In my last post, I wrote about my experience researching competition for my proposed taphouse. I did the research at the behest of my advisers at the Small Business Assistance Center and they didn’t steer me wrong. In the process, I learned a great deal about my customers and what my competition is doing to attract them.
Next, I wanted to learn more about where I should locate the taphouse. Until recently, my plan was to find something in downtown Auburn, but I decided that as long as I’m starting over from scratch I should also open myself to the idea of doing business elsewhere. What do they say about what makes a business successful? Location, location, location? Well, that may not truly be what they say, but the sentiment is spot-on. An otherwise great business in a poor location may never reach its potential.
To start, I looked at a few basic statistics for a number of zip codes immediately around my own. I used a free tool provided by Nielsen, the same company responsible for TV viewership ratings. Enter the zip code for the area of interest and you get a quick snapshot of demographic data.
I chose to examine a few specific details:
- Population, which gives me an idea of how many potential customers live in the target area.
- Median income, which gives me an idea of how much discretionary income these potential customers might have to work with.
- Per-household spending, which gives me a good idea of how much money these potential customers tend to spend.
I selected the following markets:
- 98001 (Auburn)
- 98002 (Auburn)
- 98092 (Auburn)
- 98010 (Black Diamond)
- 98038 (Maple Valley)
- 98042 (Maple Valley)
- 98027 (Issaquah)
- 98029 (Issaquah)
I chose these markets for the following reasons: 1) They are close to my home, 2) They are areas I expect to have income and spending levels that will support a luxury business, and 3) They are areas I think have market space for a taphouse. Arguably, I’ve left off a few good potential zip codes and a couple of good data points. The good news is I can easily do this analysis again with any other zip code or data point.
As I did with my competition research, I created a spreadsheet to help me track and compare the data. Using colors, I grouped the results into “neighborhoods” that make up a common market. There’s one color each for Auburn, Maple Valley/Black Diamond, and Issaquah.
Looking at these numbers, the Issaquah and Maple Valley markets stand out as having the best overall demographics: Issaquah has the highest per-household spending and median income, and Maple Valley has the highest population but only slightly lower per-household spending. Auburn, unfortunately for me as a hometown supporter, doesn’t pan out as well for a luxury market–there are more people, but significantly lower income and spending.