What is the benefit of having an Annual Spending by Consumer Unit Analysis in a business plan for A Touch of Tuscany?

The Annual Spending by Consumer Unit analysis gives a small business owner like Jack Gordon as well as the reader of the plan a very good idea into the size of the consumer unit and how much each consumer unit has been spending on an industry segment like a Full Service Restaurant or similar industry segment.

A consumer unit consists of any of the following:

1. All members of a particular household who are related by blood, marriage, adoption or other legal arrangements.
2. A person living alone or sharing a household with others or living as a roomer in a private home or lodging house or in permanent living quarters in a hotel or motel, but who is financially inidependent; or
3. Two or more persons living together who use their incomes to make joint expenditure decisions.

The term consumer unit, family and household are often used interchangeably for convenience. However, the proper technical term for the purposes of the Consumer Expenditure Survey is a consumer unit.

In order to conduct this analysis we break down the size of of the consumer unit into the following categories:

1. The average market value of owned home by a 1 person consumer unit.
2. The average market value of owned home by a 2 person consumer unit.
3. The average market value of owned home by a 3 person consumer unit.
4. The average market value of owned home by a 4 person consumer unit.
5. The average market value of owned home by a 5+ person consumer unit.

We also recommend highly that in the event we are not able to find the exact industry sector that the small business belongs to, that the data from the industry sector that is the closest, be used for this analysis - thus for example, if you are in the fast food industry and there is no data available on the annual spending by the size of consumer unit for this industry, but there is data available for the spending on the food industry in general - we recommend that you use the later data instead.

What if the analysis shows that most of the spending on an industry's products and services is done by 1 person spending units?

In the even the Annual Spending by Size of Consumer Unit shows that the most annual spending on an industry's products or services is coming from 1 person consumer units that it simply means that individuals and / or 1 person households are the best target for that particular industry. Small businesses who are involved in that industry segment would do well to concentrate their limited marketing resources to focus on 1 person units. We are not suggesting that no attention be paid to the rest of the market place consisting of 2 or more person consumer units, but we do suggest that special attention be paid to those consumers units that are spending the most of their income on the products and services being offered by businesses like A Touch of Tuscany in Full Service Restaurant.

For example if your analysis reveals that prepared meals are purchased meals are puchased most by 1 person consumer units, then it gives you a very clear insight into what may be happening in the market place - many folks who live alone have indicated that they don't like to cook for themselves or don't know how to cook outright. Thus the prepared meals may be the perfect healthy home eating alternative. On the other hand households with more than 2 or more people or as this analysis categorizes them - 2 or more person consumer units, would most probably have a lesser demand for prepared meals since larger households tend to cook and eat meals together.

Does a change in the amount of spending of any particular size of consuming unit have any significance for a business like A Touch of Tuscany?

Yes. If we were to continue with the example above and our analysis reveals that 1 person consumer units used to spend very little on prepared meals 10 years ago but in the last few years they have been spending more, then it clearly indicates a trend where households with 1 person are incresingly spending more money in prepared meals. This is of course excellent news for a small business that operates in that industry since it confirms that they are part of a rising trend of demand for their product and as the saying goes - a rising tide will lift all ships.

On the other hand if the analysis were to show a reversing trend, indicating that the annual spending by this market segment was declining and similar trends were observed in other categories of consumer units as well, it could well be indicative of a larger shift away from the prepared meals segment of the food industry.

Further research may reveal that much healthier food alternatives are now available in the form of frozen foods and that consumer units of all sizes are gravitating towards those instead of prepared meals. Thus changes in the amount of spending done by one or all of the different sized consumer units is critical to understand since it may yield valuable clues of further shifts in the demand for the products and services being offered by industries like a Full Service Restaurant or similar industry segment.

Quick Links:

1. Go to the Corresponding Template section for this industry.
2. Go to the Corresponding Business Plan section for this industry.