Ever wonder why there seems to be three or four fast-food joints at the same intersection? Or why all of a sudden, not one but three big office-supply stores open in a community?
The answer is they all rely on similar statistics to choose locations. They look for certain factors: population density, characteristics of nearby residents (such as age, gender, income), number and type of localbusinesses, etc.
Big corporations hire consulting firms to compile these statistics. You've got an even bigger consulting group doing it for you -- for free! The United States government, particularly the Census Bureau, compiles all kinds of information useful for businesses, and they've put much of it on the Internet.
First, a few key Web sites to remember:
The main portal for finding government statistics. The government really has tried to make this accessible, but if you don't know what you're looking for, it may be hard to find at this site.
The US Census Bureau -- bookmark this! This site gives you access to all Census data, whether about people, businesses, trade, and much more.
Quick Facts, a wide variety of information about population characteristics at the state or county level.
The "Economic Census" compiled every five years, with detailed information on business activity.
The Census Bureau's State Data Centers, with links to individual statestatistics.
Eureka! "County Business Patterns," the nitty gritty about businesses in your own area, down to zip-code level. If you want to know what's going on in your hometown, this is the place.
While this all seems daunting -- you'll have to click through many pages -- you can find amazing information. For instance, if I was thinking about opening a drycleaning business in a particular neighborhood in Phoenix, I might want to find out how many drycleaners already existed there and how well they were doing. Here's what I'd do:
Start from the County BusinessPatterns page, tier2.census.gov/cbp_naics/index.html.
Put in the zip code - let's say 85013.
Look for the general industry classification, in this case, "Other Services," and click "Details."
Scroll down to "Drycleaning & Laundry." Wow! I discover that in 1999, there were eight drycleaners or laundromats in that zip code, and I can also see how many employees they had.
Click "Compares" to see how that stacks up to other zip codes in Phoenix. Scrolling through, I notice that only three other zip codes have more drycleaners or laundromats, and one had the same amount. Hmm...that should give me pause. Perhaps the market for drycleaners in that neighborhood is already saturated.
Playing around with data at this site, I can find other information that might be useful if I'm starting a business. For instance, I notice that while zip code 85013 had eight drycleaners or laundromats, there were only four beauty salons. That seems low. So if I go back and click on "Details" of the three zip codes with more drycleaners or laundromats, I see they had 16, 32, and 18 beauty salons. Hmm...maybe what zip code 85013 needs is another beauty salon.
Next, I'd want to find out about the people who live in that zip code. This data is harder to find all in one place.
One of the best places to start is to the State Data Centers, www.census.gov/sdc/www/. Clicking through, I see that according to the 2000 census, there were 20,842 people in zip code 85013, and the median age was 36 years. Searching the site further, I could find that in 1990, the median household income for that zip code was $27,493.
Okay, so how does that compare to those zip codes with more drycleaners? Not so good. They all had significantly higher median incomes in 1990. Once again, I might want to reconsider whether that neighborhood could really support another drycleaner.
Of course, all this is just a starting point. You've got to drive or walk around the neighborhood, look at the competition, talk to other merchants. You still have to use your own good judgment. But if you're looking for hard numbers, the government's got them. McDonald's uses them, why not you?
Copyright Rhonda Abrams, 2002
Rhonda Abrams writes the nation's most widely-read small business columnand is the author of The Successful Business Organizer, Wear CleanUnderwear, and The Successful Business Plan. To receive Rhonda'sfree business tips newsletter, register at www.RhondaOnline.com