2016 Q1-2 Feasibility Study

Often times, an entrepreneur is seeking assistance in determining the market feasibility of establishing a business within a specific market area. The business may be a restaurant, an assisted living facility, a health and fitness center, a storage facility, a hotel, a specialty food store, a bowling center, a convenience store with gas station, etc.

Knowing the demographics of the population residing in the target market area is critical to assessing market potential. Population and 5 year growth trends, household income, population by age group, etc. are key components to establish a demographic profile. A summary of business establishments and employees 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. Identifying the following components can be useful in determining market feasibility.

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. In addition to the demographics, the psychographics are equally important. The clustering of lifestyles can be identified based on similar purchasing habits among residents.

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 from key managers can be insightful for understanding sales volume, trends, etc.

Market Potential
In addition to current and 5 year projected population and household income, the market potential is based on the likelihood of the 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, nor 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.