The CEO of a middle-market company was considering entering one or two new metropolitan areas. She had identified six potential areas and asked for my help at identifying the long-run growth potential of each. I collected economic data on population, employment, major industries and real estate, then conducted interviews with people in each area. My report to the CEO highlighted two metro areas likely to grow rapidly and a third that should be entered only if they could do so at fairly low cost. The remaining areas offered little benefit over the current areas served by the company.
A decade has gone by since this project, and my top picks did grow faster than the other areas. The company acquired a business in the first-choice area, but ran into unforeseen problems with the acquisition, delaying profitability for a few years. The company entered the third market after finding a person with industry experience in that area, allowed the low-entry-cost strategy. That office proved profitable early on.
The business has since been acquired, and it presence in the two additional markets was definitely a plus in valuation. This project illustrates two important lessons. First, that regional growth can be forecasted with enough accuracy to guide business development decisions. Second, there’s more to business success than economics. Good acquisitions and good management are still important, even in fast growth areas.