How Does Low Population Growth Affect Local Business?
Even if the population of your marketplace doesn’t shrink, a stagnant growth rate can negatively affect your sales and profits. No or few new customers means your growth potential is small and may not be enough to counter increasing salaries and other costs of doing business. Looking for new markets is critical to your survival in a market with few new customers.
Once a group has seen your product or service for years, you won’t see the exponential growth you experienced when you launched. Certain people are more willing to take a chance on a product when it’s new. After you exhaust these trendsetters and early adopters, you must fight harder to get late adopters. Without a constant influx of new residents in your area, you’ll find few new customers among these various groups. When people in a low-growth area have made their decision as to whether to buy from you, you’ll need to spend more marketing dollars to convince these laggards or create new marketing strategies to increase use among your regulars. Even if your sales stay constant, your operating expenses won’t, especially as you increase the compensation of your employees.
Just because an area isn’t gaining residents doesn’t mean its infrastructure isn’t growing. A municipality or county might spend to add new roads, bridges, libraries, parks, city hall staff and technology, requiring residents and businesses to foot the bill. Raising property and sales taxes isn’t politically popular, so politicians often look to businesses to pay for improvements by raising taxes or implementing new fees.
Those young or middle-aged customers you relied on will get older and change their tastes, needs, habits or lifestyles. If your population remains fairly constant, you might see your customer age demographic shift significantly. Newlyweds with disposable income might need to cut back on discretionary spending, such as dining out, as they add children to the nest. Parents with toddlers will need to spend more on school as their children age. Middle age customers will begin to hit retirement, making significant lifestyle changes. Review your customer demographics and your unique selling proposition to determine if your survival depends on a specific age group or if you can modify what you sell to avoid having customers age out of your product or service.
If you can’t move your business, consider expanding your territory with a second location, catalog sales, direct mail, telemarketing, online selling or direct-response TV and radio advertising. If you can’t afford to open a second location, explore franchising your concept. Meet with wholesalers, distributors, sales agents and websites to determine their interest in selling or distributing your product or service.