Sunday, January 5, 2014

BUSINESS DEV TIPS: How do you know if an area has the capacity to pay?

Location. Location. Location.

This is the most important factor when it comes to many businesses, they say.

But how would you know if the geographic market of your chosen location has the capacity to pay or is liquid enough to afford what you are offering them?

As a business development consultant who does market studies for clients ... I use two indicators as a guide: the density of banks and the density of pawnshops in an area.

The proximity of a location to a row of banks or a strip of pawnshops is something to look out for.

If your location is near a row of banks, that is a good sign because it means people who live and work within the immediate vicinity have excess liquidity. That is the reason banks gravitate towards it. Banks do their due diligence and the fact that they were convinced to locate a branch there is a positive validation.

Another advantage of being near a financial strip is that bank clients who transact there will most likely eat or shop nearby ... before or after.

The presence of many pawnshops, on the other hand, is an indication that people within a certain radius are not that liquid and need to pawn valuables in order to obtain much needed cash. It can also mean that criminality is high in the area and that snatchers and robbers are valued clients of these establishments.

The next time you do your market research for a new business you are contemplating, look out for these 2 red flags or "economic indicators."

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