Population Dynamics

Introduction

In order to present a group of business partners and investors with details informing them about the business model to pursue in Colorado Springs, CO, this report will explore the population dynamics in the city as well as draw comparisons to the state of Colorado and the nation as a whole. In addition, information about the overall cultural and service sectors will be presented. 

Initial discussions between the business partners have identified the following potential market segment possibilities to focus on in the development of their new business:

• a growing population of young children
• retirees
• Hispanic populations

Each of these segments will be explored further using these elements:

• Population Pyramid
• Dependency Ratio for the above stated market segments (city, county, state, nation)
• Location Quotient
• population market segments
• service industries

After presenting this information, conclusions and recommendations will be provided addressing each potential market segment to inform the overall direction of business investment for the partners.\

Population Dynamics

2013 American Community Survey (ACS) 5-year estimate data provides the basis for the three methods of population dynamic analysis in Colorado Springs. First, a population pyramid will be used to explain the overall age/sex structure of the population in Colorado Springs. Second, dependency ratios will provide a comparison of both the youth and retired populations to the working population. Third, location quotients will reveal the concentration of the youth, retired, Hispanic, and White populations in comparison to El Paso County, the state of Colorado, and the United States, as a whole.

Age/Sex Structure

The following population pyramid breaks down the population of Colorado Spring into 5-year age cohorts from age 0 to 4 all the way to 85+ as well as providing information about the male/female distribution in each cohort.

Figure 1: The population pyramid for the city of Colorado Springs shows relatively consistent population numbers for all cohorts with a steady decrease after the 60 to 64 years cohort

Dependency Ratio

Two market segments identified by investors relate to age (youth and retired populations). A dependency ratio provides information about the total population in each of these larger cohorts in relation to the working age population. 

The following equation is used to determine the dependency ratio:

DR = 100 * (P_0-14 + P₆₅₊) / P_15-64

P_0-14 = Population in the 0-14 age group, also known as the Youth Dependency Ratio (YDR)

P₆₅₊ = Population in the 65+ age group, also known as the Elderly Dependency Ratio (EDR)

P_15-64 = Population in the 15 to 64 age group

Using the 2013 ACS Survey 5-year estimates, dependency ratios are developed for the city of Colorado Springs and the state as a whole.

Dependency Ratio (Colorado Springs) = 46.25%

The total number of those typically identified as dependents (0-14 years, 65+ years) is equivalent to 46.25% of the working-age population (15-64 years) in the city of Colorado Springs.

Dependency Ratio (Colorado) = 46.13%

The total number of those typically identified as dependents (0-14 years, 65+ years) is equivalent to 46.13% of the working-age population (15-64 years) in the state of Colorado.

Population Location Quotient

The location quotient measures the concentration of a particular variable in a geographic region in relation to the concentration in another geographic region. For the purpose of this report location quotients will be developed for the city of Colorado Springs, the surrounding county of El Paso, the state of Colorado, and the United States as a whole. 

LQ = 1: both geographic regions have the same concentration of a particular variable

LQ > 1: the region in question has a higher concentration of a particular variable than does the               comparison region

LQ < 1: the region in question has a lower concentration of a particular variable than does the                 comparison region

The graph below (see Figure 2) reveals the location data used for the city of Colorado Springs, the county of El Paso, the state of Colorado, and the United States to determine the location quotients for the population of residents 0-14 years, 65+ years, Hispanic, and White.

Figure 2: This graph provides the data used to determine location quotients for the three potential market segments identified by investors

Using the percentages calculated in Figure 2 for Colorado Springs divided by the percentages for the other regions of comparison yields the following location quotients (see Figure 3).

City of Colorado Springs Location Quotients

Figure 3: Location Quotients for the city of Colorado Springs show the concentration of the particular variables in question when compared to the surrounding county, state, and country

Service Industry Location Quotient

Using the same process for determining location quotients for population variables in Colorado Springs, the location quotients for service industries were calculated (see Figure 4) by comparing industry concentration to that of the state of Colorado. 

Figure 4: Location Quotients for service industries in Colorado Springs when compared to the state of Colorado

Conclusions

The investors/business partners have identified three market segments (youth (age 0-14), retired (age 65+), and the Hispanic population) they are interested in developing a business within the service industry category. The population pyramid, dependency ratios and location quotients provide insight about the current population dynamics in Colorado Springs for each segment.

Youth (Age 0-14)

Looking at the population pyramid for Colorado Springs (see Figure 1), reveals that the city is not exactly suffering, as some larger cities are, from low birthrates. In fact, the pyramid shows very consistent numbers in each age cohort up until age 64. So, at first glance, investors seem to be right about the market potential in this population segment.

If anything, the dependency ratios seem to reinforce this line of thinking. The ratio of dependents when compared to the working age population for Colorado Springs (46.25%) are slightly higher than the state of Colorado (46.13%), as a whole. It remains to be seen whether that is due to larger numbers in youth populations or in retired populations. 

The location quotients shed some light on this question by showing that, while Colorado Springs has a higher concentration of youth when compared to the United States (1.05) and Colorado(1.02), it actually has a lower concentration of youth when compared to the surrounding El Paso County (see Figure 3).

Retired (Age 65+)

The population pyramid for Colorado Springs (see Figure 1) does show the decrease in population in cohorts when residents reach typical retirement age, but this is a very normal pattern as people reach this stage of life. It may still be the case that Colorado Springs has a larger than average population of retired persons.

The dependency ratios show that Colorado Springs may have a larger population of retired persons than is seen when considering the state, overall. But, again, this variable considers youth under age 14, as well. 

Colorado Springs' location quotients paint a somewhat muddled picture (see Figure 3). Both the nation and the state have higher concentrations of retired persons than Colorado Springs. However, the city also has a higher concentration (1.06) than the surrounding El Paso County.

Hispanic Populations

Neither the population pyramid nor the dependency ratios are able to shed any light on the Hispanic population market segment. Relying solely on location quotients (see Figure 3), Colorado Springs has the same concentration as the United States (1.00), a lower concentration than the state of Colorado (.80), and a higher concentration than El Paso County (1.08). This LQ value represents the most significant concentration other than the concentration of white people compared to the entire United States (1.11).

Other areas in Colorado contain concentrations of Hispanic populations that dwarf the concentration seen in Colorado Springs, but within the surrounding county, Colorado Springs appears to be a focal point for Hispanic populations.

Service Industries

Location quotients for service industries (see Figure 4) when comparing Colorado Springs to the state of Colorado show that the Finance/Insurance/Real Estate industry may be over-saturated (1.03) while the Professional/Scientific/Management/Administrative/Waste Management industry is on par with the rest of the state. 

Four service industry categories are less concentrated in Colorado Springs than the state of Colorado: 

• Education Services/Health Care/Social Assistance (.94)
• Arts/Entertainment/Recreation/Accommodation/Food Services (.94)
• Other Services (.82)
• Public Administration (.78).

Findings and Discussion

Based on the conclusions above, all of the market segments identified by investors possess an element of viability for developing a business around. However, a more intensive look reveals a hierarchy.

Youth (Age 0-14)

Colorado Springs is, by no means, suffering from a disparity of youth (age 0-14) based on the population pyramid. Within the state and nation, it definitely reveals a stronger concentration of this market segment. However, by comparing Colorado Springs to the surrounding El Paso county, we see that there might be other locations in the county where a business developed for this segment would be more apt to succeed.

Of course, it may also be the case that Colorado Springs is a regional hub with surrounding suburbs filled with a large youth-age population. Based on the limited data presented here, this can only be speculation. Further analysis would be required to make a definitive statement.

Furthermore, the industry analysis shows that businesses geared toward educational services and health care (typically used heavily by this market segment) are slightly underdeveloped in Colorado Springs.

Of the three options considered, this is the least attractive based on market analysis.

Retired (Age 65+)

On the other hand, a completely opposite picture exists for the the retired market segment. Compared to the nation and state, Colorado Springs has a low concentration of retired persons, but within El Paso County, Colorado Springs has a significantly high concentration of this market segment. Because this is typically a market segment that exhibits less mobility, Colorado Springs seems ripe for investment for businesses catering to retired populations.

The location quotient industry comparison with the state of Colorado enhances this opinion by showing lower concentrations in health care services, social assistance, as well as arts, entertainment, recreation, accommodation, and food services. All of these service industries tend to attract the dollars of the retired market segment.

Based on this information, the retired population is a strong option, but I believe there remains a more attractive market for investment and business development.

Hispanic Populations

Within the county of El Paso, Colorado Springs' notable concentration of Hispanic population stands out when compared to the concentration of any other market segment under consideration. 

In addition, there appears to be a large concentration of Hispanic population in the state of Colorado as a whole, thus Colorado Springs contains less of a concentration of this segment. Due to this interesting position, I strongly assert that the state of Colorado overall, and Colorado Springs will continue to see an influx of Hispanic population in the years to come. The overall trend, nationwide, is for this segment to experience growth. I believe Colorado Springs to be well positioned within El Paso county to capitalize on the Hispanic population market segment. 

All of the industry concentrations seen as being underdeveloped in Colorado Springs when compared to the state are relevant for Hispanic populations to one level or another. Especially of note are education services, health care, recreation, and food service. More intensive market analysis of the spending patterns of Hispanic populations in Colorado Springs would be needed in order to develop the optimal business niche.

As a result of this analysis, the Hispanic population market segment presents the strongest opportunity for business development in Colorado Springs, Colorado.

References

U.S. Census Bureau. 2013 American Community Survey 5-year Estimates. generated by Nathan Schaffer using American FactFinder. http://factfinder.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t. (20 September 2015).