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Market Feasibility Studies |
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Often times, an entrepreneur is seeking assistance in determining the market feasibility of
establishing a business within a specific location. The business may be a restaurant, an assisted
living facility, a health and fitness center, a storage facility, a retail store, etc.
Knowing the demographics of the population, a summary of businesses in the specified trade area and the
spending habits of consumers residing in the area can be useful to making a sound business decision before
you invest large sums of capital in your new business venture.
Depending upon the type of business to be started, rings or donuts are drawn around the proposed
site at various distances, typically, 5, 10 and 20 mile radii. This permits a comparison of key
demographics to determine the drawing power of your business from several distances.
Demographics
Through various databases, demographic information containing the profile of residents within a
trade area can be useful. Understanding household size, number of housing units, household income,
population by age, gender, educational attainment, etc. for the current year and a 5 year projection
is critical to profiling your customer potential. Two very useful subscription databases that provide
a wealth of information include Demographics Now and ESRI.
Business Summary
Business summaries by either SIC or NAICS reveals the types of businesses within the trade area.
Further detail highlights the actual number of businesses by type along with the number of employees.
Assessing the number of competitors in your proposed trade territory must always be considered.
Coupling Dun and Bradstreet reports with interviews of key managers in the target industry can be
insightful for understanding sales volume, trends, etc.
Market Potential
In addition to current and projected population and household income, the market potential is based on the
likelihood that adults in the specified trade area are to exhibit certain consumer behavior or purchasing
patterns compared to the U.S. average. In other words, what is an average household expected to spend on
specific consumer goods and services, not only for the current year but a 5 year projection.
Analysis and Conclusions
Once all of the information about the specified trade area is compiled, the challenge becomes one of sorting through a detailed analysis of trends, opportunities, purchasing habits, etc. At the completion of the analysis, a
GO / NO GO decision can be made with the confidence of knowing that a thorough evaluation of your business opportunity is based on the most reliable data available.
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Best regards,
Jim Sauer, President, SPG.
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