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IN THIS ISSUE:
| Bulletin Archive | |
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FROM THE EDITOR
Thank you, everyone who responded to the House Lists survey last issue! The winner of Jim Novo’s book Drilling Down – Turning Customer Data into Profits with a Spreadsheet is Greg Harris of Harris Consulting in Milton, West Virginia. Entrepreneur and Manager – Do you have the right stuff?
It is a cruel irony -- the personality traits that make us good at starting companies tend to get in the way when it is time to run them. For example, starting a business requires an independent spirit and considerable expertise at doing the work of the business, whether that means building a kayak or writing an ad. On the other hand, managing a successful enterprise requires getting things done through other people. Those entrepreneurial traits of independence and craftsmanship get in the way. An individual who starts a business naturally hopes it will succeed. But an individual whose business prospers will soon need skills and aptitude for team building, cooperation, and delegation – often the very activities that drove that individual away from a corporate job in the first place! Do you have what it takes to be an entrepreneur? And, more importantly, do you have what it takes to transition gracefully to the role of manager, should your start-up business thrive and grow? Click here to take our quiz and find out! | |  | |
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TOOL BITS
A Beauty of a Business Location
In 1887 a 20-year old widowed African-American laundress began
experimenting with formulas for beauty products. By 1915 the former
laundress had become the most successful black businesswomen of her day.
Her business, the Madam C. J. Walker Company, provided not just
opportunities for improved appearance and self esteem but also ways in
which black women could earn a living without going into domestic service
or manual labor.
She accomplished this in Indianapolis, Indiana – and her story inspired Indianapolis native Belinda with her own entrepreneurial mission. Belinda, a woman in her 20s, wants to open a cosmetics boutique specializing in products for women of diverse skin tones. She is using the Household Spending tool to research location and market potential. Let’s look over her shoulder. Getting to Know the Household Spending Report
The Household Spending reports Belinda purchases will help her estimate
market potential for products/services in any specific geography she
chooses to consider. The report displays average yearly expenditure, market
potential in dollars, and the index against U.S. average, which helps to
see how the specific geography under consideration varies from the U.S. as
a whole. The data in the table is grouped by demographic categories,
including age, household income, and more.
Belinda has selected the product category “Personal care products and services” and the product “Cosmetics, perfume, bath preparation” for her research. She has selected several Zip codes to study, based on her knowledge of residential and shopping districts in Indianapolis. She has purchased reports for three areas:
First, Belinda compares the three reports by looking at the “Total” row at the top. The first thing she sees is that Broad Ripple (46220) displays a market potential of nearly twice as much as her other two choices. Comparing the household counts, she sees that this area is more densely populated than the other two she is considering. [1] Moving across the row to the “Average Annual Expenditure” column, she sees that the average household in this neighborhood spends $118.77 a year on the cosmetics category. In the Keystone (46250) neighborhood, with the upscale shopping center, the average household spends $117.14. [2] The residential neighborhood, 46208, lags behind at $104.33. When she looks at the final column, “Geography Index”, Belinda sees that all three areas fall relatively close to the U.S. index of 100, indicating they are similar to each other and to the U.S. as a whole. [3] Demographic Categories
Next, Belinda studies the demographic categories to see what types of
households are spending the most on cosmetics, and how many of the
high-spending households there are. She zeros in on the numbers shown in
the “Household Count” column.
Belinda quickly decides to drop 46208 from consideration. The demographics draw a picture of a pleasantly diverse neighborhood, but one without much potential for generating customers for her store. Many householders are older (2,822 headed by someone 65 years and older) and many households have modest incomes (4,163 earn under $25,000 annually). Both groups skew lower than the U.S. average on purchase of cosmetics, according to the “Demographic Index” column on the report. While there certainly are affluent households with higher-than-average purchases in the category found in this Zip code – 1,317 households earn over $100,000 and show a Demographic Index of 162 – this is too few households to support her proposed store. And while the area does have a majority of non-white residents – her chosen target market – the other factors simply argue too strongly against their likelihood of becoming customers. So much for 46208. Now Belinda settles into comparing Keystone, with its upscale shopping mall, against Broad Ripple with its older street of fun and funky shops. Under “Age of Householder”, she finds the two areas are quite similar, with a good spread across the 25-54 age brackets, with their high household counts and market potential dollar amounts. [4] She turns with interest to the category “Race of Householder”, since she intends her shop to have a multi-ethnic appeal. In both neighborhoods, 13.3% of the households fall into the non-white race categories. As she looks at the “Average Annual Expenditures” amounts for these other race groups, she sees an interesting fact – these households are spending more on cosmetics than their white neighbors are! She adds the “Market Potential” numbers for the three non-white race categories and begins to get an idea of the sales her store could generate. The numbers tell her that tailoring her product selection to meet these consumers’ tastes is a viable business idea. [5] Belinda examines the “Household Income” category. Both neighborhoods skew toward higher incomes but, surprisingly, the older Broad Ripple neighborhood actually has proportionately more high-income households. And, since that neighborhood is more densely populated, this indicates Broad Ripple would be a significantly better location for her shop. [6] Belinda is now beginning to see her shop – a jazzy little boutique in Broad Ripple. She glances down to the last categories, “Housing Unit Occupancy” and “Household Type”, and sees one more sign of Broad Ripple’s superiority as a location. Considerably more houses here are owner-occupied than in the Keystone area, indicating stability in the customer base she hopes to attract. Here is a neighborhood where she can build long-term relationships with her customers. [7] Next Steps
Belinda is convinced that Broad Ripple is the place where her cosmetics
shop will thrive. Belinda needs to look at a Demographic Profile to
understand that neighborhood’s make-up in more detail, but she’ll do that
another day. Right now, she wants to talk to a commercial real estate
broker. And here, she has the last laugh – commercial rents on little old
Broad Ripple Avenue are likely to be considerably lower than in the upscale
mall at Keystone!
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