3. Analyzing Your Business Mix

A business mix comparison allows a downtown to be compared to downtowns in other communities. Creating a business mix comparison can be a useful exercise in determining the relative health of a downtown. Subsequently, the information provided can be used as a retention and expansion tool. The following section explains methods for creating and using a business mix comparison.

Examining the business mix of a downtown area provides a useful snapshot of the types and number of establishments located in the area. While the mix is useful on its own, comparing it to the business mix in a sample of economically vibrant communities provides a means of determining possible retail and service opportunities. The right comparison communities can set a standard of economic vitality your community.

A business mix analysis should help a study group answer the following:

• In total, does your downtown have fewer or more retail or service businesses than the comparison communities?
• How concentrated is business activity in the downtown area compared to edge-of-town locations?
• Is the community under-served or over-served in specific business categories?

Answers to these questions are useful as the study group begins to identify opportunities for future business expansion or recruitment. However, the business mix analysis is only one part of a series of steps needed to fully evaluate these opportunities.

Classifying Business Categories

Businesses are often categorized using a grouping system known as the North American Industrial Classification System (NAICS). This classification replaces the former Standard Industrial Classification (SIC) coding system.

The NAICS groups businesses into categories based on the types of products they sell or services they provide. Appendix B of this section provides a list of retail and service business types often found in downtown areas. The appendices in the retail and service sections of this guidebook provide definitions for these NAICS categories.

It is important to note that when classifying businesses into a specific category, each business must be placed into only one category. The category used should be based on the primary type of goods or services provided by the business. For instance, a hardware store may sell some auto parts. However, the store should be categorized as a hardware store, as hardware is the primary line of business.

Choosing Comparison Communities

Selecting communities for comparison requires choosing places that are similar in various aspects. However, for purposes of this analysis, the communities chosen should have active and vibrant downtown areas. Some characteristics to consider include:

• Population Size - Choose communities that are similar in size.
• Demographic Characteristics - Choose communities that have similar incomes, education, age levels, etc.
• Distance from Major Metropolitan Areas - Communities that are closer to Metro Areas may have different retail mixes than those at greater distances.
• Vibrancy of Downtown - Choose communities that have successful downtowns. These communities provide more examples of how businesses can thrive in a downtown area.

Often study groups will have difficulty identifying other communities that meet these characteristics. The study group should be encouraged to look at communities out-of-state, perhaps places where they have traveled or read about in the past.

Collecting Business Mix Data

Before gathering data on the number of businesses, it is usually helpful to establish a geographic boundary, or ring, around each downtown. In doing so, the comparison with other communities will be based on a similar size area. Data should be collected on all businesses that are located within the downtown ring. For purposes of this analysis, various distances around the middle of the downtown can be used as follows:

• City/Village population <5,000 - 1/4 mile radius
• City/Village population 5,000-9,999 - 3/8 mile radius
• City/Village population >10,000 - 1/2 mile radius

In some communities, it may also be useful to collect data on the entire community as defined by its zip code or series of zip codes. A larger geographic area beyond downtown captures businesses that exist on the edge of town. The number of businesses downtown can then be calculated as a percent of total businesses in the community. This can provide a rough indicator of downtown's role as a retail and service hub and can provide a useful and simple indicator in analyzing business concentration (and sprawl). However, it does not take into consideration the size of local businesses or their economic health.

Using the NAICS codes and business categories in Appendix B, the number of businesses can be summarized by retail or service category. This step can be repeated for each comparison community to create a business mix comparison. Collecting the data for a business mix comparison can be accomplished using a combination of the following methods:

Using a Building and Business Inventory - Your Community

Information from a downtown building and business inventory can be used to summarize the business mix in your downtown. The building and business inventory procedures as described in the earlier section include detailed business classification coding that are needed in this analysis. However, if the business mix analysis extends beyond downtown, the downtown building and business inventory will need to be supplemented with additional business data for the entire community.

Walk the Streets - All Communities

A second method of collecting data is to simply walk the streets of your downtown and that of the comparison communities. While doing so, the number and types of businesses can be recorded on a clipboard or personal data assistant such as a PalmÔ. This method is the most labor intensive, but can have additional benefits, as it provides information on the character and amenities of other communities. Aspects such as streetscape, facades, atmosphere and downtown vibrancy can be recorded along with the business data.

Purchase Data - All Communities

Private data sources such as InfoUSA offer business database lists that can be purchased at varying costs. The databases include NAICS codes for each business, allowing lists to be purchased according to desired categories. Furthermore, the business data can be purchased using a pre-defined geographic area. That is, businesses can be purchased using areas such as zip codes, communities or distances around an address. For instance, you could purchase data on all of the retail or service businesses located within one-half mile of a street address in the middle any downtown. The advantages to this method are that it is fast, easy and can be used for any community in the United States. However, the method can be costly and does not allow for any additional insight that could be gained by actually visiting the other communities.

Analyzing the Findings

Once completed, the business information can be entered into a spreadsheet and compared side-by-side for each community. A side-by-side comparison of the business mix in your downtown with the mix in a number of comparison communities provides an initial indicator of market gaps (opportunities). Exhibit 1 provides an example of a comparison of selected business categories for one community. The business mix comparison worksheets provided in Appendix B can be used in the analysis for your community.

*Indicates gap (potential business expansion or recruitment opportunity to explore)

As previously mentioned, the business mix comparison allows retail and service businesses to be compared among communities. While examining the different communities, look for differences in business numbers. Does your community have similar numbers of businesses in each category? Are there categories that have significantly fewer or greater number of businesses? Have any of the communities developed a market niche in selected categories demonstrated by clustering of similar or complementary businesses?

Make note of each business category that is lower in the subject community than the comparison communities. This will allow for the identification of categories that may provide opportunities for recruitment or niche expansion. Furthermore, business categories that have greater numbers in your community also may provide a recruitment tool for other businesses, as they may point to a unique niche in the downtown area.

Appendix A - Sample Press Release

For Immediate Release
(Enter Date)

Contact: (Enter name and phone number of primary contact)
(Enter name and phone number of secondary contact)

--------------------------------------------------------------------------------

MARKET STUDY EXAMINES DOWNTOWN BUSINESS MIX

(Enter city)--(Enter main street organization) has examined the business mix in five other communities that have vibrant and active downtown. Their research shows that compared to these communities, downtown (Enter City) has a significant gap in a number of business categories including ___________. Downtown leaders plan on examining these categories in more detail as part of their current market analysis.

(Enter main street organization)'s economic restructuring committee completed the business mix analysis as one part of a broader market analysis to identify new economic development opportunities for downtown. The committee identified ______,______,______,_____ and ______ as comparison communities with economically vibrant downtowns. These communities have maintained or increased their level of downtown business activity despite intense pressure from discount department stores and outlying shopping centers. Study group volunteers visited these communities and inventoried the types of business establishments within their downtown areas. A similar inventory was also completed for (Enter City).

A comparison between (Enter City) and the comparison communities revealed significant shortages in specific business categories such as ______and _____. While (Enter City) has ____ retail businesses in its downtown area, the comparison communities have an average of _____businesses downtown. Similarly, (Enter City) has ____ service businesses downtown compared to an average of _____ in the other communities.

The business mix comparison will provide the (Enter main street organization)'s economic restructuring committee with additional information to help in identifying business expansion and recruitment opportunities. This analysis will be supplemented with other research including a consumer survey and an analytical study of consumer spending potential to quantify these opportunities.

Interested parties may volunteer for the downtown market analysis team by calling (Enter name of committee chair) (Enter phone number). For more information on the downtown market analysis or on (Enter Main Street Organization), contact (Enter Main Street Manager Name), at (Enter phone number).

Appendix B - Business Mix Comparison Worksheets

A - includes 52211, 52221, 52219, 52213
B - includes 52311, 52312, 52313, 52314, 52321, 52392, 52393
C - includes 53121, 81399, 53131, 53132, 81222, 53139
D - includes 53221, 53231, 53229, 53241, 56299, 53242, 53249
E - includes 54151, 51121, 33461, 54151, 51419, 54153, 81121
F - includes 53212, 53211, 81293, 81112, 81111, 32621, 81119, 48841