Methodology & Sources

Last Updated: January 12, 2026

At LocalNichePro, we believe that trust is built on transparency. We don't use "proprietary black box algorithms" or rely on subjective opinions.

Our platform is an engine that aggregates, cleans, and synthesizes official United States government data into clear, actionable insights for entrepreneurs.

This page explains exactly where our data comes from and how we calculate the metrics you see in our reports.

Our Official Data Sources

We rely exclusively on administrative records from the U.S. Census Bureau. We do not use third-party scraping, user-generated reviews, or unverified private surveys.

ACounty Business Patterns (CBP)

What it is: The official annual count of establishments with paid employees.
What we use it for: Tracking the size, payroll, and growth of employer-based businesses (teams) in your city.

BNonemployer Statistics (NES)

What it is: Tax return data for businesses that have no paid employees (solopreneurs, freelancers, independent contractors).
What we use it for: Calculating the "Solo-Friendly %" and estimating revenue potential for solo founders. This is critical for understanding the "Gig Economy" and independent consultant market.

CAmerican Community Survey (ACS)

What it is: The premier source for detailed population and housing information.
What we use it for: Providing the "Macro Context" for your market—specifically Total Population and Median Household Income, which helps gauge the buying power of your potential customers.

How We "Synthesize" the Answers

Raw government data is messy, complex, and often overwhelming. Our "Synthesis Engine" turns that raw noise into a clear signal through a simple three-step process:

Step 1: Aggregation & Cleaning

We download millions of rows of data for over 380 U.S. metro areas. We then remove industrial outliers (like "Nuclear Power Generation" or "Heavy Manufacturing") that aren't relevant to local small business owners.

Step 2: The "Viability Filter"

To protect you from bad data, we hide any niche that is too small to analyze reliably.

  • •The Rule: A niche must have at least 10 active businesses in a metro area to appear in our reports.
  • •Why? If a niche has only 1 or 2 businesses, growth percentages become misleading (e.g., 1 new business looks like "100% Growth"). We filter these out so you only see stable, proven markets.

Step 3: Benchmarking

We don't just look at local numbers in a vacuum. We compare your city's data against the National U.S. Baseline. This allows us to tell you if a market is "Underserved", "Balanced", or "Highly Competitive" relative to the rest of the country.

Explaining the Metrics

Here is a plain-English guide to the key terms you will see on our Metro Reports.

"Competition Level"

What It Measures: Business density per capita vs U.S. average.
Technical Term: Based on Location Quotient (LQ), but presented as easy-to-understand tiers.
The Three Levels:
  • < 0.8xUnderserved: Fewer businesses per capita than the U.S. average. This suggests a supply gap and potential market opportunity with less competition.
  • 0.8-1.2xBalanced: Business density matches U.S. average. Typical competitive environment with room for differentiation.
  • > 1.2xHighly Competitive: More businesses per capita than the U.S. average. Strong demand indicators, but requires clear differentiation and positioning strategy.

"Solo-Friendly %"

What It Means: The percentage of businesses in a specific niche that are run by a single person (Non-Employers).
How to Read It:
  • •High %: Ideally suited for freelancers, consultants, and solo founders. Low barrier to entry.
  • •Low %: Typically requires a team, office, or significant capital to start.

"Revenue Potential"

What It Means: The average annual receipts (revenue) reported by businesses in this sector.
Note: We separate this into "Solo Revenue" (for Non-Employers) and "Payroll per Location" (for Employer businesses) so you can set realistic expectations based on your business model.

"Growth Rate"

What It Means: The 5-year percentage change in the number of active businesses comparing 2018 vs 2023.
Important Note: This is a simple percentage change, NOT a Compound Annual Growth Rate (CAGR). Formula: (current year count - base year count) / base year count × 100%
How to Read It:
  • +15%(Positive): More businesses are opening than closing. Rising demand and expanding market opportunity.
  • -10%(Negative): The sector is consolidating or shrinking. Declining demand requires extra caution and differentiation.

"Composite Score" (Intelligence Ranking)

What It Means: Our primary ranking algorithm that identifies the most promising niche opportunities in your metro.
The Formula: Growth Rate × Competition Level
Why This Works:
  • •High Growth + Underserved: Maximum opportunity signal ("Rocket Ships").
  • •High Growth + Highly Competitive: Strong demand but requires differentiation.
  • •Low Growth + Balanced: Mature markets with steady demand ("Strongholds").

A Note on "Real-Time" Data

It is important to understand that there is no such thing as "Real-Time" Census data. The rigorous process of government data collection and auditing takes time.

  • •Our Promise: We update our database annually as soon as the U.S. Census Bureau releases new files.
  • •The Lag: The most current "Official" data is typically 12-18 months behind the current calendar date. This is the industry standard for economic analysis.

While our data provides the most accurate structural picture of the economy, you should always verify current conditions with on-the-ground primary research.

Still have questions?

If you want to know more about a specific calculation or data source, please contact us at:

support@localnichepro.com