The community or trade area where you will operate your business is generally that geographic domain from which you will draw the major portion of the customers needed to support your business on a continuing basis. According to Hal B. Pickle and Royce L. Abrahamson in their book, Small Business Management, the trade area can usually be divided into three distinct zones of influence:
1. The primary trading area --The geographic area within the community where you will be able to exert the most influence. It usually accounts for 75 percent of sales.
2. The secondary trading area --The geographic area that is immediately beyond the primary trading zone. The secondary trading area usually accounts for 15 to 20 percent of sales.
3. The tertiary trading area --This area is outside both your primary and secondary trading areas, but it still holds customers who patronize your business. The tertiary trading area usually accounts for 5 percent or more of sales.
To conduct an analysis of the community, you will consider many factors. The most important questions to answer are:
*Is the population base large enough to support your business?
*Does the community have a stable economic base that will promote a healthy environment for your business?
*Are demographic characteristics compatible with the market you wish to serve?
*What are the attitudes or outlooks or people within the community?
Weigh these considerations according to your business needs and goals.