Almost every day we get a call asking where the "No failure location in the U.S. for practices." If by that definition, you mean the place that seems to have the greatest demand for MOST practice types, we see a great deal going on in Alabama. Yes, there is growth. No, there is not a great deal of money. But in so many of the towns we consider, if a doctor is willing to move to the town of the practice and get involved in the community, these states look pretty good. Among our favorites are:
1 Helena
2. Hoover
3. Trussville
4. Alabaster
5. Pelham
Never heard of them? Maybe that is for the best.
Wednesday, July 30, 2008
Best Cities for Senior Care
Our friends at "Sperlings" have come up with an interesting study. Rather than consider locations that are best for ACTIVE seniors, they put together the places that are best and worst for senior care. These would include adult care centers, senior assisted living, and infrastructure that is senior friendly. Their top choices are:
So, where do the say the worst cities are? They are:
50. Passaic, NJ
49. Miami, FL
48. Nassau-Suffolk, NY
47. Orange County, CA
46. Riverside-San Bernardino, CA
Here is their methodology: The data categories include health, economy, transportation, housing, social, crime, environment, disease, and spiritual. Each data category was statistically weighted to reflect the needs of the senior population, and the 50 largest U.S. cities received points based on their relation to the other cities' scores in that data category. Categories were suggested by senior living experts from the International Longevity Center, Health and Human Services, and Bankers Life.
1. Portland, OR
2. Seattle, WA
3. San Francisco, CA
4. Pittsburgh, PA
5. Milwaukee, WI
6. Philadelphia, PA
7. New York, NY
8. Boston, MA
9. Cincinnati, OH
10. Chicago, IL
So, where do the say the worst cities are? They are:
50. Passaic, NJ
49. Miami, FL
48. Nassau-Suffolk, NY
47. Orange County, CA
46. Riverside-San Bernardino, CA
Here is their methodology: The data categories include health, economy, transportation, housing, social, crime, environment, disease, and spiritual. Each data category was statistically weighted to reflect the needs of the senior population, and the 50 largest U.S. cities received points based on their relation to the other cities' scores in that data category. Categories were suggested by senior living experts from the International Longevity Center, Health and Human Services, and Bankers Life.
WAKE UP!: Trends That Are Changing Practice
The U.S. Census is a gold mine into the minds of Americans. These trends are very likely going to touch every practice and every region in the U.S.
1. Aging Trends
It may surprise you but the average head of household in the U.S. is almost 50 years old. But that is nothing when we compare the fact that 80% of the growth in the number of households in the next five years will be with households headed by 55+ year olds. For the rest, most new households will be headed by 25 to 34 year olds. For those 35 to 54 (the ones with the money), there is likely to be almost no growth but their economic impact will actually grow more than their numbers.
Those between 35 and 54 have the highest number of dual-earners and account for nearly half of U.S. Consumer Spending. This age group is going to shrink over the next five years (due to aging). As they move into the older group, for the first time in history, we are seeing those 55 to 64 really guiding the consumer patters for the rest of the U.S. This is the great hope of the economy. With more than $10,600 more in Per Capita disposable income than any other group, doctors had better think about serves that these healthy but older adults want.
2. Risk Aversion
Something all of a sudden happens when you realize you have something to lose for the first time. You don't want to lose it. We strongly recommend consideration of promoting practices and services based upon the desire of patients to hang on to what they have. Prevention is a strong selling point to consumers who still feel healthy and have money and don't want to lose either.
3. Widening Demographic Gulf in Attitudes and Regions
We have long believed that what works for a practice in Denver may have no relationship for a practice in Atlanta. Based upon the demographic and consumer attitude research we are reading, that is becoming TRUER and TRUER.
Americans have always had divisions in opinion and assumption. This is nothing really new. However, as people age, there is an understanding among social scientists that these attitudes are become calcified. And these consumers do NOT want someone to preach at them that they are "stogy" of "close-minded." Senator Obama has (at this writing) hit a wall in his poll numbers as he tries to convince older Americans that they have been wrong for all these years. There is something to be said for the safe and the familiar.
The divisions in Americans can be tracked by their demographics as well. As we look at different regions, the differences can be quite stark. In the Northeast, for example, the population is significantly older, more white and has fewer children. The West is younger and more diverse. Two-thirds of recent immigrants have settled in the South or West. We will make a prediction that the Media Bigwigs (who are primarily products of New York and Washington, DC) will claim shock at how electoral trends will turn during the next two cycles. It is more than a difference in party allegiance. What will surprise them is just how out of sync they will be with those outside of their region.
The Northeast has one fifth of the nation's elderly. The six New England states are among the 10 oldest states for median age. In many towns in New England, only one in five households has a child in the home. The national average is one in three. For health care practitioners who treat children, the practice areas must be significantly larger than in the west.
The implications for practices is this: we have to devise rules that are more regional rather than national in determining the ideal size of a patient base, referral base, cost of living, office overhead, and revenues. The differences we are finding between regions are growing larger, not smaller. There is an ancillary trend of migration and immigration we will discuss in a future post.
1. Aging Trends
It may surprise you but the average head of household in the U.S. is almost 50 years old. But that is nothing when we compare the fact that 80% of the growth in the number of households in the next five years will be with households headed by 55+ year olds. For the rest, most new households will be headed by 25 to 34 year olds. For those 35 to 54 (the ones with the money), there is likely to be almost no growth but their economic impact will actually grow more than their numbers.
Those between 35 and 54 have the highest number of dual-earners and account for nearly half of U.S. Consumer Spending. This age group is going to shrink over the next five years (due to aging). As they move into the older group, for the first time in history, we are seeing those 55 to 64 really guiding the consumer patters for the rest of the U.S. This is the great hope of the economy. With more than $10,600 more in Per Capita disposable income than any other group, doctors had better think about serves that these healthy but older adults want.
2. Risk Aversion
Something all of a sudden happens when you realize you have something to lose for the first time. You don't want to lose it. We strongly recommend consideration of promoting practices and services based upon the desire of patients to hang on to what they have. Prevention is a strong selling point to consumers who still feel healthy and have money and don't want to lose either.
3. Widening Demographic Gulf in Attitudes and Regions
We have long believed that what works for a practice in Denver may have no relationship for a practice in Atlanta. Based upon the demographic and consumer attitude research we are reading, that is becoming TRUER and TRUER.
Americans have always had divisions in opinion and assumption. This is nothing really new. However, as people age, there is an understanding among social scientists that these attitudes are become calcified. And these consumers do NOT want someone to preach at them that they are "stogy" of "close-minded." Senator Obama has (at this writing) hit a wall in his poll numbers as he tries to convince older Americans that they have been wrong for all these years. There is something to be said for the safe and the familiar.
The divisions in Americans can be tracked by their demographics as well. As we look at different regions, the differences can be quite stark. In the Northeast, for example, the population is significantly older, more white and has fewer children. The West is younger and more diverse. Two-thirds of recent immigrants have settled in the South or West. We will make a prediction that the Media Bigwigs (who are primarily products of New York and Washington, DC) will claim shock at how electoral trends will turn during the next two cycles. It is more than a difference in party allegiance. What will surprise them is just how out of sync they will be with those outside of their region.
The Northeast has one fifth of the nation's elderly. The six New England states are among the 10 oldest states for median age. In many towns in New England, only one in five households has a child in the home. The national average is one in three. For health care practitioners who treat children, the practice areas must be significantly larger than in the west.
The implications for practices is this: we have to devise rules that are more regional rather than national in determining the ideal size of a patient base, referral base, cost of living, office overhead, and revenues. The differences we are finding between regions are growing larger, not smaller. There is an ancillary trend of migration and immigration we will discuss in a future post.
Age of Austerity
There is an undeniable change that has occurred in purchasing habits over the last year. Due to the PERCEPTIONS of the economy (reality rarely has any significant impact), a larger segment of the population feels insecure about large purchases and commitments. This falls into the concerns of many health care practices.
The most immediate impact of this trend will probably be felt by orthodontists and plastic surgeons. It isn't as though there is a major unemployment crisis in America. With 5.5% unemployment, things are still about 1% BETTER than during most of the Clinton administration. True, energy is much more expensive but as a percentage of gross income, it is still something that can be managed. But what has gotten into consumer's heads is the idea that MAYBE things will get worse AND SOON. Why? Because during a political election cycle like this, it makes good sense for one or both major parties to appear like they are the answer to the crisis.
So, those procedures that are perceived as needing a "commitment" are the ones that will be delayed. Obviously, oncology will continue to be a business that will remain untouched by economic shifts but dentistry and chiropractic may. "After all,: the patients says, "Can't we do without it?" The answer is YES but only for a time.
We suspect that the fundamental demand (and the desire for the benefits of treatment) will only be delayed, not denied.
The answer is to add the "moral imperative" to helping patients move forward with their treatment. "It is the right thing to do," is the message that must be repeated load and clear and often.
Is there a geographic region that is more prone to this trend? We have found the "delayed, not denied" attitude to be most common in those areas that are losing jobs (think Detroit) and losing homes (think California, Arizona, Florida, and New Mexico.) Our advise is NOT to panic! Don't slash fees. Don't blindly discount. Think about what patients are thinking and help them find the REAL reason they need this service.
The most immediate impact of this trend will probably be felt by orthodontists and plastic surgeons. It isn't as though there is a major unemployment crisis in America. With 5.5% unemployment, things are still about 1% BETTER than during most of the Clinton administration. True, energy is much more expensive but as a percentage of gross income, it is still something that can be managed. But what has gotten into consumer's heads is the idea that MAYBE things will get worse AND SOON. Why? Because during a political election cycle like this, it makes good sense for one or both major parties to appear like they are the answer to the crisis.
So, those procedures that are perceived as needing a "commitment" are the ones that will be delayed. Obviously, oncology will continue to be a business that will remain untouched by economic shifts but dentistry and chiropractic may. "After all,: the patients says, "Can't we do without it?" The answer is YES but only for a time.
We suspect that the fundamental demand (and the desire for the benefits of treatment) will only be delayed, not denied.
The answer is to add the "moral imperative" to helping patients move forward with their treatment. "It is the right thing to do," is the message that must be repeated load and clear and often.
Is there a geographic region that is more prone to this trend? We have found the "delayed, not denied" attitude to be most common in those areas that are losing jobs (think Detroit) and losing homes (think California, Arizona, Florida, and New Mexico.) Our advise is NOT to panic! Don't slash fees. Don't blindly discount. Think about what patients are thinking and help them find the REAL reason they need this service.
Wednesday, May 7, 2008
Micro versus Macro Demographics for Practices
"I heard that Indiana sucks."
"I heard the Phoenix is overcrowded with dentists."
"I heard that you can't swing a dead cat in Salt Lake City without hitting a dermatologist."
No kidding. I have heard it all and much more besides. And what is most interesting is that none of these statements is necessarily wrong. The problem is, they are irrelevant.
A practice area as small as three Zip Codes will define a signficant number of practice types. These include dentists, chiropractors, and veterinarians along with many others. You just don't need to look to the entire metropolitan area to determine the viability of a site. Rather, it is a unit of geography much smaller than this that will define the viability of a site.
So, does Indiana suck?
It is hard to deny that the statistics for the state overall are challenging. Even if we took a fairly middle-sized city like Gary, we could say, it is not positive. But does that mean that no new practice can or should open in Gary?
Of course not!
As we consider the work of a major downtown developer (New Gary Development Group), it seems that someone finally figured out that Gary is an easy drive and train-ride from Chicago. They are taking the "rust belt" image and making Gary a little mroe "people friendly." More suburban developments are going in on reclaimed farm land on the south side of town. This is useful when you consider that the Median Price for a home in Chicago is $261,000 but is only $124,600 in Gary.
Can we recommend practices in ANY part of Gary will be a good idea? Nope. But we can say confidently that even a site that has had such a poor image and bad reputation can hold promise if we look at the Micro versus Marco Economics (and Demographics) of a community.
In conclusion, be creative in your location selections and you will be well-served. There are some gold nuggets in MANY markets others have considered dead, dead, dead.
"I heard the Phoenix is overcrowded with dentists."
"I heard that you can't swing a dead cat in Salt Lake City without hitting a dermatologist."
No kidding. I have heard it all and much more besides. And what is most interesting is that none of these statements is necessarily wrong. The problem is, they are irrelevant.
A practice area as small as three Zip Codes will define a signficant number of practice types. These include dentists, chiropractors, and veterinarians along with many others. You just don't need to look to the entire metropolitan area to determine the viability of a site. Rather, it is a unit of geography much smaller than this that will define the viability of a site.
So, does Indiana suck?
It is hard to deny that the statistics for the state overall are challenging. Even if we took a fairly middle-sized city like Gary, we could say, it is not positive. But does that mean that no new practice can or should open in Gary?
Of course not!
As we consider the work of a major downtown developer (New Gary Development Group), it seems that someone finally figured out that Gary is an easy drive and train-ride from Chicago. They are taking the "rust belt" image and making Gary a little mroe "people friendly." More suburban developments are going in on reclaimed farm land on the south side of town. This is useful when you consider that the Median Price for a home in Chicago is $261,000 but is only $124,600 in Gary.
Can we recommend practices in ANY part of Gary will be a good idea? Nope. But we can say confidently that even a site that has had such a poor image and bad reputation can hold promise if we look at the Micro versus Marco Economics (and Demographics) of a community.
In conclusion, be creative in your location selections and you will be well-served. There are some gold nuggets in MANY markets others have considered dead, dead, dead.
Building Purchase Conundrum
During the course of our consultations regarding properties, we get the question, " Would it better for me to purchase the building (or land) or merely lease?"
It is a difficult question to answer ONLY on the basis of demographics and market trends. The Client's economic situation, credit, and myriad other factors have to be considered FIRST. But with that taken into account and all other factors being equal, we say that the time to consider purchase of real estate (either an existing building or land for construction) is looking good.
Here is our reasoning based upon the numbes we see coming through:
1. Real estate (both commercial and residential) is at a low-point right now. Obviously, when the market is down, there is money to be made by those who have income and credit.
2. The cost of borrowing money is going down. Recent interest rate cuts are not the sole indicator of the price of money, however. Lenders WANT to lend as the way for them to shore-up their portfolios (some of which are looking less than stellar), to keep relevant in the marketplace, and to continue cash flow. True, State and Federal regulators are trying to fix what they had caused earlier by making loan qualifations more restrictive. But we believe this is only giving better leverage to those who CAN borrow.
3. If well selected, real estate is the safest investment in the world IF IT IS AN INCOME PRODUCING PROPERTY. Now, here is where the rubber meets the road: No favorable market can overcome "stupid." You have to do your homework (and consider purchasing a demographic report to help) to determine the best sites.
So, given the current market and all other factors being equal, we believe that an investment in real estate to support your practice could put your well beyond your financial goals in a short time, keep your overhead low (or controllable), and vastly benefit your retirment using a tried-and-true method of investing for doctors.
It is a difficult question to answer ONLY on the basis of demographics and market trends. The Client's economic situation, credit, and myriad other factors have to be considered FIRST. But with that taken into account and all other factors being equal, we say that the time to consider purchase of real estate (either an existing building or land for construction) is looking good.
Here is our reasoning based upon the numbes we see coming through:
1. Real estate (both commercial and residential) is at a low-point right now. Obviously, when the market is down, there is money to be made by those who have income and credit.
2. The cost of borrowing money is going down. Recent interest rate cuts are not the sole indicator of the price of money, however. Lenders WANT to lend as the way for them to shore-up their portfolios (some of which are looking less than stellar), to keep relevant in the marketplace, and to continue cash flow. True, State and Federal regulators are trying to fix what they had caused earlier by making loan qualifations more restrictive. But we believe this is only giving better leverage to those who CAN borrow.
3. If well selected, real estate is the safest investment in the world IF IT IS AN INCOME PRODUCING PROPERTY. Now, here is where the rubber meets the road: No favorable market can overcome "stupid." You have to do your homework (and consider purchasing a demographic report to help) to determine the best sites.
So, given the current market and all other factors being equal, we believe that an investment in real estate to support your practice could put your well beyond your financial goals in a short time, keep your overhead low (or controllable), and vastly benefit your retirment using a tried-and-true method of investing for doctors.
Monday, April 14, 2008
How Close is TOO Close for a Competing Practice?
We get this question often enough that a few "truths" might be worth sharing:
Many practice types do not suffer in any way from having a direct competitor right next door. First of all are those practices that depend 100% upon professional referrals. An example here is a pediatric nephrologist. Included in this are those practices that will tend to dominate a particular insurance type (i.e., the only practice to accept a particular insurance type.)
General Dentists, Ophthalmologists, and Primary Care Physicians (including internists, and pediatricians) tend to fall into a middle range. You don't want to find yourself in an area with too many of them. For each, there is a certain "range" of how many an area will support. For example, with general dentists, we found a ratio of one dentist per 1,400 patients to be about right. But with all of these professionals, having a clear "brand" or identity is vital. In short, potential patients must understand what makes one practice different (not necessarily better) than another.
When it comes to more "retail" types of practices, they have to be far more careful that they have some "geographic integrity." These practices include optometrists, dermatologists, and plastic surgeons. That is why we place such emphasis upon traffic patterns, accessibility, and competition signage when we are looking at these locations.
Of all practices in which local competition is a big deal, veterinarians are perhaps the most important. With the exception of specialists (i.e., exotics, equestrian, bovine, or avian), we think that having another practice with a mile may be more than can be handled under most circumstances. Of course, there are always exceptions.
An Open Letter to a Young Client
We can go back and forth time and again but the results are going to be the same. I do not believe that you will ever find a location that will be so good (“Perfect”) that it will overcome your shortfalls in production, business experience, and an empty patient roster. Let me put it another way:
There are many wonderful places to practice that will have low overhead. By definition, these places won’t be perfect. As a young professional wanting to build a long-term practice, you have to keep overhead in mind. A reasonable location (not Perfect) will help mitigate some of the risks you face with having a large debt service when you start practice. Remember, the lease will be only a fraction of your operating costs. You still have to hire a competent and experienced staff. Does it mean that you may want to change locations as the practice grows and you have beaten the wolf back from the door a little ways? Absolutely! The problem with coming directly out of school and wanting to open a “Taj Mahal” practice is really found in the risks you undertake when opening as a scratch practice.
I am sure you have had friends who claim to have left school and opening a practice on a shoestring and NOW they are rich beyond belief. Experience tells me that there is always part of the equation that is missing. They may not be lying (many are) but there is something you don’t know. Certainly a reasonable location will be important (a good demographic character + favorable competition ratio + growth + luck) but there are other factors that will matter far more in determining your success. One of those factors is how quickly you can treat patients without (them or you) feeling too rushed. Experience can be gained only with time. It will make the practice more profitable. Further, having some time in a practice and seeing the various staff “types” will also give you insights that cannot be purchased. As many experienced hands in the professional will tell you, the most expensive mistake you can make is hiring the wrong person.
Please do not think that I am trying to talk you out of opening a practice nor should you think that I am trying to tell you that a particular location you have fallen in love with won’t support a successful office. What I am trying to say is that there are risks and issues associated with an office that is frankly larger than you will need for five years in a retail environment that will place you deeply in risk of failure for two years even if everything goes reasonably well. In short, don’t make things harder on your self that you must.
Yes, I know your supply representative has sworn that with the right kind of equipment, you cannot fail. He may actually believe it with all his heart. It does not mean that he is right. Listening to sales people rather than those who have been through “the mill” will probably get you into trouble. Do all the furnishing REALLY need to be new? Can you get along with a smaller staff (but one with experience)? The questions are not inconsequential. Let’s find a location you can afford, that will lower your risk and help you to stay in practice for the long-run.
There are many wonderful places to practice that will have low overhead. By definition, these places won’t be perfect. As a young professional wanting to build a long-term practice, you have to keep overhead in mind. A reasonable location (not Perfect) will help mitigate some of the risks you face with having a large debt service when you start practice. Remember, the lease will be only a fraction of your operating costs. You still have to hire a competent and experienced staff. Does it mean that you may want to change locations as the practice grows and you have beaten the wolf back from the door a little ways? Absolutely! The problem with coming directly out of school and wanting to open a “Taj Mahal” practice is really found in the risks you undertake when opening as a scratch practice.
I am sure you have had friends who claim to have left school and opening a practice on a shoestring and NOW they are rich beyond belief. Experience tells me that there is always part of the equation that is missing. They may not be lying (many are) but there is something you don’t know. Certainly a reasonable location will be important (a good demographic character + favorable competition ratio + growth + luck) but there are other factors that will matter far more in determining your success. One of those factors is how quickly you can treat patients without (them or you) feeling too rushed. Experience can be gained only with time. It will make the practice more profitable. Further, having some time in a practice and seeing the various staff “types” will also give you insights that cannot be purchased. As many experienced hands in the professional will tell you, the most expensive mistake you can make is hiring the wrong person.
Please do not think that I am trying to talk you out of opening a practice nor should you think that I am trying to tell you that a particular location you have fallen in love with won’t support a successful office. What I am trying to say is that there are risks and issues associated with an office that is frankly larger than you will need for five years in a retail environment that will place you deeply in risk of failure for two years even if everything goes reasonably well. In short, don’t make things harder on your self that you must.
Yes, I know your supply representative has sworn that with the right kind of equipment, you cannot fail. He may actually believe it with all his heart. It does not mean that he is right. Listening to sales people rather than those who have been through “the mill” will probably get you into trouble. Do all the furnishing REALLY need to be new? Can you get along with a smaller staff (but one with experience)? The questions are not inconsequential. Let’s find a location you can afford, that will lower your risk and help you to stay in practice for the long-run.
Is This Some Kind of Real Estate Blog?
Before you get too concerned that we are trying to be realtors, please keep in mind what our REAL purpose is: we want to tell you where people are going and how they are living so you can get ahead of the curve to figure out where to put YOUR practice. We don't want to take time to talk about what happened yesterday or even today. It will be too late. We have to stay ahead of the curve and that is why we discuss "trends" rather than "history."
New Trends in Affordable Housing
During strong economic times, we always recommend practices take into account single-family detached housing increases. In other words, when you see lots of homes being built, it is usually an indication of strength within an area. The recent changes in the credit market are making this trend reverse itself FOR NOW.
Do not assume that large tracts of single-family homes are a thing of the past. We expect that within four years, this trend will hold true. We also expect that the “square footage” of homes to be steady but that the tract of land they are one will shrink significantly. But we are noticing a change in the “middle class, affordable housing market” that you should consider.
Young families are going to have a harder time getting into the housing market than ever before. Having been burned by foreclosures in the sub-prime market and being under closer scrutiny of regulators, the effect is a pendulum swing toward more middle-class apartment projects. Single people always have tended to live in apartments. But young families try to get into single-family homes as early as possible. That possibility of moving in may have to put off as larger down payments and higher credit scores are required to qualify. That does not mean that these young families are going to consider living in mom and dad’s basement.
Young families are going to be offered larger and nicer apartments for rent that will cater to middle class families with children. Rather than looking like the apartment complexes from their single-years, they will have common playgrounds and swimming pools that are supervised, study halls for children coming home before their parents, increased access to food delivery services (delivery is not just pizza anymore!), and more parking spaces per apartment.
Practices that are conveniently located near these rental apartment units will have a distinct advantage. This is especially true for orthodontists and pedodontists.
Where can these new locations be found? In our experience, we are seeing more and more of them grow up near city “beltways.” It is a serious trend that most cities are developing a beltway for easy access to the city center as well as far-flung, newly developing locations. The new suburbs (particularly those that are upscale) lied outside of these beltways, often within a 45-minute drive of the downtown. These apartment centers are usually closer in and seem to be associated with new regional shopping centers (such as the Lifestyle Centers we have described in previous articles). The trend seems strongest in the New South and Southwest (Atlanta, Jacksonville, South Beach, Dallas, Phoenix, Columbus, etc.) as well as the Central Valley in California, North Las Vegas, and many communities in Northern Utah.
But be warned, the housing market is fickle. These apartment complexes will likely not survive more than a single generation of middle class families before the single-family housing market picks up again. After that, who knows who will live in these apartments?
Do not assume that large tracts of single-family homes are a thing of the past. We expect that within four years, this trend will hold true. We also expect that the “square footage” of homes to be steady but that the tract of land they are one will shrink significantly. But we are noticing a change in the “middle class, affordable housing market” that you should consider.
Young families are going to have a harder time getting into the housing market than ever before. Having been burned by foreclosures in the sub-prime market and being under closer scrutiny of regulators, the effect is a pendulum swing toward more middle-class apartment projects. Single people always have tended to live in apartments. But young families try to get into single-family homes as early as possible. That possibility of moving in may have to put off as larger down payments and higher credit scores are required to qualify. That does not mean that these young families are going to consider living in mom and dad’s basement.
Young families are going to be offered larger and nicer apartments for rent that will cater to middle class families with children. Rather than looking like the apartment complexes from their single-years, they will have common playgrounds and swimming pools that are supervised, study halls for children coming home before their parents, increased access to food delivery services (delivery is not just pizza anymore!), and more parking spaces per apartment.
Practices that are conveniently located near these rental apartment units will have a distinct advantage. This is especially true for orthodontists and pedodontists.
Where can these new locations be found? In our experience, we are seeing more and more of them grow up near city “beltways.” It is a serious trend that most cities are developing a beltway for easy access to the city center as well as far-flung, newly developing locations. The new suburbs (particularly those that are upscale) lied outside of these beltways, often within a 45-minute drive of the downtown. These apartment centers are usually closer in and seem to be associated with new regional shopping centers (such as the Lifestyle Centers we have described in previous articles). The trend seems strongest in the New South and Southwest (Atlanta, Jacksonville, South Beach, Dallas, Phoenix, Columbus, etc.) as well as the Central Valley in California, North Las Vegas, and many communities in Northern Utah.
But be warned, the housing market is fickle. These apartment complexes will likely not survive more than a single generation of middle class families before the single-family housing market picks up again. After that, who knows who will live in these apartments?
The New Trend in Affluent Housing
Just because trends change and the economic fluctuates (often radically), the desire to build is strong, particularly among the wealthy. So, where are the wealthy going?
We have noted a trend in Bainbridge Island, Washington, Napa, California, Simsbury, Connecticut and Dutchess County, New York that seems to be solid enough for us to mention to our doctors who want to know where the affluent are going. Rather than look at modern looking homes, these developers are selling history by the foot. We have to credit Christina S. N. Lewis of the Wall Street Journal for the lead. The developers are looking to mimic historic styles called “New Ruralism.” Homes are unique inside and out from their neighbors. They have all the latest conveniences of new-built homes but they have a character to them that is more like the homes of 200 years past. They all have in common the look of an agrarian past. Many have working farms of vineyards as part of the development.
These homes look as though they fit better with the landscape rather than seeming to “master” it.
These developments can be fairly large. One called “Serenbe” near Atlanta has more than 420 homes. Most of these homes start in the $600,000s in the more rural parts of the country and can easily go for more than $1,000,000. The idea is to offer “character” with the homes. Less expensive versions of these trend are found in Bainbridge Island, WA which as just opened 70 “bungalows” of 2,200 to 2,600 square feet.
While we are neither critics nor fans of this development, we certainly have recognized that from those who can afford spec homes, we believe that this is a long-term trend among the wealthy. Rather than offer cramped neighborhoods, these places look like there are individuals in that community.
Professional office space is something of a challenge because developers seem almost antagonistic toward non-residential buildings. That is why we have seen “town centers’ coming into these areas that closely resemble the professional offices of a century ago. Very often, these are offices that appear to be homes but built near a shopping district. When possible, we would advise the motif of the community to be carried into the reception areas an even treatment rooms. But as we have toured these spaces, we note that they TEND to be smaller (narrower) and offer less square footage than many mature practices would prefer.
We have noted a trend in Bainbridge Island, Washington, Napa, California, Simsbury, Connecticut and Dutchess County, New York that seems to be solid enough for us to mention to our doctors who want to know where the affluent are going. Rather than look at modern looking homes, these developers are selling history by the foot. We have to credit Christina S. N. Lewis of the Wall Street Journal for the lead. The developers are looking to mimic historic styles called “New Ruralism.” Homes are unique inside and out from their neighbors. They have all the latest conveniences of new-built homes but they have a character to them that is more like the homes of 200 years past. They all have in common the look of an agrarian past. Many have working farms of vineyards as part of the development.
These homes look as though they fit better with the landscape rather than seeming to “master” it.
These developments can be fairly large. One called “Serenbe” near Atlanta has more than 420 homes. Most of these homes start in the $600,000s in the more rural parts of the country and can easily go for more than $1,000,000. The idea is to offer “character” with the homes. Less expensive versions of these trend are found in Bainbridge Island, WA which as just opened 70 “bungalows” of 2,200 to 2,600 square feet.
While we are neither critics nor fans of this development, we certainly have recognized that from those who can afford spec homes, we believe that this is a long-term trend among the wealthy. Rather than offer cramped neighborhoods, these places look like there are individuals in that community.
Professional office space is something of a challenge because developers seem almost antagonistic toward non-residential buildings. That is why we have seen “town centers’ coming into these areas that closely resemble the professional offices of a century ago. Very often, these are offices that appear to be homes but built near a shopping district. When possible, we would advise the motif of the community to be carried into the reception areas an even treatment rooms. But as we have toured these spaces, we note that they TEND to be smaller (narrower) and offer less square footage than many mature practices would prefer.
Wednesday, March 26, 2008
Market Research in YOUR Office
We have always been amazed at how few doctors bother to ask their patients what they like and don't like about the practice. I recently became the patient of a great, young internist. He is everything I like in a doctor. But he has ONE little flaw: he thinks I will tell him to his face what I don't like about his practice.
We hope that at some time in your professional training you learned that the white coat and latex gloves place the doctor and patient into a somewhat uneven relationship. After all, guys with white coats and latex gloves have the ability to hurt you in ways that, well, are not common. Why would he think I am going to complain about his front desk lady just as he is rubbing KY jelly on his index finger? Can you image that with the light in my eyes, as the chair lowers at the dentist that it is the time to say that his assistant has terrible breath?
If you don't do it already, PLEASE consider a patient survey. They are available from so many sources and all have some value. We offer such a report (that can be customized) for as little as $350. This is an in-office survey. Another company we know will do telephone surveys for about $950 to start (at our last check) and another does simple post cards for about $750.
If you have any specific questions about these surveys, sample sizes, formats, and the like, why not post them here?
Today's Disaster, Tomorrow's Wonder
One advantage of reading history is that the cycle of boom and bust becomes somewhat coherent. Over my more than 20 years of looking at demographics for practices, I have come to see that the very places that things look terrible (or wonderful) WILL change quickly. A great example of this is Riverside County, California. At present, there are 11,640 properties that have been returned to lenders or investors. This represents 1.1% of the total properties.
This has caused a chill among doctors considering places like Riverside County as a place to put a practice. Keep in mind what is REALLY happening here. Folks got overextended and had their homes foreclosed upon. Obviously this is terrible for them and the local housing market. The lender wants to get rid of the property ASAP so they try to move it by reducing the sale price. A house that is "below market" will necessarily lower the price of existing homes (that are for sale) by as much as 15% during a good time and 50% during a terrible economic time (when there is a credit crunch, like right now.) Doom, despair, and agony!
BUT, the area becomes a bargain basement for new home owners and investors. These homes WILL sell as soon as these buyers believe that the bottom has been reached. That is how the market works. Now, rather than an inflated real estate market, people move in who either didn't have the money to move in to the area OR have money to invest to upgrade the property which they could not do before.
The result is a sad case for new home starts and sales. There may even be a temporary dip in new patients during the transition time. But as the bottom of the market is touched, almost every area that had serious foreclosure percentages will zoom back up.
So, if I am a young doctor who is getting out of school in a year or two, these are exactly the sites that I would consider targeting for a start-up practice. The only exception is a site that has passed the "point of no return" in terms of economic stability. This is the case with Detroit. It certainly doesn't help that the local and state officials believe that taxing their way out of debt is anything but a pipe-dream. This MAY be happening in Cleveland at this moment. We believe we can make a good case for letting the market find its own balance!
The metropolitan areas with the largest numbers of properties in foreclosure are (according to First American Core Logic):
Chicago-Naperville-Joliet, IL 46,345 2.5%
Atlanta-Sand Springs-Marietta, GA 26,310 1.8
Detroit-Livonia-Dearborn, MI 19,647 2.4
Phoenix-Mesa-Scottsdale, AZ 18,585 1.8
New York-White Plains-Wayne, NY 18,442 1,2
Denver-Aurora, CO 17,048 2.4
Riverside-San Bernardino, CA 11,640 1.1
Los Angeles-Long Beach, CA 11,057 0.6
Washington-Arlington-DC/VA 10,881 0.9
Cleveland-Elyria-Mentor, OH 8,266 1.3
In those locations that are allowed to find their natural balance, we believe that within 2 years the practice potential will be significant.
Wednesday, March 19, 2008
Sweet Spots: Where in a town should you open a new office?
The title of this post suggests that there are different places to put practices within a community and that the ideal places will change. In this case, we are considering communities that have 30,000+ residents (ideally 50,000+).
We have noted that the new housing market has slowed to the point that many doctors who have opened offices to cater to these new residents are feeling the strain. So, are there any alternatives? Data from our brethren in Real Estate indicated that there are two kinds of "centers" in most communities that are enjoying growth even when the city itself is doing poorly. These are:
- Universities
- Hospitals
The trend HAD been quite the opposite in the 1980s and early 1990s. Hospitals were going through consolidations and Universities were suffering from a dearth of students. But with the increase of adults seeking regular treatment from fewer but larger hospital facilities and the "bump" in the U.S. population (from many causes we will discuss in another post), the University growth in new building had ancillary developments contiguous to campus has made them a natural attraction for a start-up office.
We have noted that the new housing market has slowed to the point that many doctors who have opened offices to cater to these new residents are feeling the strain. So, are there any alternatives? Data from our brethren in Real Estate indicated that there are two kinds of "centers" in most communities that are enjoying growth even when the city itself is doing poorly. These are:
- Universities
- Hospitals
The trend HAD been quite the opposite in the 1980s and early 1990s. Hospitals were going through consolidations and Universities were suffering from a dearth of students. But with the increase of adults seeking regular treatment from fewer but larger hospital facilities and the "bump" in the U.S. population (from many causes we will discuss in another post), the University growth in new building had ancillary developments contiguous to campus has made them a natural attraction for a start-up office.
Wednesday, March 12, 2008
New Patient Trends: Permanent Problem?
We have heard the story again and again about how new patient counts are down in most regions of the U.S. We thought we would explain one of the important reasons for this. We believe the issue is more one of considering "dental economics" rather than "demographics" even though demographics may get the blame.
Simply put, fewer people are buying and selling homes right now than at any time over the last five years. Certainly, there are exceptions to this trend but it is manifested broadly enough to be considered a national trend. With fewer people moving into the area, there are obviously fewer "new patients" who might respond to an advertisement. Those with a doctor(and research strongly backs this) tend to like their dentist very much. The primary reason for changing doctors has been relocation.
This means that new patient counts are going to be down for EVERY kind of practice in most areas of the U.S. This does not account for lower production, however. Before getting off the topic of new patients, we have to point out that many doctors get into the habit of "patient turnover" rather than "patient retention." They assume that there will always be someone new coming in the door. During times of economic downturn, particularly a downturn in new housing, making sure that your recall system is in place and working is vital to practice viability.
With the exception of TRULY discretionary medical and dental services (breast augmentation?), there is only a delay in treatment rather than a fundamental change in the medical and dental purchasing habits of patients. We note that these "dry spells" usually last about 18 months (more or less). So, we recommend being extremely careful when it comes to looking at the green grass on the other side of the fence. Certainly, demographics change and should be accommodated. We only want to make sure you are not making decisions based upon fear.
Simply put, fewer people are buying and selling homes right now than at any time over the last five years. Certainly, there are exceptions to this trend but it is manifested broadly enough to be considered a national trend. With fewer people moving into the area, there are obviously fewer "new patients" who might respond to an advertisement. Those with a doctor(and research strongly backs this) tend to like their dentist very much. The primary reason for changing doctors has been relocation.
This means that new patient counts are going to be down for EVERY kind of practice in most areas of the U.S. This does not account for lower production, however. Before getting off the topic of new patients, we have to point out that many doctors get into the habit of "patient turnover" rather than "patient retention." They assume that there will always be someone new coming in the door. During times of economic downturn, particularly a downturn in new housing, making sure that your recall system is in place and working is vital to practice viability.
With the exception of TRULY discretionary medical and dental services (breast augmentation?), there is only a delay in treatment rather than a fundamental change in the medical and dental purchasing habits of patients. We note that these "dry spells" usually last about 18 months (more or less). So, we recommend being extremely careful when it comes to looking at the green grass on the other side of the fence. Certainly, demographics change and should be accommodated. We only want to make sure you are not making decisions based upon fear.
Costco as Savior
It appears that there is a new "trend" in saving dying shopping malls. While big box retailers like Mervyn's and Macy's are folding their tends and moving on, Costco is taking their place. There are 396 such warehouse clubs in the U.S. Costco has made the move to take over locations that have not been profitable for other stores, even in enclosed malls.
Costco members (who pay for an annual membership fee of between $50 and $100) have median household incomes of $62,222 compared with the national average of $46,243. There is some possiblity that a similar trend will catch on with Wal-Mart Stores (and their Sam's Club model which is similar to Costco) but it appears this has not happened yet.
So, if you want to consider new locations for practice, you might want to look up to see if a new Costco is coming to town.
Costco members (who pay for an annual membership fee of between $50 and $100) have median household incomes of $62,222 compared with the national average of $46,243. There is some possiblity that a similar trend will catch on with Wal-Mart Stores (and their Sam's Club model which is similar to Costco) but it appears this has not happened yet.
So, if you want to consider new locations for practice, you might want to look up to see if a new Costco is coming to town.
Dodging Bullets and Defying Gravity
There are times that one must look deeply at "the numbers" of a practice before completing a sale. This case-in-point may prove instructive:
A nearly retired orthodontist and his wife were helping their son, a new orthodontist, get set-up in practice with the purchase of an existing office. They had asked us to do a demographic report on two sites (including the one for sale). The "other" site proved to be much better in terms of competition, referral base, growth, demographic character, and the other things one would hope to find. Still, they had received "the numbers" including the tax return of the practice they had considered for sale. The money was fantastic! The overhead with less than 30%! The sale price was reasonable! Why would we NOT recommend this area (even though the demographic picture looked poor and declining). Surely the money that this doctor was bringing in would make the sale a "no-duh."
So, we looked at the numbers behind "the numbers" and found a few interesting truths. For one thing, the doctor was selling to move to a different state to start all over again. One has to ask "Why would this doctor leave such a 'cash cow?' " The other question we need to ask was ,"How can one operate with such low overhead in what was a fairly normal-to-expensive place to practice?"
We learned that the seller had put NO money in the practice for a very long time. The physical facility was awful. The equipment was worse. We also got wind that the staff was underpaid and not happy about it but they thought a new boss might bring a desirable change to their situation.
The selling doctor was a very shrewd investor and he has every right to be. So, assuming that his numbers were correct, was he being dishonest? Absolutely not!
We have to assume that if the young buyer (and his parents) pursued practice in just the same way as the seller, this practice would probably be profitable. But in discussing the issue with this young buyer, his parents revealed that it was his plan to invest in the building and the equipment. He had an idea that if he could invest some of the "big money" coming out of the practice, he could easily afford to make things better. Of course, the staff would be expecting more money AND there are myriad other places that would need money as well.
It is also our assumption that the seller saw the curtain falling on the demographic stage and thought to make a timely exit. Smart people often do that.
The lesson here is to young buyers: if you assume that you are going to make a "silk purse out of a sow's ear" it is going to cost you more than a silk purse AND a whole pig to do it. When you look at numbers, you are looking at more than cases that have potential or patient records. You are looking at a practice philosophy and a business model. If you can improve upon either or both, you will be profitable. But keep in mind that all the information you have gotten on the practice such as overhead, production, and collections will all go out the window and have NO value to you in evaluating the practice's potential for YOU.
A nearly retired orthodontist and his wife were helping their son, a new orthodontist, get set-up in practice with the purchase of an existing office. They had asked us to do a demographic report on two sites (including the one for sale). The "other" site proved to be much better in terms of competition, referral base, growth, demographic character, and the other things one would hope to find. Still, they had received "the numbers" including the tax return of the practice they had considered for sale. The money was fantastic! The overhead with less than 30%! The sale price was reasonable! Why would we NOT recommend this area (even though the demographic picture looked poor and declining). Surely the money that this doctor was bringing in would make the sale a "no-duh."
So, we looked at the numbers behind "the numbers" and found a few interesting truths. For one thing, the doctor was selling to move to a different state to start all over again. One has to ask "Why would this doctor leave such a 'cash cow?' " The other question we need to ask was ,"How can one operate with such low overhead in what was a fairly normal-to-expensive place to practice?"
We learned that the seller had put NO money in the practice for a very long time. The physical facility was awful. The equipment was worse. We also got wind that the staff was underpaid and not happy about it but they thought a new boss might bring a desirable change to their situation.
The selling doctor was a very shrewd investor and he has every right to be. So, assuming that his numbers were correct, was he being dishonest? Absolutely not!
We have to assume that if the young buyer (and his parents) pursued practice in just the same way as the seller, this practice would probably be profitable. But in discussing the issue with this young buyer, his parents revealed that it was his plan to invest in the building and the equipment. He had an idea that if he could invest some of the "big money" coming out of the practice, he could easily afford to make things better. Of course, the staff would be expecting more money AND there are myriad other places that would need money as well.
It is also our assumption that the seller saw the curtain falling on the demographic stage and thought to make a timely exit. Smart people often do that.
The lesson here is to young buyers: if you assume that you are going to make a "silk purse out of a sow's ear" it is going to cost you more than a silk purse AND a whole pig to do it. When you look at numbers, you are looking at more than cases that have potential or patient records. You are looking at a practice philosophy and a business model. If you can improve upon either or both, you will be profitable. But keep in mind that all the information you have gotten on the practice such as overhead, production, and collections will all go out the window and have NO value to you in evaluating the practice's potential for YOU.
Wednesday, February 27, 2008
Universities and Practice Locations
There is a trend that we think is worth mentioned regarding practice sites near major universities. Many (even most) universities own property on the edge of their campuses. Due to the fact that the demographics of the U.S. are such that large increases in enrollment are unlikely, many of them including Cleveland’s Case Western Reserve, University of Pennsylvania, Harvard and Columbia are taking that land and developing retail centers. They are not likely to cater exclusively to the student population. Rather, they are using this property to open retail and professional spaces that create a more appealing environment for the universities (which in the case of Penn is long overdue, IOHO). We do not recommend considering these sites BECAUSE of the student population but because they are becoming some of the most desirable practice sites in many inner cities. Rates are generally favorable and their potential value over a long period of time will go up. And it doesn’t hurt the universities’ bottom line to have some non-donor cash coming in when the economy seems troubled.
Hit in the Gut: Jacksonville, FL
We are NOT saying that Jacksonville is a bad bet for a new practice. Actually, we are not saying anything terrible at all but we are offering a warning. Jacksonville may have overbuilt itself and construction continues. That means that if you come to Jacksonville to open a practice, don’t take the first offer. Don’t take the second offer. This market is getting soft and there are some good deals one can make, especially in the downtown.
Will Office Rates Rise Due to Home Foreclosures?
This is important to anyone who is thinking about opening a new practice in the next few months or moving to a new site or renegotiating their lease. There has been a fear that there was a relationship between foreclosure volume and retail property delinquencies. The current wisdom is that if there IS a relationship, than the cost of properties will go up AND they will be more difficult to qualify for if the doctor is young, a new graduate and/or has a credit ding or two.
The good news is: there is NO relationship that we can find.
Detroit is the top market for home foreclosures. It had a 0.48% delinquency rate (which is pretty good) on commercial loans. This data comes from TreppLLC, a data and real estate analysis firm.
The next three highest-ranked markets for home foreclosures – Stockton, CA; Las Vegas, NV; and Riverside, CA – posted no delinquencies on retail loans. Just because I know you want to know, the highest commercial real estate delinquencies were in Indianapolis and New Orleans. That is some great new!
The good news is: there is NO relationship that we can find.
Detroit is the top market for home foreclosures. It had a 0.48% delinquency rate (which is pretty good) on commercial loans. This data comes from TreppLLC, a data and real estate analysis firm.
The next three highest-ranked markets for home foreclosures – Stockton, CA; Las Vegas, NV; and Riverside, CA – posted no delinquencies on retail loans. Just because I know you want to know, the highest commercial real estate delinquencies were in Indianapolis and New Orleans. That is some great new!
Wednesday, February 20, 2008
El Paso, Texas Potential
El Paso already has a strong military population. But that population is going to get a lot bigger SOON. Fort Bliss is going to nearly double the size of the base to 37,000 within the next five years. Also, nearby White Sands Missle Range is going to increase from 130 soldiers to 4,000.
The El Paso International Airport will be increasing in size as nearly 3,000 acres next to it are developed into an industrial park to host the military contractors. The bottom line is that by 2012, there could be an additional 100,000 residents moving to El Paso. We strongly suspect this is going to have a profound effect upon Las Cruces, New Mexico.
"The early bird catches the worm."
The El Paso International Airport will be increasing in size as nearly 3,000 acres next to it are developed into an industrial park to host the military contractors. The bottom line is that by 2012, there could be an additional 100,000 residents moving to El Paso. We strongly suspect this is going to have a profound effect upon Las Cruces, New Mexico.
"The early bird catches the worm."
Friday, February 15, 2008
Which Way Did They Go? Potential Practice Sites
I have a daughter with a newly minted diploma just move into a new "career" employment situation. Being responsibile parents, we helped her move. Now, keep in mind, we track demographic and psychographic data EVERY DAY but one NEW resourse I wanted to pass along to the new doctors out there is U-Haul's web site - www.uhaul.com.
It was a wakeup call when we compared the simple COST of moving from one location to another. The site allows you to enter two cities. It then calculates the cost of making the move. We began to see a pattern that was, well, chilling.
Take, for example, moving from Austin, TX to Los Angeles, CA, the van will cost $407. Going the other way will cost $1,831. The reason is that they want one-way vans in Los Angeles because they are losing population. Dallas to Philadelphia costs $633 versus $2,422 in the opposite direction.
United Van Lines released as study in January 2008 that showed the top destination states as being:
- North Carolina
- Nevada
- Alabama
- Oregon
- South Carolina
The top departure states are:
- Michigan
- North Dakota
- New Jersey
- New York
- Illinois
Is it possible that the reason for this has to do with Taxes? One could say that it is just a coincidence that the Big Departure States are also the Big Tax States. One really odd statistic involves South Dakota versus North Dakota. The weather and economics are about the same. But South Dakota, one of the top ten destination states, has no income tax while North Dakota, a major loser of population does.
To be honest, we don't believe that taxes should be the major reason why one considers one state over another for practice. Nevertheless, if you want an indication of potential of growth, look to State Income Taxes as a major indicator of the future.
It was a wakeup call when we compared the simple COST of moving from one location to another. The site allows you to enter two cities. It then calculates the cost of making the move. We began to see a pattern that was, well, chilling.
Take, for example, moving from Austin, TX to Los Angeles, CA, the van will cost $407. Going the other way will cost $1,831. The reason is that they want one-way vans in Los Angeles because they are losing population. Dallas to Philadelphia costs $633 versus $2,422 in the opposite direction.
United Van Lines released as study in January 2008 that showed the top destination states as being:
- North Carolina
- Nevada
- Alabama
- Oregon
- South Carolina
The top departure states are:
- Michigan
- North Dakota
- New Jersey
- New York
- Illinois
Is it possible that the reason for this has to do with Taxes? One could say that it is just a coincidence that the Big Departure States are also the Big Tax States. One really odd statistic involves South Dakota versus North Dakota. The weather and economics are about the same. But South Dakota, one of the top ten destination states, has no income tax while North Dakota, a major loser of population does.
To be honest, we don't believe that taxes should be the major reason why one considers one state over another for practice. Nevertheless, if you want an indication of potential of growth, look to State Income Taxes as a major indicator of the future.
Monday, February 11, 2008
Mid-Atlantic Signs of LIfe
Almost every day a doctor will ask me toward the end of our of consultation, "Scott, you look at locations all the time. Is there anywhere I should consider?" When I first started answering that question, I would get all kinds of heat from those who thought I had some kind of agenda.
Nope, no agenda. But I AM being more cautious than I once was. So take this with a grain of salt:
Prince William County DEFINTELY has some potential. (Ditto for Loudoun County) New "big box" stores are the key indicator of new neighborhoods, office sites, and expanded traffic areas. There are several developments that are opening up and several general practices considering their options. This is NOT a "room for one more" situation. We believe that general practices as well as specialists may want to take a look at the Counties and decide for themselves.
On the other hand, we have been much cooler on Maryland (for the most part although some neighborhoods have been showing great potential). So what makes the difference? TAXES!
There are few locations where the differences between state tax policies have had as dramatic a contrast as in the Mid-Atlantic region. We are not in the business of pitching states JUST BECAUSE they have lower taxes but it is a "no duh" moment when we see how lower taxes affect growth both in populatinos and employment.
Nope, no agenda. But I AM being more cautious than I once was. So take this with a grain of salt:
Prince William County DEFINTELY has some potential. (Ditto for Loudoun County) New "big box" stores are the key indicator of new neighborhoods, office sites, and expanded traffic areas. There are several developments that are opening up and several general practices considering their options. This is NOT a "room for one more" situation. We believe that general practices as well as specialists may want to take a look at the Counties and decide for themselves.
On the other hand, we have been much cooler on Maryland (for the most part although some neighborhoods have been showing great potential). So what makes the difference? TAXES!
There are few locations where the differences between state tax policies have had as dramatic a contrast as in the Mid-Atlantic region. We are not in the business of pitching states JUST BECAUSE they have lower taxes but it is a "no duh" moment when we see how lower taxes affect growth both in populatinos and employment.
Friday, February 1, 2008
Hidden Dangers of the Perfect Location
We just ran an analysis on Aurora, Colorado. This suburb of Denver is growing (well parts of it are), and filled with upscale, affluent households with children present in the home. These are all great indications. The ratio of dentists to population in Zip Code 80015 is a favorable 1:3,000+. Granted the contiguous Zip Codes of 80013 and 80016 are not so good but they are still better than "just acceptable.
The problem that local doctors might have as they examine these locations is an "apparent glut" of dental practices because so many are found within a narrow geographic region. Cities like Aurora do not want to build "strip malls" or "professional centers' in their residentail areas. In this way, the community appears to be well-planned. But what do you do when you are considering a location with a good demographic character and reasonable competition ration but you can throw a rock and hit 10 dental offices?
The answer is "diversity of branding." If the practice is going to compete in an apparently crowded market, it must look or seem different or unique in some way. In the olden days of practice marketing, the advise would be to vary one of the Four "Ps" of Marketing:
- Product
- Price
- Place
- Promotion
So, which office will be perfect for those who commute into Denver? Which one will best serve a mother with two small children? Or teens? Or Catholics? Or "the thrifty"? Or "the extravagant." It is less a matter of "niche" marketing as it is a means of providing some clear differences from the guy next door. And if you want to serve EVERYONE, then the practice may suffer because no one knows that they are part of EVERYONE. They are just "me." This is the reason why we preach the effectiveness of "Market Segmentation."
The problem that local doctors might have as they examine these locations is an "apparent glut" of dental practices because so many are found within a narrow geographic region. Cities like Aurora do not want to build "strip malls" or "professional centers' in their residentail areas. In this way, the community appears to be well-planned. But what do you do when you are considering a location with a good demographic character and reasonable competition ration but you can throw a rock and hit 10 dental offices?
The answer is "diversity of branding." If the practice is going to compete in an apparently crowded market, it must look or seem different or unique in some way. In the olden days of practice marketing, the advise would be to vary one of the Four "Ps" of Marketing:
- Product
- Price
- Place
- Promotion
So, which office will be perfect for those who commute into Denver? Which one will best serve a mother with two small children? Or teens? Or Catholics? Or "the thrifty"? Or "the extravagant." It is less a matter of "niche" marketing as it is a means of providing some clear differences from the guy next door. And if you want to serve EVERYONE, then the practice may suffer because no one knows that they are part of EVERYONE. They are just "me." This is the reason why we preach the effectiveness of "Market Segmentation."
Saturday, January 26, 2008
Change-up: Growth Patterns in U.S. Changing
What was once the conventional wisdom on growth is changing. Arizona, Florida, and Nevada have traditionally been the fastest growing states. While each continues to grow, the RATE of that growth has undergone some changes.
Demographers at the Brookings Institution, a Washington, D.C. think-tank, attribute the changes to the slow-down in the housing market.
People continue to flee the Mid-west, especially Michigan (one of two states to actually lose population). The Mountain States in the West continue to post large population gains as people arrive from California and elsewhere. Arizona, Florida, and Nevada are still among the fastest growing states by percentage. For example, Nevada increased by 2.9% (72,955 people). But, this is less than the 3.5% increase and lower than the 3%-plus growth rate for the six previous years. Over the same time period, Arizona saw its population increase by 2.8% compared with 3.6% growth in the previous year.
Florida has taken a serious hit from the mortgage crisis. Florida grew 1.07%, slightly faster than the U.S. growth rate of 0.96%. This means that 35,301 people moved to Florida from another state, 134,798 fewer than the previous year. That is the slowest rate of domestic migration into Florida since at least 1990 when the U.S. Census Bureau started tracking migration between states.
So, why did the Midwest suffer so much? Jobs! Michigan lost 30,500 residents (0.3% decline). Ohio was essentially flat. Other than Michigan, Rhode Island is the only state to lose population. Utah and Idaho were the third and fourth fastest growing states. Colorado and Wyoming were eighth and ninth.
California lost 263,035 residents but grew 0.8%, primarily from births.
Florida has given up the “crown” of growth in the South to Georgia (+2.17%, 202,670 residents) and North Carolina (+2.16%, 191,590 residents). Texas is still king of growth (+2.12) by gaining 496,751 residents; more than any other state.
One final note on Louisiana: DANGER! Because of Katrina, the state lost 220,000 residents. Last year the state saw a return of 50,000 residents. In short, it has a ways to go before getting back to normal.
Demographers at the Brookings Institution, a Washington, D.C. think-tank, attribute the changes to the slow-down in the housing market.
People continue to flee the Mid-west, especially Michigan (one of two states to actually lose population). The Mountain States in the West continue to post large population gains as people arrive from California and elsewhere. Arizona, Florida, and Nevada are still among the fastest growing states by percentage. For example, Nevada increased by 2.9% (72,955 people). But, this is less than the 3.5% increase and lower than the 3%-plus growth rate for the six previous years. Over the same time period, Arizona saw its population increase by 2.8% compared with 3.6% growth in the previous year.
Florida has taken a serious hit from the mortgage crisis. Florida grew 1.07%, slightly faster than the U.S. growth rate of 0.96%. This means that 35,301 people moved to Florida from another state, 134,798 fewer than the previous year. That is the slowest rate of domestic migration into Florida since at least 1990 when the U.S. Census Bureau started tracking migration between states.
So, why did the Midwest suffer so much? Jobs! Michigan lost 30,500 residents (0.3% decline). Ohio was essentially flat. Other than Michigan, Rhode Island is the only state to lose population. Utah and Idaho were the third and fourth fastest growing states. Colorado and Wyoming were eighth and ninth.
California lost 263,035 residents but grew 0.8%, primarily from births.
Florida has given up the “crown” of growth in the South to Georgia (+2.17%, 202,670 residents) and North Carolina (+2.16%, 191,590 residents). Texas is still king of growth (+2.12) by gaining 496,751 residents; more than any other state.
One final note on Louisiana: DANGER! Because of Katrina, the state lost 220,000 residents. Last year the state saw a return of 50,000 residents. In short, it has a ways to go before getting back to normal.
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