How Population Growth Can Affect Your Business’s Financial Strategy

Your community is growing and changing, which means your business is, too. From a larger hiring pool to increased customer demand, population growth impacts your business growth in a variety of ways.

When the local population increases, so do your business opportunities. Population shifts affect your customers' lifestyles and incomes, which can also impact how you approach your business model and finances. Don’t get caught off guard--let’s examine nine ways population growth can influence your business strategy.

Need for More Capital

A population boom may mean you need more capital to expand your business. Keeping up with market insights will help you understand how to strategically approach the financial impact of population growth. This is especially important in Idaho — we were the second-fastest-growing state between 2010 and 2020, according to the U.S. Census Bureau. For example, Coeur d'Alene’s population increased by more than 26%, and Treasure Valley is projected to surpass one million residents by 2040.

More residents mean more potential customers. If your business needs to raise capital quickly to address the impact of a growing customer base, there are many kinds of business loans you can apply for. But first, make sure you understand:

• How much of a loan you can qualify for,
• How long it will take for the loan to come through,
• If the loan is installment or revolving, and
• How to write a business plan for your loan.

The need for more capital can be a sign that population growth has resulted in another kind of growth — the need for more space.

Need for More Space

You might be ready to consider expanding or remodeling your current space, building a new location entirely, or opening additional locations to reach more communities.

Consider funding options like loans to expand your space. Be sure to choose a business loan that can be used to buy property. Also, investigate whether or not you want a fixed rate for your small business loans. These loans can give you room to increase inventory, production, and staff — all ways that small businesses can meet the demands of a growing community.

Need for More Staff

To create and sell more products and services, your company will need more specialized staff, which also comes with costs. The job website Indeed reports that “it will cost between roughly $4,000 to $20,000 to hire a new employee, not including the new employee’s salary and benefits.”

From production to bookkeeping, sales, and payroll, think about the staff you need to support your growth and sustain the momentum. And keep in mind while there may be more candidates in the applicant pool, population shifts may also mean wage shifts.

Wage Shifts

The researchers at Pew Charitable Trusts say that population growth does not always equate to wage growth. However, there will likely be a change. If wage shifts are hard to keep up with initially, remember other benefits that appeal to employees, such as work-life balance, health insurance, retirement matching, and flexible schedules.

While it’s clear that population growth can impact the wage you pay your workers, it’s also important to recognize how it can impact your customers’ income as well. In addition, both your employees and your customers can be impacted by another kind of shift that comes with population growth — a change in demographics.

Shifting Demographics

Demographic growth can influence the interests of customers moving to your town. For example, if your population is growing because more people are retiring to your community, you may want to stock more items that appeal to senior citizens. Perhaps your area is growing in young, professional parents. You could offer parents special deals and discounts for your services.

Demographic changes can also influence the hiring pool. For instance, restaurant owners may see a surge in customers who prefer delivery, meaning they’ll need more experienced delivery drivers.

In Boise County, the population has increased by 15.5% from 2010 (7,005) to 2021 (8,094). Ages 65+ have seen the largest increase in population--a 98.4% increase between 2010 and 2021.

Considerations for Business Type

When your community grows, your company grows, and that may mean that your business type needs to evolve. When you first formed your company, your business type determined the kinds of taxes you file. While that business decision may have been the right choice early on, as you prepare to expand, you will want to consider if other business structures are now a better fit.

If you need to protect your wealth from business liability, it will be time to form an LLC or a C or S Corporation. If you are applying for business loans, you’ll want to be clear whether you are a sole proprietor or have business partnerships. Keep in mind that changing your business type has a substantial impact on your financial strategy, especially when it comes to tax considerations.

Changing Tax Considerations

Different business types are associated with different tax considerations. If your business is changing due to a population boom, you may also need to consider how that growth impacts your business taxes. Taxes can be complex and complicated, so it’s important to thoroughly understand the tax considerations for different business types, such as:

• Sole Proprietorship: From the IRS’s standpoint, this is not a taxable entity. Assets and income are attributed directly to the owner.
• Partnership: Under federal law, a partnership is not a taxable entity. Each owner is taxed at their own individual tax rates.
• C Corporation: Income is taxed at the corporate level, though dividends are taxed for individuals. This is often called “double taxation.”
• S Corporation: A corporation that received special permission to be taxed like a partnership.
• LLC: Treated like partnerships for federal tax purposes, though not always with state taxes, LLCs get the liability protection of a corporation.

Each business structure has specific tax considerations, which can impact your bottom line. Don’t forget to factor in another impact to your bottom line that comes with growth — property and maintenance costs.

Changing Property and Maintenance Costs

Expanding comes with many opportunities, as well as risks. Prepare ahead of time for property and maintenance changes that may come with your expansion. Whether you plan on buying a new location or expanding your current one, pay attention to the zoning laws, as well as any other property rules, regulations, and compliance conditions.

Be sure to plan for increased maintenance costs — often a surprising and unforeseen small business cost. If you’re moving to a larger building, the utility bills might increase. If your customer base is growing, you may want more parking. When the population grows, so does the infrastructure. Be on the lookout for new neighborhoods, roads, and shopping complexes where you can grow your business, but just remember, other businesses may be growing, too.

New Competition

Competition is also impacted by population growth. When residents migrate to your area, you are competing with other businesses for new customers. In Idaho, the number of small businesses has been growing in recent years. In a shrinking population, you are competing for their current customers. The former is often more attainable than the latter.

Population growth can impact the way you allocate funds for your business. For instance, you may want to increase your marketing budget to reach new customers, offer a wider delivery area for your restaurant, broaden your inventory, or open a new location in a growing neighborhood.

Stand apart from the competition and reach new customers by getting involved in your community. Customers value businesses that care about their city. Sponsor fundraisers or sporting events, volunteer, connect with your local chamber of commerce, and support other local businesses. These partnerships will give your growing business a competitive edge while still building connections and strengthening the community. 

Apply for a business loan in Idaho!

Idaho Trust offers a variety of business loans to help your business grow along with the local population. Find out why Wallet ranks Boise, ID #6 of 100 for 2023’s Best Large Cities to Start a Business. Learn more about our small business loans, and contact us with questions!