to keep more of it in the area.

Maybe you’re a community leader with the strong suspicion that the local bank threatening to close its cashpoint machine will mean bad news for your town. You don’t know just how bad, and you don’t have a clue how to find out – or even if your hunch is right. Perhaps if you could prove the case then more people might take action to keep the cashpoint open. So for all these reasons, NEF has created LM3, our ‘local multiplier’ tool. It is intended for regular people who see a need for measuring the impact of aspects of local spending in their communities. You probably have a hunch that spending money locally benefits your community. But how much? That’s exactly what LM3 will help you find out.

Table of Contents

The Money Trail

Is that the way the money goes?
Understanding the local economy
Local Multiplier Effect to the rescue
Introducing LM3: the local multiplier tool
Worked example 1: Eden Community Outdoors
LM3: How-to guide
Process Overview
Round 1
Path A
Path B
Calculating LM3
Worked example 2: LOCAL
LM3: Troubleshooting
Surveying and data collection
Assessing survey responses
Calculating surveys and LM3
Worked example 3: North Norfolk District Council
Taking action
What’s the score?
Worked example 4: Cusgarne Organics
Playing with your LM3
Show and tell
Food for thought
RSVP: don’t forget to write!
Appendix 1: Checklist and flowchart
Appendix 2: Surveys
Appendix 3: Converting surveys
Appendix 4: Averaging surveys together
Appendix 5: Chain store data