All brick-and-mortar businesses have at least one thing in common with real estate: Success is determined by location, location, and location. But conducting an effective business location analysis isn't always as intuitive as it might seem.
Enter the annual American Community Survey, a wealth of government data that provides the foundation for comprehensive business location analysis. The Census Bureau sends the survey out to roughly 3.5 million U.S. households every year, providing data on everything from the number of people in a state to the percentage of housing units without plumbing in a zip code.
The data is so voluminous that it can be hard to pin down which variables might help your business location analysis. We can provide a few key tables to start you off on the right foot. Each contains a description of items in the table and how you can find them, using either the Census Bureau table numbers or simplified Social Explorer table numbers.
Population: The Foundation of Business Location Analysis
Obviously, if you're starting a business, you're likely to want to establish it in a populated area. Population data is the cornerstone of any business location analysis. Even if it's an online business, you might need workers. And even if it's a one-person shop, it's helpful to know more about the demographics of where you're sending goods or providing services.
Let's say you want to conduct a business location analysis for all neighborhoods in Shelby County, Ala. The best neighborhood equivalent in the American Community Survey is the Census tract; there are about 85,000 in the United States.
To find the population for each tract, you'd use Table B01003 from the Census Bureau, or Table A00001 from Social Explorer, both of which can be found here.
This is a good place to address the margin of error, often abbreviated as "MOE" in tables. Because the American Community Survey is a survey, and not an actual headcount, there will always be some margin of plus-or-minus error. Although the Census Bureau surveys an epic number of U.S. households – about 3.5 million every year – the margin of error will become larger as geographies grow smaller. In other words, you'll get more accurate numbers at a state level than at a tract level. That doesn't mean the tract figures will be inaccurate, especially relative to other tracts; it just means you'll need to use common sense in determining when a result is probably spot-on and when it's a statistical fluke that should be disregarded.
Another issue: Strangely enough, not all of us know the precise boundaries of each Census tract in our area. Keep in mind that tracts are only approximations of neighborhoods by virtue of their size, which can range from 1,200 to 8,000 people but average around 4,000. Fortunately, Social Explorer has a mapping solution that allows you to zoom to an area, select the Census tracts, and design a map for your business location analysis.
Median Household Income in Business Location Analysis
When conducting business location analysis, knowing where your customers live is important. Equally important, though, is knowing if your market can afford the goods or services that you're providing. As a general rule, the best metric to use is the median household income, which gives you a figure that's in the middle of all incomes; half of households earn more, and half earn less.
The median income is also generally a better gauge of income than per-capita, or average; say, Elon Musk walks into a bar and there are 10 other people. The average income of people in the bar is now likely several billion dollars; the median is a bit more realistic since it's picking out the midpoint of earnings.
You should also understand the definition of a household. It's not necessarily a two-parent, two-child nuclear family. It's a single group of people living together. A household can be a traditional nuclear family, an extended, multigenerational family, or even a single person.
Let's look at the median household income for Harris County, Texas, one of the nation's biggest. Finding the median household income for your business location analysis is straightforward, involving either Table B19013 from the Census Bureau or Table A14006 from Social Explorer. You can find them both here.
(As you'll see by clicking on the link, we've included a report that generates the median household income for the state, Harris County, and all counties in Texas. You can mix and match geographies as much as you want with Social Explorer and download the results in an Excel or *.csv format.)
Here’s a map of our results; Social Explorer makes it simple to divide the counties into quantiles (fifths) and color code by each:
Educational Attainment: A Key Factor in Business Location Analysis
Some goods and services – groceries and healthcare, for example – are needed in almost any neighborhood. More specialized businesses, however, might want to appeal to a more (or less) educated customer base as part of their business location analysis. A high-end yoga studio would probably want to follow the money; a used-car dealership might want to locate in a low- to middle-income zip code.
Education is often a proxy for income, but it can also stand alone as a variable when conducting business location analysis. College-educated consumers are most likely to shop at organic and specialty groceries, luxury goods stores, and financial institutions that offer investment services.
The American Community Survey doesn't offer zip code-level data, because (you learn something new every day, right?) zip codes aren't spatial geographies. They're delivery routes, and they consist of straight lines, or even a single point on a map. So the Census Bureau has created rough approximations known as Zip Code Tabulation Areas (ZCTAs).
Here, we'll use Table B12001 from the Census Bureau (or Social Explorer Table A12001) to discover the number of people with at least a bachelor's degree in 40 different zip code-equivalents in west and southwest St. Louis, Mo. You can find the table here; note that the easiest way to analyze Census data by zip code in tabular format is to use the first three digits of the zip, then filter your selection. In this case, we used 630 and 631 to identify zip equivalents around St. Louis.
The results can be seen visually, as well:
Also note that if we wanted to shortcut the business location analysis process, we could create the map first, then select all the zip codes in it and ask Social Explorer to create a report. While this would be a quick and painless way to filter for only zip code equivalents that you want, it will give you a much broader range of information than the simple table used in the above example (not that a broader range is always a bad thing).
Occupations: Understanding Your Customer Base in Business Location Analysis
Willie Sutton robbed banks "because that's where the money is." Not that you're robbing banks, but people conducting business location analysis usually will want to follow the same guideline. Businesses that don't go where their customers are (or will be) aren't going to last long.
While detailed occupations (i.e., hairdressers, firefighters, lawyers, etc.) aren't available at granular levels, the five-year American Community Survey datasets are more helpful for general occupations. So while you might not be able to determine the number of compensation and benefits managers for a metropolitan statistical area, you could use the survey to get the number of professional, scientific, management, and administrative jobs in management and business-related industries.
We can use Table C24050 from the Census Bureau (or Table A17004 from Social Explorer) to see, for example, how many real estate professionals might be located in a metro area. Generating a table in Social Explorer and looking at Aberdeen, S.D., we can see that there were 1,242 civilian employees older than 16, or about 5.6 percent of the workforce, in the "Finance And Insurance, And Real Estate, And Rental And Leasing" category.
Using Social Explorer's visualization tools for business location analysis, we can see that the Aberdeen metro area has about an average percentage of FIRE (finance, insurance, and real estate) professionals for the state. It certainly has fewer than the 10.6 percent of the civilian workforce in the Sioux Falls metro area, but more than nearby Huron, which has only 2.8 percent of its labor force in FIRE and related professions.
Obviously, this is a very broad view of the workforce. It could be that almost all of the 1,242 people in the category work in the insurance industry, and only a few are involved in real estate. Other data will need to be brought into your business location analysis, such as a state database of licensed real estate professionals. The American Community Survey data, however, can be a very good start and raise even more good questions to ask before a business is located.
Household Types: Critical Data for Business Location Analysis
As discussed earlier in the median household income discussion, households are a key variable in business location analysis. Businesses that are likely to succeed in areas with a high concentration of family households might not do as well in an area with many single-person households, and vice versa.
The Census Bureau's primary household type data consists of two primary types: family and non-family households. The family households include married-couple families, and other families, which consists of subtypes that cover male householders with no spouse and female householders with no spouse. The non-family households include householders living alone and householders not living alone.
If we wanted to create a family-centric business in Anchorage, Alaska, for example, we could use Census Table 11001 (or Social Explorer Table A10008) as part of our business location analysis to look at the types of households within 62 different Census tracts. When we create such a table, we find that 76.8 percent of households Census Tract 28.13 are married-couple households, the highest percentage in the Anchorage metro area.
As always, this begs the question: Where is this Census tract? Using Social Explorer's customizable mapping tools for business location analysis, we can find that Census Tract 28.13 is located in near southeast Anchorage. The mapping tool also can give us valuable information, such as the greatest percentage of married-couple households tend to be east of downtown Anchorage.
It's possible to get even more granular with household data in your business location analysis, looking at the average size, the number of children in family households, the age and race of households, and much more. Simply finding where specific household types are located, however, can go a long way towards finding a location for your business.
One important note for new users of Census data: You can't find information about individual households from the American Community Survey, or any other Census product, for that matter. By law, Census data is confidential. Releasing it carries a five-year prison sentence and $250,000 fine. The Census Bureau has only released data on individuals once in its history, when it passed along records of 120,000 Japanese-Americans to the War Department as part of its roundup and incarceration of the population. The Census Bureau offered a formal apology in 2000.
Transportation Patterns in Business Location Analysis
Another variable that can be useful for business location analysis involves modes of transportation. It's generally acknowledged that the United States is a car-centric nation, but businesses can (and do) survive in places where cars don't make up a majority of traffic.
The most common transportation metric studied by the Census Bureau involves the commute to and from a workplace. While your business might not be related to commuting, the variable can tell you quite a bit about how people get around in your location.
Table B08301 in the American Community Survey has a considerable number of transportation modes listed, ranging from the simple car (drove alone) commuting method to ferry. It also breaks out the number of people who work from home, a figure that has waxed and waned since the COVID-19 pandemic developed in late 2019. Social Explorer also has a table, A09005, that collapses much of the data. The Census Bureau, for example, includes subcategories for carpooling (two-person, three-person, four-person, five- or six-person, and seven- or more person), while Social Explorer simply provides the total number of people who carpooled.
A look at New York counties shows the variability in transportation patterns. More than 80 percent of workers in Broome County, which borders Pennsylvania, drove to work in 2023. Only 3.3 percent took public transportation or taxis to work. In Bronx County, which marks the northern end of the nation's largest city, only 27.5 percent of the labor force drove to work; more than 55 percent took public transportation or taxis to work.
As one often does, a map generated with Social Explorer presents a picture that's easier and quicker to shed light on the subject. Here, we can see the clear divide between car-centric upstate New York and the New York City metro area:
Housing Data for Comprehensive Business Location Analysis
Housing may be high on Maslow's hierarchy of needs, but it's not always the first thing that comes to mind when conducting business location analysis. The Census Bureau, however, has a wealth of housing information that can be at your fingertips with very little effort via Social Explorer.
Besides being useful as a proxy for wealth – people who own homes tend to have greater net worths than renters – housing characteristics can tell us quite a bit about different neighborhoods in your business location analysis. Does most housing consist of single-family homes, or multiunit buildings? How many rooms does the typical housing unit include? What is the median value of homes in the area, according to the owners? When were most housing units in the area built? How are they heated? How much does the typical homeowner or renter pay in monthly housing costs? How much as a percentage of their income?
For purposes of one example in business location analysis, we'll look at the Census Bureau's Table B25005, which provides vacancy status for housing units – the number of vacant homes for sale, the number that are used as second or vacation homes, the number for rent, the number for migrant workers, and the number that are vacant for other reasons. The Social Explorer equivalent is Table A10047; like the transportation table mentioned above, categories are collapsed into the number of vacant homes for sale, rent, or other reasons.
Since there are almost 400 Census tracts in Alameda County, Calif., we'll generate a table, download it into a *.csv file (Social Explorer also offers the option of an Excel 2007 download), and sort the data to see which neighborhood has the greatest percentage of vacant homes for rent. The report shows that 100 percent of housing units in 25 Alameda Census tracts are empty and for rent.
Again, you'd be extremely unlikely to be able to quickly determine a geographic pattern simply by looking at a table of several hundred Census tracts. Again, it's Social Explorer to the rescue, with a visualization that shows the greatest percentage of vacant homes for rent occurs along major north-south roads in Alameda:
You'll notice that there are a number of blank spaces on the map. It's safe to assume that those blank spaces represent Census tracts that don't contain enough housing units to protect privacy. In other words, if there were only two vacant housing units for rent in one Census tract, it's possible that they could be identified, so the Census either omits them or allocates them to a nearby tract with similar characteristics.
Immigration Trends: An Emerging Factor in Business Location Analysis
The increase in the number of foreign-born citizens may be considered a problem by the U.S. government, but in many cases, it's an opportunity for businesses conducting thorough business location analysis. Indeed, some of the fastest-growing businesses in the United States have been those catering to people who have immigrated from other countries.
Whether documented or not, immigrants have been the focus of a number of businesses, ranging from financial institutions that can handle overseas money transfers to mobile phone stores that offer international calling and/or SIM cards. While a much smaller niche, culturally targeted businesses – say, a store that sells quinceañera dresses in a Hispanic community – also can appeal to an immigrant population.
Of course, the inverse also should be considered in your business location analysis. A liquor store in a community with a large number of immigrants from the Middle East might not be any more successful than a car dealership located in an Amish village. As more and more businesses are learning, KYC – Know Your Customer – is an important element in the success or failure of any venture.
As an example for business location analysis, let's look at neighborhoods in Harris County, Texas, one of the nation's most diverse areas with Hispanics making up 43 percent of the population, whites 27.4 percent, blacks 18.7 percent, and Asians 7.1 percent. The American Community Survey allows us to zero in on specific countries of origin or the foreign-born population.
We can start with Table B05006, Place of Birth for the Foreign-Born Population in the United States (Social Explorer Table A07001). As you can see from a table, it has a large number of countries to select, from Albania to Zimbabwe. Let's say we want to open a business that would cater to the Caribbean population within a certain area. The table shows us that people from more than a dozen Caribbean nations make up 4.4 percent of the foreign-born population in Harris County.
Sadly for non-Social Explorer users, there are more than 1,100 Census tracts in the county, which includes the nation's fourth-largest city, Houston. So while we might be able to download the data for all tracts and discover that almost one-third of the foreign-born population in Census Tract 5420.01 is from the Caribbean, it will take some digging to figure out exactly where the tract is located.
Again, Social Explorer's mapping software can come to the rescue for your business location analysis:
Looking around the map, we can find the tract fairly easily, in a very small geographic area of far west Harris County. Here, it's also a good idea to keep in mind that every Census table and map will be built on part of a universe of the population. In this case, the universe isn't the total population; it's the foreign-born population. Always double check to make sure that you're aware of the universe you're studying. While the 55,022 people in Harris County who were born in the Caribbean represent 4.4 percent of the 1.26 million residents born in other countries, they only make up a little more than 1 percent of the county's total population of 4.76 million.
Conclusion: Making Data-Driven Business Location Analysis Decisions
Conducting thorough business location analysis using American Community Survey data provides entrepreneurs and business owners with the insights needed to make informed decisions about where to establish or expand their operations. By examining population demographics, income levels, education, occupations, household types, transportation patterns, housing characteristics, and immigration trends, you can identify the optimal location that aligns with your target customer base and business model. The tools and techniques outlined in this guide offer a comprehensive framework for business location analysis that can significantly improve your chances of success.
To see how Social Explorer could aid you in your own business location analysis, you can sign up for a free trial.