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4.29 Market Value of Owned Home by Area Type Nationally Analysis Questionnaire

What is the benefit of having the Market Value of Owned Home by Area Type analysis in a business plan for Central Plumbing & Heating Inc.?

The market value of owned home by area type analysis is a great tool whereby the owner of a small business like Felix Gonzalez is able to get a clear idea of just what is the distribution of the national housing stock when accounting for the type of area in which the home is located. The great advantage of this analysis is that it is covers a period of 10 years and thus the reader of the plan is able to see what the changes have been over the years, how the market values of urban homes have fared when compared to their rural cousins. In addition this analysis presents the data in both tabular and graphical format which is an added bonus.

How is the population classified when conducting an analysis for the Market Value of Owned Homes by Area Type?

In order to conduct the analysis a business owner like Felix Gonzalez would have to use data that would classify the population into two large buckets:Urban Population: All persons living in metropolitan statistical areas (MSA), in urbanized areas and urban places of 2,500 or more persons outside MSA's. Urban, defined in this survey, includes the rural populations within an MSA.Rural Population: All persons living outside a metropolitan statistical area (MSA) and within an area with a population of less than 2,500 persons.

What if the market value of homes in urban areas is more than the homes in the rural areas - should a business ignore rural areas?

Ignoring a target market of potential clients is always a bad idea - we are of the belief that if the market values of homes in rural areas are on average are lower, and the number of folks in your industry serving this market are few, then there may actually be a very good opportunity for a small business to get in there and quickly establish themselves. Smaller regional banks have done a terrific job of establishing themselves as local community banks and have been able to hold their own very well against the large well established global banks that tend to dominate the urban and sub-urban landscape.

Many small business owners that run small companies like Central Plumbing & Heating Inc. in Charlotte, North Carolina make the mistake of thinking that the folks living in rural areas don't have much in terms of income and hence will not make good customers. The reality is that many well to do folks also live in areas that are classified as rural, and since very few businesses take the time to market in rural areas, there may a large untapped market just waiting for you.

What if home prices in urban areas were holding strong but are now beginning to decline more than their rural counterparts?

One of the reasons we highly recommend that all business plans have an analysis that covers the spending by type of area is to identify changes of this type. In the event we were to see this in the analysis it could mean a host of things - typically the market values of homes in urban areas tend to hold well when compared to their rural counterparts, and thus if there is a subtle and recent change, especially in the target market of a small business like Central Plumbing & Heating Inc., further analysis and a deeper dive would be needed to understand the reason for this change. A very large urban area employer may have decided to shut shop and move production to another state or country leaving the area with a very large unemployed population resulting a major blow to urban home values.

What is important for small businesses to understand is that these changes do often take place and can easily wreak havoc on the profitability of many

businesses. For example if you just opened a restaurant in the downtown urban area which just lost its biggest employer, you can bet that your business will suffer and you may even fail due to a major cash crunch for the first few months. Thus if you see this coming, as a smart and savvy business owner, you may consider drawing down on a line of credit, or applying for a line of credit quickly and keeping it handy in case you need to tap into it to stay afloat during the first few challenging months of the slowdown.

Quick Links:

  1. Go to the Corresponding Template section for this industry.
  2. Go to the Corresponding Business Plan section for this industry.

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