A Rough Cut on Feasibility
A piano tuner recently moved to Buffalo, NY, and would like to assess the business possibilities for him in his new home. He plans to estimate how many piano tuners the greater Buffalo area can support, and compare that to the number listed in the phone book. How do we advise him as to how to estimate the "right" number of tuners for the area?
One approach is simply to guess. Would it be 1, 10, 50, or 100? Are you comfortable with this approach? I am not. An approach I would be comfortable with would be to search for data on estimates of how many piano tuners per capita there are in the U.S., and apply that ratio to the Buffalo area population (let's use 1.3 million). Is data on this likely to be available? Test your resourcefulness by trying to find it.
Assuming that data is not available, we must go to the "some assembly required" approach to estimating, that is, deriving the estimate from data which is available modified by related local and national data, norms, and "rules of thumb." While this seems so indirect as to be little better than just guessing, it can be a very useful exercise. If nothing else, it causes us to identify some important variables and how they relate to our business of interest. The inaccuracies of compounding estimates can be minimized by working in ranges to give us a "ballpark" figure.
How can I derive a meaningful estimate from generally available information? It would be interesting to know what percentage of American households own a piano, and how often they get it tuned. If the data is national, we may need to apply some local adjustment factor. Given the annual number of piano tunings, we can divide by the annual capacity of a tuner to determine how many are needed.
I will do an "off-the-top-of-my-head" calculation to illustrate the method, then leave it to you to provide real values:
Buffalo has about 400,000 households population divided by 3 members average); 8% of American households own pianos. I can think of no reason to apply any local adjustment to this figure, so we are talking about roughly 32,000 pianos. My guess is that two-thirds of all pianos are merely furniture, so that the remainder of about 11,000 are played regularly and in need of tuning. Tuners recommend that a piano be serviced twice a year, but my guess is that the average is probably once a year for active pianos, or 11,000 tunings per year.
A tuner can service 2 to 4 pianos a day; let us say 3 per day, 5 days a week, 50 weeks a year, or 750 tunings per year per tuner. To provide Buffalo's 11,000 annual tunings would require almost 15 tuners. The phone book lists 9. Sounds promising!
How do you like this? How many would you have guessed without this analysis? Does the result seem reasonable? Enough on which to base the opening of a business?
Could it have been done more scientifically? How? Would discussions with piano tuners and music stores have been useful? Are there any journals worth consulting? Would a survey have helped?
Are pianos in places other than homes? Are there tuners not listed in the yellow pages?
The Census of Retail Trade provides the average number of stores per capita for a variety of retail outlets. Based on their data, we can determine how well our proposed market area is served on a relative basis for the type of business we plan to start. For example, there is, on average, a stationery store for every 33,000 people; for every 26,000 people there is one bookstore and one nursery and garden supply store. The population can presumably support a barber shop for every 2,200 residents, and a furniture store for every 3,000.
John B. Vinturella, Ph.D. has almost 40 years experience as a management and strategic consultant, entrepreneur, author, and college professor. For 20 of those years, Dr. Vinturella was owner/president of a distribution company that he founded. He is a principal in business opportunity sites jbv.com and muddledconcept.com, and maintains business and political blogs.
More Resources
Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exitingMore Strategic Planning Information:
Related Articles
Consolidation in the Software Industry is Hardly New: Obsess About It or Risk Losing it All
Some analysts credit [Larry] Ellison with anticipating the consolidation in the enterprise software industry and leading the charge. Ellison 'called a major shift in an entire market, which was impressive.
Why Six Sigma Will Work in Healthcare
If ever there were an industry where we want zero defects, it's healthcare. Patients, medical professionals, and healthcare administrators all want mistakes eliminated and quality and efficiency improved.
What Every Service Provider Ought To Know About Writing A Business Plan
It's easy to lose sight of what needs to be communicated to prospective investors when writing the various sections of a business plan. Successful business owners/entrepreneurs use each section of their business plan to work up interest, to present arguments and, most important, to build trust and confidence.
I Always Play by the Rules and It Stinks!
This week I coached a wonderfully lovely woman I'll call Jill. She's a bright woman, very compassionate and sweet.
3 Undercover Ways to Make Big Profits from Your Competition
You have heard that there is extra money on the table
marketing products related to yours. You have also heard
that your direct competitors product is off the table.
Why Do a Business Plan?
To Grow (Catapult) Your Business That's Why.When it's in your head it's not as likely to happen--too much missed.
Business Process Methodologies
I've either been involved with or held a process-related role since 1994. It started in the government with TQM (Total Quality Management).
Innovate Today for Great Leaps Forward Tomorrow
How often does your company make a quantum leap forward? My guess is that, on a scale from "frequently (10) - to - never (1)" the answer is much closer to "never" because few companies have a process to innovate or think creatively. Very few attempt to formally think through their business model, their relationships with staff, clients, and vendors, and their product / service offerings.
Attributes of Companies You Dont Want to Buy!
There are no "rules of thumb" in the pursuit of companies to
buy. Each purchase opportunity has to stand on its own merits.
Corporate Venturing For Emerging Growth Companies
The boom of the dot-com era in 1999 brought the emergence of
corporate venture capital as a major source of funding to the
private equity markets. Corporate venture investments peaked
in the third quarter of 2000 with 608 deals totaling a combined
$4.
Going Self-Employed - A Few Handy Hints
The day you decide to take the plunge and work for yourself will be one of the most life-changing choices you ever make, whether starting a company large or small or as a freelance; from the very first moment of being self-employed, you and you alone will stand or fall by your decisions and actions. You will be responsible for steering your business through all its ups and downs, good times and bad times with no guarantee that everything will turn out right in the end.
Mastermind Your Way to Success
What do Mark Victor Hansen, Robert Allen, Anthony Robbins, Andrew Carnegie, Henry Ford, Thomas Edison and Ben Franklin have in common?They all leverage the power of the mastermind team.The mastermind works on the concept that two (or more) heads are better than one.
Offense: Beat the Odds
When in doubt, cut that out! Yeah, yea, doubting Thomas may have had a point in his day, and life may not be what you want it to be, but if you constantly doubt yourself, how can you accomplish anything?Where is your confidence? What possible good can come from taking the negative aspect of any situation and growing it into acceptance?Purpose of achievement is to attain a goal. So, if you set your goals and strive to get there, it should be assumed that you are moving toward your goal (at least so far as intent) no matter what you are doing, right?I vaguely remember an instructor from college saying once, "If there are two ways to take something, always input the benefit of doubt and assume the better more optimistic choice is the right way to take it.
The Chasm of Change---- Restructuring ----- The Goliath
Richard L. Daft one of the country's recognized academic leadership experts raises the question, "What kind of people can lead an organization through major change?" A Turn-A-Round restructuring qualifies as major change and requires transformational leadership.
Writing a Business Plan for Success in Business and for Funding
Writing a business plan to help you direct and manage your company is a key part of starting you new company that will help lead you and your company to success. Creating a "living and breathing" business plan makes that success even easier to reach.