Opening a business is a risky proposition. But for many people the dream of opening their own business is too great to ignore. According to the Small Business Association, there are over 27 million small business owners in the United States. If you’re considering opening a business you are probably already planning to do due diligence on the market and industry, but there are other, local and regional trends that you should also make sure that you understand. After all, not everything that trends in the country as a whole is popular in specific areas of the country.
Here are five location specific questions that are important to ask when doing research.
- How is the general business climate in your area viewed?
Lists like Forbes’ best cities for business and CNBC’s top states for business do a great job of analyzing various factors including quality of life and access to investment capital and defining what makes a good business environment.
- What are the demographics of the area?
Your local chamber of commerce or the Small Business Association should be able to give you a good idea not only of what the current demographics in your area are, but how the demographics are trending. If you’re planning to open a business that targets young people, but your area is losing younger people, it may not be a good fit. Other demographics to consider include income and education levels, as well as gender.
- What are the business bankruptcy rates in the area?
Understanding state bankruptcy rates can help you see whether other businesses in the area succeed or not. Unfortunately, as a recent study has shown, because these rankings are based solely on the number of bankruptcies in an area, and do not consider other factors such as the area’s economy, they are often misleading.
- What are local sales taxes like?
If you live in the area where you are considering opening a business you are probably already familiar with the state sales tax rate, but what about your city or county sales tax rate? In some areas cities and counties may exist very close together making a huge difference in decisions about where to open your business. Make sure to also research any income tax trends, expected tax referendums, or other ballot initiatives that could affect your business.
- What’s the weather like?
Weather may not be the most obvious business trend to follow, but if your dream is to open a restaurant with primarily outdoor seating and you choose an area that has had poor weather for the past several years, you may have a hard time attracting investors. On the other hand, there are several areas around the country actively rebuilding after large storms, which might mean great opportunities for the right businesses. The National Weather Service provides data tracking for local climates.
When asking these questions, make sure to consider not only current statistics, but overall trends as well. If the trending data is not favorable to your business, you may want to alter your business plan, or waiting until a more favorable time.