Trailer based ready mix start-up requires market research
Perhaps you’ve used a concrete mixing trailer to make a small pour around your house. Maybe you’ve used one in connection with your job. However you came into contact with trailer based concrete, a lot of you are talking about selling it yourself.
I advocate a 5-step plan to get into this profitable concrete mixing niche and we’ll explore each of those in detail in the next couple of weeks. Today, we’ll start with my favorite: market research.
By contracting with the same service that Office Depot, AT&T, Comcast, and other large corporations use I can print out an eight page demographic report on just about any location in the US. In my job as the Product Manager for Cart-Away Concrete Systems, I use this report to look for Success Indicators. These indicators are common statistics that show up regularly in the demographic reports of our most successful customers. The Success Indicators I pay the most attention to are:
Population. Using driving radii we establish a rough map of a potential market. Your core market is generally within a twenty minute driving radius of your location and your extended market is within thirty minutes. The size of the population in these markets helps determine not just feasibility but also what type of concrete mixing equipment would be recommended.
Growth Rate. The growth rate alone is not enough to base opening up a Cart-Away business decision on. The percentage of growth is the one Indicator that must be factored with all of the other four together. As an example, many years ago when we were just beginning to look at demographics for our customers I sold some equipment to a customer in Myrtle Beach, SC. The growth rate was fantastic and I supposed that any population experiencing that much growth must be a really booming place and a perfect location for trailered concrete. Unfortunately, our customer was in a retirement community whose population wasn’t on the demographic map for an end user of our equipment. I ended up selling the concrete mixer trailers for them and we learned that growth is great as long as it’s accompanied with other favorable factors.
Median Household Income (MHI). The basic reason for the being of any business is making money. Customers can’t buy your products if they have no money, so we look at what money is available in your market.
Owner Occupied Homes (OOH). In a successful market there is a combination of commercial and residential end users. The combination varies per market and often includes municipal users, as well. However, a portion of any market will include homeowners that will either work on projects themselves or contract them out. A low percentage of home owners spells renters and they are rarely a group that will make capitol improvements to property they don’t own.
Target age Group. This is one of the Indicators that came to light after the Myrtle Beach incident. We learned there that retirees who are building homes tend to build them they way they want them and are unlikely to need improvements anytime soon. Also, there are some communities (Sun City, AZ for example) that are designed specifically for the retiree. Therefore, we pay attention to the percentage of people in our target age group.
I use these Success Indicators to put together a Market Analysis for potential customers. That analysis will also include some research into the cost of materials in the proposed market. I will make calls to the local ready mix providers and get actual costs of concrete by the yard and any minimums and short load fees. This is a part of the feasibility process as well as helping set a sell point for the customer.
Next, I will search for any competition and find out what they are selling trailered concrete for and what concrete mixing equipment they are using to offer it to the market. This is to get a reality check on the selling point I would recommend based on the ready mix prices and also to ensure we aren’t suggesting a new customer goes into a covered market setting them, and our current customer, up for hard times. This is a crucial point.
Lastly, we look at the information gathered and compare their potential market to other known markets and project sales for the next five years showing the revenue stream and also the return on the investment. We believe our customer should be able to realize a return with 36 months. Most of our customers do it much sooner.
So, there’s step number one. Stay tuned for step two in the next few days!