THRESHOLD ANALYSIS FOR MOORE, OKLAHOMA
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1 AE THRESHOLD ANALYSIS FOR MOORE, OKLAHOMA Susan Moffat, County Extension Director, Cleveland County (405) Dave Shideler, Extension Economist, OSU, Stillwater (405) OKLAHOMA COOPERATIVE EXTENSION SERVICE OKLAHOMA STATE UNIVERSITY April 2013
2 Threshold Analysis For Moore, Oklahoma Susan Moffat Cleveland County Extension Director 601 E. Robinson Norman, OK Dave Shideler Extension Economist 323 Ag Hall Oklahoma State University Stillwater, OK ABSTRACT The goal of this paper is to provide a threshold analysis for Moore. Threshold analysis attempts to estimate how many stores of various types a community can support. The estimate is based on the community s population and average number of persons per business in Oklahoma. "Oklahoma State University, in compliance with Title VI and VII of the Civil Rights Act of 1964, Executive Order as amended, Title IX of the Education Amendments of 1972, Americans with Disabilities Act of 1990, and other federal laws and regulations, does not discriminate on the basis of race, color, national origin, sex, age, religion, disability, or status as a veteran in any of its policies, practices or procedures. This includes but is not limited to admissions, employment financial aid, and educational services." "Readers may make verbatim copies of this document for non-commercial purposes by any means."
3 THRESHOLD ANALYSIS FOR MOORE, OK Introduction to Threshold Analysis Most people know that a town's population must reach a certain level before a McDonald's will locate in that community. McDonald's marketing specialists are using a technique referred to as threshold analysis to make these decisions. The concept is simple. The restaurant needs a sizeable market to be profitable. If this kind of analysis works for fast food restaurants, it stands to reason that it would apply to other kinds of businesses as well. Next time you drive through a small town, take a look at the business mix. You ll probably notice that even a small town of 3,000 people has 5 or 6 beauty or barber shops, 1 or 2 florists, a small grocery store and a couple of antique shops. The small town probably won t have a furniture store, a shoe store, or a music/cd store. To be successful, different kinds of businesses need to have different sized markets. Beauty shops don t require large market areas, but music stores do. Dr. Kenneth Stone is a professor of economics and an Extension economist at Iowa State University, and he has worked for many years in the field of retail trade and community development. Stone, along with his colleague Georgeanne Artz, has developed a fairly simple way to estimate how large a market needs to be for various types of retail establishments. They refer to this minimum market size as the threshold level. Stone and Artz define the threshold level for a type of business as: the average number of people in the state per business. Because other types of businesses also depend upon the local population (e.g., certain service providers like physicians and dentists), we have expanded our analysis to include all NAICS codes for which data was available except sectors 11, 21, 22 and These sectors represent Agriculture, Mining, 2
4 Utilities and Manufacturing, respectively, and they are excluded because the locations of these activities rely on factors other than resident population. For example, in 2011 Oklahoma's population equaled 3,791,508, and according to the 2010 County Business Patterns and Nonemployer Statistics, there were 1,234 grocery stores. Thus, in 2011 there were 3,073 people per grocery store in Oklahoma; this is the threshold level for grocery stores in Oklahoma. Using threshold levels as a general guide, it is possible to predict how many businesses of a certain type a community might support. Small towns can generally support several restaurants, which have a threshold between 1,002 and 1,233. Shoe stores, on the other hand, require a much larger market of about 12,391. Using Census data and the threshold level methodology developed by Stone and Artz, this paper will estimate the number of establishments that Moore could reasonably expect to support. These estimates should be viewed as guidelines only, and the authors make no recommendations concerning the use of these estimates. Because the threshold values are based upon state-level data, they are best interpreted as averages. Some communities will be able to sustain more businesses than our analysis reports, while other communities will not be able to sustain the number of business generated in our analysis. Many factors contribute to the success of businesses locally, such as managerial skill of the business owner, local economic development initiatives (e.g., Main Street programs), and sales tax differentials between jurisdictions. Proximity to other communities, commuting patterns and access to highways can also impact the number of businesses a community can sustain. Therefore, the numbers contained in this report are meant to be conversation starters they must be contextualized to the local community based upon more detailed knowledge available to local leaders but not 3
5 available to the researchers. Several sources of the actual number of businesses in Moore include: retail sales tax permit holder listings, a web search, telephone book listings, Chamber of Commerce membership directory, or marketing lists that can be purchased from a number of companies. Methodology The data requirements for conducting a threshold analysis for Moore, OK include: Moore s current population and the threshold levels for various kinds of establishments. Population estimates from the U.S. Census Bureau indicate that Moore has a population of 56,315 in Thresholds for the state of Oklahoma have been constructed following the Stone and Artz methodology. The state population estimate was taken from the U.S. Census Bureau for 2011, and the number of businesses by sector is the sum of the 2010 County Business Patterns and Nonemployer Statistics number of establishments data (the most recent available). (Nonemployer Statistics captures the number of self-employed persons in Moore by industrial sector.) By dividing the population estimate for Moore by the derived, state-level thresholds, one can estimate the number of businesses the community should be able to sustain on average. Definitions of the North American Industrial Classification System (NAICS) codes are available at the sector level (2-digits) in Table 3, or more detailed definitions are available from the U.S. Census Bureau at Results for Moore, OK Table 1 presents the threshold analysis results for Moore. For example, the threshold level for fast-food restaurants (a.k.a, NAICS 7222: Limited-Service Eating Places) is 1,002 persons. The 2011 population of Moore is 56,315; thus it is estimated 4
6 that this city may be able to support as many as 56 fast-food restaurants (56,315 divided by 1,002). Generalizing, it is believed that Moore could support somewhere in the range of 102 restaurants (fast-food and full-service restaurants combined). Moore could also probably support 219 beauty salons and barber shops (NAICS 8121) and 109 child day care facilities (NAICS 6244). Moore could probably support 87 accountants and/or tax preparers (NAICS 5412), 40 drug stores (NAICS 4461), and 18 grocery store (NAICS 4451). Moore probably does not have enough population to support scheduled or nonscheduled air transportation (NAICS 4811 and 4812). Recognizing that Moore is situated on the south side of Oklahoma City, the estimated number of businesses supported in Moore could exceed the estimates presented here. It is also the case that businesses in Moore will experience intense competition from other businesses in close proximity (e.g., Oklahoma City, Del City, Midwest City, and Norman. While the shoppers in Moore may come from outside of Moore s city limits, estimated numbers of businesses are generated only using Moore s population to reflect these dynamics. According to Stone and Artz, threshold levels should be used as a general guide in determining how many businesses a town can support. They remind, however, that there are always exceptions to any rule. A highly successful watch, clock, and jewelry repair store many be located in a town of 2,500, but, in general, stores that buck the trend in this way are usually well-established, well-operated, and have usually been around for a long time. Similarly, a community may not be able to sustain the number of businesses reported here due to individual mismanagement or other factors (e.g., recent loss of a 5
7 major employer). These numbers are best used as guidelines in developing locally-driven economic development goals. Readers who are interested in learning more about Kenneth Stone and his work with threshold analysis are encouraged to check out Iowa State University s website located at 6
8 Table 1: Expected Number of Businesses for Selected Industries in Moore, OK (Sorted in Descending Order by Expected Number of Businesses in Moore) NAICS Description Estimated Establishments, Moore 5617 Services to buildings and dwellings Other personal services Personal care services Lessors of real estate Other specialty trade contractors Building finishing contractors Other professional, scientific, and technical services Direct selling establishments Residential building construction Agencies, brokerages, and other insurance related activities Child day care services General freight trucking Foundation, structure, and building exterior contractors Automotive repair and maintenance Management, scientific, and technical consulting services Activities related to real estate Building equipment contractors Offices of real estate agents and brokers Legal services Accounting, tax preparation, bookkeeping, and payroll services Offices of other health practitioners Independent artists, writers, and performers Offices of physicians Personal and household goods repair and maintenance Limited-service eating places Architectural, engineering, and related services Religious organizations Computer systems design and related services Business support services Full-service restaurants Other financial investment activities Health and personal care stores Home health care services Nonresidential building construction Other miscellaneous store retailers Office administrative services Individual and family services 34 7
9 NAICS Description Estimated Establishments, Moore 7112 Spectator sports Automobile dealers Gasoline stations Other amusement and recreation industries Clothing stores Investigation and security services Other support services Offices of dentists Depository credit intermediation Specialized design services Employment services Special food services Specialized freight trucking Automotive parts, accessories, and tire stores Advertising, public relations, and related services 20 Commercial and industrial machinery and 8113 equipment (except automotive and electronic) repair and maintenance Machinery, equipment, and supplies merchant wholesalers Grocery stores Nondepository credit intermediation Building material and supplies dealers Office supplies, stationery, and gift stores Miscellaneous durable goods merchant wholesalers Traveler accommodation Used merchandise stores Sporting goods, hobby, and musical instrument stores Drinking places (alcoholic beverages) Electronics and appliance stores Commercial and industrial machinery and equipment rental and leasing Electronic shopping and mail-order houses Miscellaneous nondurable goods merchant wholesalers Wholesale electronic markets and agents and brokers Electronic and precision equipment repair and maintenance Securities and commodity contracts intermediation and brokerage Other motor vehicle dealers Other general merchandise stores 10 8
10 NAICS Description Estimated Establishments, Moore 8123 Drycleaning and laundry services Home furnishings stores Beer, wine, and liquor stores Utility system construction Consumer goods rental Performing arts companies Other ambulatory health care services Activities related to credit intermediation Jewelry, luggage, and leather goods stores Specialty food stores Vending machine operators Residential mental retardation, mental health and substance abuse facilities Data processing, hosting, and related services Outpatient care centers Business, professional, labor, political, and similar organizations Management of companies and enterprises Other information services Death care services Professional and commercial equipment and supplies merchant wholesalers Wired telecommunications carriers Florists Motion picture and video industries Lawn and garden equipment and supplies stores Grocery and related product merchant wholesalers Promoters of performing arts, sports, and similar events Motor vehicle and motor vehicle parts and supplies merchant wholesalers Other heavy and civil engineering construction Automotive equipment rental and leasing Land subdivision Book, periodical, and music stores Furniture stores Taxi and limousine service Insurance carriers Medical and diagnostic laboratories Facilities support services Nursing care facilities Travel arrangement and reservation services Electrical and electronic goods merchant wholesalers 5 9
11 NAICS Description Estimated Establishments, Moore 6116 Other schools and instruction Shoe stores Community food and housing, and emergency and other relief services Hardware, plumbing and heating equipment and supplies merchant wholesalers Newspaper, periodical, book, and directory publishers Scientific research and development services Civic and social organizations Highway, street, and bridge construction Vocational rehabilitation services Lumber and other construction materials merchant wholesalers Chemical and allied products merchant wholesalers Other transit and ground passenger transportation Petroleum and petroleum products merchant wholesalers Agents and managers for artists, athletes, entertainers, and other public figures Warehousing and storage Metal and mineral (except petroleum) merchant wholesalers Gambling industries Grantmaking and giving services Farm product raw material merchant wholesalers Apparel, piece goods, and notions merchant wholesalers Community care facilities for the elderly Sound recording industries Furniture and home furnishing merchant wholesalers Waste collection RV (recreational vehicle) parks and recreational camps Rooming and boarding houses Wireless telecommunications carriers (except satellite) Paper and paper product merchant wholesalers General rental centers Museums, historical sites, and similar institutions Social advocacy organizations Elementary and secondary schools Support activities for air transportation 2 10
12 NAICS Description Estimated Establishments, Moore 4885 Freight transportation arrangement Drugs and druggists' sundries merchant wholesalers General medical and surgical hospitals Radio and television broadcasting Lessors of nonfinancial intangible assets (except copyrighted works) Pipeline transportation of natural gas Support activities for road transportation Technical and trade schools Remediation and other waste management services Couriers and express delivery services Beer, wine, and distilled alcoholic beverage merchant wholesalers Department stores Amusement parks and arcades Other telecommunications Other residential care facilities Business schools and computer and management training Waste treatment and disposal School and employee bus transportation Charter bus industry Educational support services Software publishers Local messengers and local delivery Colleges, universities, and professional schools 1 NAICS code definitions are available online from the U.S. Census Bureau at Sectors for which the estimated number of businesses is 0 have been excluded from the table. 11
13 Table 2: Expected Number of Businesses for Selected Industries in Moore, OK (Sorted by NAICS Code) NAICS Description Estimated Establishments, Moore 2361 Residential building construction Nonresidential building construction Utility system construction Land subdivision Highway, street, and bridge construction Other heavy and civil engineering construction Foundation, structure, and building exterior contractors Building equipment contractors Building finishing contractors Other specialty trade contractors Motor vehicle and motor vehicle parts and supplies merchant wholesalers Furniture and home furnishing merchant wholesalers Lumber and other construction materials merchant wholesalers Professional and commercial equipment and supplies merchant wholesalers Metal and mineral (except petroleum) merchant wholesalers Electrical and electronic goods merchant wholesalers Hardware, plumbing and heating equipment and supplies merchant wholesalers Machinery, equipment, and supplies merchant wholesalers Miscellaneous durable goods merchant wholesalers Paper and paper product merchant wholesalers Drugs and druggists' sundries merchant wholesalers 2 Apparel, piece goods, and notions merchant 4243 wholesalers Grocery and related product merchant wholesalers Farm product raw material merchant wholesalers Chemical and allied products merchant wholesalers Petroleum and petroleum products merchant wholesalers Beer, wine, and distilled alcoholic beverage merchant wholesalers Miscellaneous nondurable goods merchant wholesalers 13 12
14 NAICS Description Estimated Establishments, Moore 4251 Wholesale electronic markets and agents and brokers Automobile dealers Other motor vehicle dealers Automotive parts, accessories, and tire stores Furniture stores Home furnishings stores Electronics and appliance stores Building material and supplies dealers Lawn and garden equipment and supplies stores Grocery stores Specialty food stores Beer, wine, and liquor stores Health and personal care stores Gasoline stations Clothing stores Shoe stores Jewelry, luggage, and leather goods stores Sporting goods, hobby, and musical instrument stores Book, periodical, and music stores Department stores Other general merchandise stores Florists Office supplies, stationery, and gift stores Used merchandise stores Other miscellaneous store retailers Electronic shopping and mail-order houses Vending machine operators Direct selling establishments Scheduled air transportation Nonscheduled air transportation Inland water transportation General freight trucking Specialized freight trucking Urban transit systems Interurban and rural bus transportation Taxi and limousine service School and employee bus transportation Charter bus industry Other transit and ground passenger transportation Pipeline transportation of crude oil 0 13
15 NAICS Description Estimated Establishments, Moore 4862 Pipeline transportation of natural gas Other pipeline transportation Scenic and sightseeing transportation, land Scenic and sightseeing transportation, water Support activities for air transportation Support activities for rail transportation Support activities for water transportation Support activities for road transportation Freight transportation arrangement Other support activities for transportation Couriers and express delivery services Local messengers and local delivery Warehousing and storage Newspaper, periodical, book, and directory publishers Software publishers Motion picture and video industries Sound recording industries Radio and television broadcasting Cable and other subscription programming Wired telecommunications carriers Wireless telecommunications carriers (except satellite) Satellite telecommunications Other telecommunications Data processing, hosting, and related services Other information services Monetary authorities- central bank Depository credit intermediation Nondepository credit intermediation Activities related to credit intermediation Securities and commodity contracts intermediation and brokerage Other financial investment activities Insurance carriers Agencies, brokerages, and other insurance related activities Other investment pools and funds Lessors of real estate Offices of real estate agents and brokers Activities related to real estate Automotive equipment rental and leasing Consumer goods rental General rental centers 2 14
16 NAICS Description Estimated Establishments, Moore 5324 Commercial and industrial machinery and equipment rental and leasing Lessors of nonfinancial intangible assets (except copyrighted works) Legal services Accounting, tax preparation, bookkeeping, and payroll services Architectural, engineering, and related services Specialized design services Computer systems design and related services Management, scientific, and technical consulting services Scientific research and development services Advertising, public relations, and related services Other professional, scientific, and technical services Management of companies and enterprises Office administrative services Facilities support services Employment services Business support services Travel arrangement and reservation services Investigation and security services Services to buildings and dwellings Other support services Waste collection Waste treatment and disposal Remediation and other waste management services Elementary and secondary schools Junior colleges Colleges, universities, and professional schools 1 Business schools and computer and management 6114 training Technical and trade schools Other schools and instruction Educational support services Offices of physicians Offices of dentists Offices of other health practitioners Outpatient care centers Medical and diagnostic laboratories Home health care services Other ambulatory health care services General medical and surgical hospitals 2 15
17 NAICS Description Estimated Establishments, Moore 6222 Psychiatric and substance abuse hospitals Specialty (except psychiatric and substance abuse) hospitals Nursing care facilities Residential mental retardation, mental health and substance abuse facilities Community care facilities for the elderly Other residential care facilities Individual and family services Community food and housing, and emergency and other relief services Vocational rehabilitation services Child day care services Performing arts companies Spectator sports Promoters of performing arts, sports, and similar events Agents and managers for artists, athletes, entertainers, and other public figures Independent artists, writers, and performers Museums, historical sites, and similar institutions Amusement parks and arcades Gambling industries Other amusement and recreation industries Traveler accommodation RV (recreational vehicle) parks and recreational camps Rooming and boarding houses Full-service restaurants Limited-service eating places Special food services Drinking places (alcoholic beverages) Automotive repair and maintenance Electronic and precision equipment repair and maintenance Commercial and industrial machinery and equipment (except automotive and electronic) repair and maintenance Personal and household goods repair and maintenance Personal care services Death care services Drycleaning and laundry services Other personal services Religious organizations 50 16
18 NAICS Description Estimated Establishments, Moore 8132 Grantmaking and giving services Social advocacy organizations Civic and social organizations Business, professional, labor, political, and similar organizations 9 NAICS code definitions are available online from the U.S. Census Bureau at 17
19 Table 3: NAICS Codes, 2-Digit Sector Level NAICS Description NAICS Description Code Code 11 Agriculture, Forestry, Fishing and 53 Real Estate and Rental and Leasing Hunting 21 Mining, Quarrying, and Oil and Gas Extraction 54 Professional, Scientific, and Technical Services 22 Utilities 55 Management of Companies and Enterprises 23 Construction 56 Administrative and Support and Waste Management and Remediation Services Manufacturing 61 Educational Services 42 Wholesale Trade 62 Health Care and Social Assistance Retail Trade 71 Arts, Entertainment, and Recreation Transportation and Warehousing 72 Accommodation and Food Services 51 Information 81 Other Services (except Public Administration) 52 Finance and Insurance 92 Public Administration 18
20 References Stone, Kenneth E. and Artz, Georgeanne M. Threshold Levels for Selected Retail & Service Businesses in Iowa Iowa State University Extension: Ames, IA. Stone, Kenneth E. and Artz, Georgeanne M. Threshold Levels for Selected Retail & Service Businesses in Iowa Iowa State University Extension: Ames, IA. U.S. Census Bureau. Population Estimates City and Town Totals: Vintage Accessed on October 29, U.S. Census Bureau County Business Patterns. Accessed on September 14, U.S. Census Bureau Nonemployer Statistics. Accessed on September 14,
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