When you’ve chosen to develop a new market, planning for the successful penetration of that market begins. The primary reason for your planning should be to go where your customers are, and the competition isn’t. Further analysis must be completed to understand and prioritize the trade areas for development. The starting point is to identify the relevant trade areas in the market and secure demographic data on its residents. Understanding the trade area population by daypart is very helpful. This data will help you prioritize the trade areas for development. I learned the fine points about developing a market while managing the Atlanta market.
I have lived in the Atlanta area for 28 years. My last employer transferred me here as preparations were underway for the 1996 Olympics. They saw Atlanta as a primary market for development and assembled the resources to execute that strategy. In that assignment, I was directly responsible for two QSR franchising brands. Later, as an independent consultant, I gained further experience with other brands. Atlanta is a very desirable market for national and regional restaurant brands. However, it can be a difficult market to develop. There is a long list of brands that came to Atlanta and failed. Ultimately, they closed their stores and left. Atlanta is an excellent case study of how to develop a retail brand.
Atlanta is the 6th largest city in the United States of America. It is the Capital of Georgia and is considered the Capital of the South, probably due to its strategic location It is a major crossroads for the Southeast, so logistics and supply chain are significant industry sectors. Hartsfield Jackson Atlanta International is the world’s busiest Airport. 80% of the U.S. Population is within a two-hour flight from Atlanta. Atlanta is also a Financial Hub. Other major industry sectors in the SMSA include Advanced Manufacturing, Life Sciences, Healthcare, and FinTech.
The Atlanta SMSA is very attractive to businesses due to its moderate climate, reasonable cost of living, and business-friendly State and Local Governments. Atlanta is the headquarters for many national and regional brands. Nineteen Fortune 500 companies are headquartered in Atlanta, including sixteen Fortune 100 companies. Two Hundred Inc. 500 companies also call Atlanta home. It boasts home-grown QSR and Casual Dining Brands that dominate their categories.
The Atlanta market has been growing steadily for as long as I can remember. Many fraternity brothers made a beeline for Atlanta when I graduated from college. In 1996, the population of the SMSA was about 4.5 million people. Today it is closer to 6.1 million. Atlanta continues to grow in all directions, unimpeded by major bodies of water and other natural boundaries. Atlanta has a highly diversified population and a well-diversified economic base. There are many well-regarded Colleges and Universities located in the Atlanta area creating an ample supply of part-time employees.
The population growth in suburban Atlanta continues. Growth is so great that traffic, especially during rush hour, has become a major problem. Commute times are unbearable. Many employers have moved into the suburbs to be more convenient for their employees. In other words, businesses are following their employees into the suburbs. This is very helpful as it adds to the daytime population of trade areas. Development opportunities in trade areas on the periphery of the SMSA are abundant. Based on the rationale I have presented; Atlanta is a very desirable place to conduct business.
I have witnessed successful development programs and many failures of national and regional brands. The difference between success and failure is often the development strategy pursued by the brand. Regarding the development of markets like Atlanta, one must plan a military campaign. Don’t jump into the middle of the market to be surrounded by savvy competitors with established brands. Solid brands have lost time and resources by attacking the Central Business District first. A brand must have exceptional national recognition to effectively develop the core of an SMSA. Successful brands, including Marlows Tavern, have pursued an “Outside-In, Development Strategy.” Success requires attacking growing trade areas from the fringes of the market. Building from, the perimeter offers a less competitive landscape. Less competition means lower investment costs and a more favorable labor market. An Outside-in Development Strategy is the most effective way to develop Atlanta!
Summary and Conclusion
A successful market development program requires a thoughtful analysis of the trade areas within the SMSA. If the trade areas are ranked by their potential ROI, it will probably lead to an Outside-In Development Strategy. For a market like Atlanta, that is the recommended path. An exception to that rule would be high-end, luxury goods and services, with well-established brand identification.
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Now that your foundation for growth is established, it is time to craft a development strategy. You must determine when and where to direct your investment. To craft a development strategy, one needs a framework to synthesize the relevant statistics and prioritize the markets for development. This is the focus of this article.
I just got off the phone with my best and oldest friend, John. He recently learned that an employee stole over $100 K from his business. It breaks my heart to hear of the trouble it’s caused him and his wife. The situation is especially disheartening as he is at the end of his career, looking forward to retirement. Fortunately, he will be OK, but It still stings.
If you are a small business owner with aspirations of building a bigger business, you must have a clear understanding of the business profile. Mitigating risks includes a combination of systems, processes, and procedures. However, without oversight, systems, processes, and procedures are useless. As an owner-operator, you must make time to review critical aspects of the business. You must know where your funds are going and in what amount. You must be familiar with your vendors and the terms of those agreements. A Big Red Flag is to see funds going to a vendor you don’t recognize. You must investigate that matter immediately. Another Red Flag is payroll checks for an unfamiliar employee. Small and large accounts payable can reveal problems. It is incumbent that owner-operators and senior executives build oversight into their daily routines to ensure compliance and minimize risk.
Before making any significant investment, competent business managers thoroughly analyze the opportunity. They will perform a financial analysis to justify the investment. The typical analytical model employed is a discounted cash flow analysis. The two major components of this methodology are the upfront investment and the ongoing cash flow from operations. The initial investment is straightforward. It includes the outlay for land, building, furniture, fixtures, and other startup costs to be capitalized. A cash flow analysis employs the typical expenses incurred in your existing outlets. The cost of Goods Sold and Labor vary with sales. Most other expenses are fixed, at least on an annual basis.
