A business proposal for Chesapeake, VA

Sean LaCroix

ECO 202

Microeconomics

NAICS Code 453110 Florists

See the “Location Quotient” presentation for more on this measure!

To select an industry, I reviewed all Retail Trade Location Quotients in Chesapeake

I determined that Florists were relatively under concentrated in

Chesapeake.

Business background

• Sell flowers retail• Develop relationship with national providers• Develop relationship with wholesalers• Develop relationship with local businesses that

might need flowers routinely• Hotels (there are about 40 in Chesapeake), • Legal firms (88)• Nursing Care facilities (26)• Country Clubs (3)

I plan to:

So how big should my business be?

A review of all Florists in Virginia reveals:

• There were 2,484 employees at florists in Virginia 2009• There were 472 florists in Virginia in 2009• Total payroll was $39.0 million in 2009

• Average employment per store: 5.3• Average payroll* per employee: $15,712• Total annual labor costs: $82,688

Data obtained from County Business Patterns at http://www.census.gov/econ/cbp/

*Includes all forms of compensation, such as salaries, wages, reported tips, commissions, bonuses, vacation allowances, sick-leave pay, employee contributions to qualified pension plans, and other forms of pay.

I’ll probably need about 5 or 6 part

time employees!.

What about facility costs?

Retail rentals appear to be between $13 and $24 per ft2 per year.

Assuming a 1,500 ft2 shop, rental costs will be about $2,250/month or $27,000 per year.

Data obtained from LoopNet at http://www.loopnet.com/xNet/MainSite/Listing/Search/

Is demand for my product elastic?

Is it a luxury?

Are there close substitutes?

Is the market narrowly defined?

Yes

Yes

Yes

Answering “yes” to all three of these questions suggests that demand for this good will be

elastic!

With elastic demand, I expect that:

•Consumers will be sensitive to price changes•Business may slow significantly with an economic downturn

•I am competing with items other than flowers (gifts, candy etc).

Do I have any market power?

• Concentration Ratios:– 4 largest firms: 2.1% of total sales in U.S.– 8 largest firms: 2.9% of total sales in U.S.

– 20 largest firms: 4.5% of total sales in U.S.– 50 largest firms: 7.1% of total sales in U.S.

0%100%40%

Monopolistic Competition Oligopolistic

Perfect Competition

MonopolisticSee the “Industry Concentration” presentation for this metric

No. This industry is near perfect competition.

I better match other firm’s prices.

Who are my competitors?

For this information, I “googled” “florists in Chesapeake superpages”

There are numerous florists in Chesapeake …but only one in the Deep

Creek area!

What about my market?

This came from Chesapeake’s Comprehensive Plan available at http://www.cityofchesapeake.net/Assets/documents/departments/planning/Demographics/2011+Statistical+Profile.pdf

Deep Creek’s population is expected to increase by almost 40% by 2026!

More people means more customers!

The End!

So what should I name it?

Out of the dog house flowers!

1-800 IMGUILTY