Steamboat Springs Before you dust off your great aunt’s favorite recipe for nakji somyun and open that Korean barbecue of which you’ve long dreamed, you might take the time to find out if that dog will hunt sam gyup sal in Ski Town USA.
Economic researcher Scott Ford and Bud Werner Memorial Library reference librarian Jackie Kuusinen spoke to an audience of about 15 businesspeople in the Yampa Valley Entrepreneurship Center at Colorado Mountain College's Alpine Campus on Thursday night about the tools needed to find their companies' target markets. They used the example of a fictional Korean restaurant startup as a case study to illustrate the research people need to undertake before opening a new business in Steamboat Springs.
Does Steamboat have an appetite for stir fried squid and vegetables (nakji somyun) and thinly sliced pork belly (sam gyup sal)? In the business sense, that’s a complicated question.
Ford, who is fond of colloquialisms, boiled down the detailed process of conducting a business-feasibility study to the old saw: “Yeah, but will that dog hunt?”
In reality, he told his audience there are no shortcuts for the process of mining databases to glean the information that yields understanding of even a small market like Steamboat.
Market research begins with posing the question, “Who are my customers?” Ford said. “Even if you have an existing business, this is the question you have to ask yourself constantly.”
And right after that, startups need to address two more questions: “Who is my competition?" and "How much market share do I think I can claim from them?”
“Market research is an artful science,” Ford said. It will tell you, 'How big is the market? How many bodies (are in the market)? And how many dollars?' You can use it as an element in determining the feasibility of a business.”
Ford said he returns time and again to databases subscribed to by Bud Werner Memorial Library. Subscriptions to databases like ReferenceUSA can be expensive, but the library makes them available to its patrons, and Kuusinen said she and her staff are available to help people make the most of the databases.
People working from their office or home can use the number on their library cards as a password to enter a rich database called ReferenceUSA, Kuusinen said. And no password is necessary if they are working from inside the library, even if they are using their own laptops. Go to www.steamboatlibrary.org and follow the "Services" drop-down menu to "Research & Databases" and "Browse by Subject." Then select "Business & Economy."
Other databases at the library include Business Source Premier, Law Depot, Net Advantage and Regional Business News.
Entrepreneurship Center Manager Randy Rudasics said business owners who are willing to mine the data will be able to approach financial institutions with a business plan that greatly reduces the associated risk in the eyes of lenders.
Ford likes to begin his data search at the American Fact Finder maintained by the U.S. Census Bureau. By typing Steamboat Springs into the search window on the home page, people can tap into information about population and employment here. Ford learned that the greater Steamboat metro area comprises 6,768 households, and using the median household income of $66,467, he calculated that aggregate household income here is just below $450 million (as of 2010).
From the U.S. Census, Ford then jumps to the Federal Bureau of Labor Statistics’ Consumer Expenditure Survey, where one can learn (based on people who volunteered to keep diaries of their spending habits) that households nationally spend 78 percent of their gross income, or almost $50,000 annually. Ford also knows that nationally, households spend 5.3 percent of their disposable income on food consumed away from home, which could mean full-service restaurants or convenience stores, among other food and drink establishments.
Admittedly, Ford said, it’s a bit of a leap to assume that Steamboat households spend the same on dining out of the home as the national average. However, with the notable exception of outdoor sporting goods, experience has taught him that we are much the same as consumers across the country.
So if Steamboat residents spend 5.3 percent of their disposable income of $351 million (78 percent of $450 million) on dining away from home, that number is $18.6 million. However, assuming 35 percent leakage, the actual amount spent locally on meals outside the home is likely closer to $12.1 million
Of course, Steamboat’s dining industry is bigger and more complex than that because vacationers here represent a majority share of the restaurant business. Ford consulted accommodation tax data in the city of Steamboat, average daily room rates and average number of people in a room, from the lodging community to determine that 280,000 to $330,000 unique visitors visit Steamboat annually, a number that has been stable for at least seven years, he said. For the purposes of his research, he used the midpoint of that range and assumed 305,000 visitors annually.
Turning again to sales tax figures and lodging community data that includes average length of stay and average spending per stay — while taking into account winter, summer and shoulder seasons — Ford concluded that visitors spend $57 million annually on food and beverages.
So local and visitor spending on meals consumed in local businesses annually is about $70 million when local spending of $12 million is added to visitor spending. If that sounds like an encouraging number for restaurant startups, consider the competition.
Ford said ReferenceUSA is an ideal source of data that can help someone planning to open a new restaurant define the competition. The database allows users to search business categories, full-service restaurants, for example, and obtain detailed information about specific businesses. But like most databases, it contains a certain amount of extraneous noise that must be sifted out, and the restaurateur planning a Korean barbecue here will need knowledge of local establishments to rule out some businesses that have been misclassified.
Ford said, the next logical step is to refine a list of perhaps 10 or 12 direct competitors, add up their combined gross annual receipts found in ReferenceUSA and try to determine whether there is room for one more. A part of that process, he said, might be identifying the two weakest competitors and estimating how much business a new Korean barbecue might be able to capture.
Will that restaurant hunt in Steamboat?
Ford said he would bet any day of the week on a dynamic and highly motivated businessperson with an OK idea for a startup over an uncommitted businessperson with a can’t-fail idea. And because people who generate business ideas represent significant human capital, he’s determined to honor every idea brought to him.
To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com