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Extension > Community > Retail Analysis and Development > Retail Trade Analysis > How can I assess demand for a proposed business in my community?

One of a series of fact sheets on economic issues for communities


Tip: Use the updated Economic Census

American businesses are in constant flux. Some store categories are in decline, while others are on the upsurge. The Economic Census gives us a snapshot of American businesses, providing valuable information to analyze business opportunities. These figures are relatively easy to find and use, and they are free of charge.

I've heard of the Census, but what is the Economic Census?

Conducted every five years (most recently in 2007 and 2012), the Economic Census surveys businesses about basic information, such as sales and number of employees — as well as in-depth information such as businesses expenses and types of products. Unlike the Decennial Census that targets everybody living in the United States, the Economic Census surveys all large and medium-sized companies, samples small companies and non-employers, and draws upon federal administrative records such as IRS data and employment insurance for others. (Learn about the methodology of the Economic Census at The result is robust and reliable data you can use to analyze your market, community, or individual business.

What can I learn from the Economic Census?

The Economic Census provides a wealth of information about American businesses and changes over time. For any business category you can learn about the number of establishments, sales, labor costs (including payroll), employment (including employee numbers), expenses, assets, and more. You can put all this data to many uses, but this fact sheet concentrates on using the Economic Census to measure the demand for retail and service businesses.

Analysts measure demand by calculating potential sales, defined as the expected sales in a given trade area or market. You can use Economic Census data to calculate potential sales for a product or service in your community — thus gaining a quick assessment of whether a business in viable in your town. You can also apply your potential sales figure to your business and marketing plans, as well as loan applications.

How do I calculate potential sales for a proposed business in my community?

Since the number of residents in a trade area is the key driver of retail and service sales, you can do a basic calculation of potential sales based on population only. Do this by multiplying typical spending in a business or store category by the population of your trade area. You can obtain both these figures from the Economic Census. Analysis can be more sophisticated, taking into consideration income and other non-local customer segments, but here's a simple calculation based only on population to get you started.

The following five steps will allow you to do a basic potential sales calculation:

  1. Define a reasonable trade area for the potential business (see Extension's fact sheet, "Where Do Your Community's Customers Come From?"). The size of this area primarily depends on the business you are investigating. A convenience business such as a gas station or hair solon may pull customers within a 10-mile radius, whereas a destination business such as a furniture store pulls from a 50-mile radius.
  2. Find the population of your trade area. A number of online tools allow you to run reports about your trade area, providing information about common demographics, such as population, age, income, and education. For example, you can access Business Analyst Online at, select a location by using its "draw polygon" tool, and then choose "get report" to view demographic data. Business Analyst Online requires creation of an account and login, but grants access to a limited number of demographic reports for free.
  3. Choose the store category you want to research. The Economic Census uses a set of numeric codes under the NAICS (North American Industrial Classification System) to categorize businesses. The higher the code number, the more specific the category. For example, 72 is the NAICS code for accommodations and food service, while 7221 is specific to full-service restaurants. You can search for your business by keyword at
  4. Find per capita spending for your store category from "industry snapshots" on the Economic Census site at Drill down to a store category for basic industry ratios and statistics, including per capita spending (the amount spent in a store category for every man, woman and child in the United States). Below is a sample entry from the industry snapshots section of the Economic Census website:
    Economic census industry snapshot
  5. Calculate potential sales for the business you are researching. To do so, simply multiply your trade area population by the per capita spending figure for your business from the Economic Census. Then compare your calculation to the average sales per establishment from the Economic Census to identify whether or not this is an opportunity.

Be cautious using strictly national or statewide statistics in your research. The industry snapshots are a good place to start your research, but you may need to dig a bit deeper into the Economic Census to find data particular to your situation or at least adjust your estimates accordingly.

Extension offers a free online tool called the Gap Analysis Calculator that quickly makes all the calculations described above across a range of retail and service businesses based on a single trade area for your community. Learn about the tool by clicking on "Evaluating Retail and Service Business Opportunities" on Extension's Downtown Market Analysis Toolbox page.

What's the bottom line?

The Economic Census is one of the most accurate and robust sets of data you can use to evaluate business opportunities in your community. If you have considered opening a business or simply wondered if a particular business would work in a community your size, these numbers help you investigate the idea. However, this is only a first step. If you want to evaluate a potential business in detail, contact your local Small Business Development Center or SCORE chapter for business planning advice.


Pesch, R. (2011). Where do your community's customers come from? (Fact Sheet). St. Paul, MN: University of Minnesota Extension

