Small Business Model Series Entry #7 – Location, Location, Location

The e-mails keep coming.  A few days ago I asked my friends and family to be on the lookout for ATM’s.  I describe the difference between a bank owned ATM and an independent ATM.  I was strictly interested in the independents.  I wanted to know exactly where the ATM is located, the name of the business, and what kind of business.  With this information I am tracking the locations using a spreadsheet and a map with push pins.  I have 19 zip codes to cover and I’m hoping I can get around 70% of the machines identified.  There are several reasons to know this information:

1.  By knowing where the ATM’s are located I can identify possible trends or patterns.
2.  I want to identify underserved areas for a possible site to locate a machine.
3.  I am interested in knowing what types of businesses have ATM’s.  Is there a pattern or some kind of get lucky thing going on here?  I am interested in knowing what others are thinking.

I estimate that I sent out my request to around 70 family, friends and associates from work.  It appears that some of them forwarded this request to their friends because I’m getting e-mails from folks I’ve never met.  I thank each one with a short e-mail explaining why I’m doing this and how much I appreciate their help.  It is a tremendous time saver.

As of right now I have over 87 locations covering 17 of the zip codes.  My Dad decided to go out on his own and do one zip code by himself.  He drove down every main road and pulled into various establishments and shopping areas looking for the ATM sign in the door.  With each gas station and convenience mart, he stopped and checked out the premises.  When he was done, he had spotted 7 in one zip code and 6 in another.  The old man is a hero in my book.

A friend of my brother e-mailed me with his list.  List?  Oh yeah, it turns out he drives one of those Lance Snack Trucks and has a route that covers a good portion of 3 zip codes.  Unfortunately, two of the machines he spotted, my Dad had already documented them.

As the e-mails arrive, I proceed to record the data in the spreadsheet.  I send a response thank you and then put a color push pin into the map at that site.  Each pushpin color means a different type of business.  I used red for restaurants, green for the gas stations/convenience marts, blue for shopping/retail facilities and white/black for the odd places. 

Now that I have 87 ATM’s spotted, I think I have enough data to identify patterns or empty territories.  Of course I’m expecting the obvious.  The less respectable areas will be underserved but I decided to initially focus on the better neighborhoods that have some potential.  More importantly, I want to find the spot that has a lot of volume of traffic that needs cash.  If I can discern that from the existing machines, then I might be able to find a spot somewhere out there that meets my safety concerns too.

Of the 87 machines, 38 of them are in or near some form of retail outlet.  Nine of them were in the two malls located in our area.  I toured one of the malls and discovered a pattern.  One machine was set at the main entrance to the food court area.  I grabbed a bite to eat and just watched the machine.  In the course of 45 minutes, 4 people withdrew money.  That machine was obviously going to pay for itself because based on my analysis in my prior entry, the machine only needs to get 5 transactions per day to cover its costs and make some money for the owner.  Most of the mall machines were located near the main entrances or in the food court area.

A good portion of the locations were in the convenience stores.  So here, I asked the clerk at the counter how well the machine did on a daily basis.  He told me that on Fridays the machine gets about 10 transactions from 5 until 10 PM.  During the rest of the day, it ranges from 3 to 8 depending on the day of the week.  Saturdays are better.  Most folks that need cash; get cash from the counter as they make purchases.  So to me a convenience store is OK, but not the absolute best spot.  I am going to rank this spot a Five on a scale of Ten.  Good enough if you find a convenience mart to take one.

I took the list from my father and went out to spot them.  Similar to the spreadsheet pattern, convenience locations and one in a shipping/package store.  Interesting; as I was in there looking around I noticed the mail boxes for the customers.  They had over 300 post office boxes and the clerk told me that they rented out about 70%.  Most of the customers come in regularly to get their mail and yes, they use the ATM. 

Four machines were located in some odd spots.  One was in a strip club.  I got this in an e-mail from one of my friends.  Of course I think he wrote it when he got home because if you could slur while writing, he figured out a way to do it!  Anyway, I found this one to be really interesting.  Does this work?  So I asked a few of my associates at work and one of the guys said it was actually a good idea.  Think about it, the dancers want cash, not checks or debit cards.  They want the cash.  The owner wants the customers to have access to cash to purchase drinks and tip the girls.  I wonder how much runs through a machine located in a spot like that site.

Another interesting location was the Pizza joint.  Well, not so much a pizza joint as a kid’s play spot that sells pizza.  My brother works near this location and I asked him to look into the joint to see how it was doing.  He went in there on Friday afternoon after work, bought a pizza and a soda and watched.  Sure enough, the restaurant does not take checks or credit.  It will take debit cards.  But many of the customers just walked over the machine and got cash out.  He said that while there, 8 customers used the machine.  He left by 7:30 PM.  So I’m thinking this must be a good location, find a spot where the customer needs cash and is not allowed to use checks.

Because of the two sites above, I decided to change a description group and called it entertainment instead of either a restaurant or adult venue.

So here is my final chart of information:

    Retail ( & Liquor Stores)           38 (9 of these are in the two malls)
    Convenience Marts(Gas)           31
    Restaurants                                  8
    Entertainment                              8
    Other                                            2  Hotel, Medical Facility
    Total                                           87

Based on the map pushpins, it looks like the bulk of the machines are located near apartment/condo areas too.  So the thinking must be access to demographics that will use the machines, volume of activity, and then sighting a machine in such a way that people will want to use the machine or have no choice but for convenience, use the machine.

After some time staring at the map on the wall, I decided to use the hotels from my monopoly game and glue a hotel where there is a bank.  This didn’t work too well, because the glue didn’t hold the little red hotel very well.  So I used a hot glue gun.  There are a lot of banks out there!

From all this information, I needed to decide how to move forward.  My initial thoughts are three machines to get going.  This achieves two goals.  First, it gives me a chance to get the hang of this whole idea; secondly, I don’t have the money for more machines and the money to keep them stocked.  So for now, having three machines allows me to learn without much risk.  So where should I place the machines?

After looking at my maps and the various charts I generated, I decided that the best way to do this is to test out three of the five markets.  I am going to place one in retail, one in a convenience mart and a third in an entertainment spot somewhere.  So my next step is to review my notes, jot down a plan, and then order the machines.  While the machines are being shipped to me, it will be time to find the three locations and get my tools gathered together.

P.S.  – Thanks to everyone that spotted an ATM and sent me an e-mail.

Entry #7 – Location, Location, Location         Invested Time:  11.25 Hrs.                 Cumulative Time:  39.50 Hrs.

This entry is part of a series of entries exemplifying the steps an entrepreneur takes from starting a business to selling the operation.  It is a step by step process addressing the multitude of business concepts every small business owner must face.  This is a 6 year example from Day 1 to the day the owner receives a check for selling his business.  Read this series as if it you were experiencing all of the trials, tribulations and joy of owning and operating a business.

About David J Hoare 427 Articles
I spent 12 Years as a Certified Public Accountant, Over 20 Years of Practice in Accounting and Consulting, Controller in Management of Closely Held Operations, Masters of Science in Accounting, Prepared over 1,000 Business Tax Returns and Hundreds of Individual Returns

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