The Business Concentration Index: Market Saturation by Industry (2022)

What if you could see that health care represents 12.4% of all businesses in California but only 9.2% in Wyoming? This Business Concentration Index reveals exactly how saturated each industry is by location—and how you can position yourself in markets with the right concentration level for your competitive strategy.

The data shows dramatic differences: health care and social assistance (NAICS 62) ranges from 127,019 establishments (12.4% of total) in California to just 2,130 establishments (9.2% of total) in Wyoming. This isn’t just about geography—it’s about understanding market saturation, competition intensity, and location opportunities that directly impact your market entry strategy.

See business concentration indices to understand market saturation by industry. This analysis reveals competition intensity th

This analysis examines County Business Patterns (CBP) data from the U.S. Census Bureau to calculate business concentration indices—measures of how concentrated or saturated an industry is in each location. You’ll discover which industries dominate each market, how saturation levels vary by geography, and where opportunities exist for market entry.

What You’ll Discover:

• State rankings by industry concentration (establishment share, employment share)
• Industry-specific saturation patterns revealing market structure
• Location-specific concentration levels impacting market entry decisions
• Market saturation indicators by industry and location
• Opportunity identification (underserved vs. oversaturated markets)

Why This Matters: Understanding business concentration helps you assess market saturation, evaluate competition intensity, and make strategic location decisions. Markets with high concentration indicate industry dominance but also potential oversaturation, while low concentration may indicate underserved opportunity.

Industry Concentration Varies Dramatically by Location

The Numbers: Health care represents 12.8% of all businesses in Pennsylvania but only 9.2% in Wyoming—a 39% difference. This means Pennsylvania has nearly 40% more health care concentration relative to its total business base.

So What? High-concentration states like Pennsylvania (12.8%) and California (12.4%) offer strong industry clusters with customer density, networking opportunities, and talent pools. However, high concentration also means more competition. Low-concentration states may offer less competition but require careful market validation.

How to Use This: If you’re in health care, high-concentration markets offer proven demand and industry clustering advantages. Low-concentration markets may offer underserved opportunities but need careful market size assessment.

Concentration Reveals Market Saturation Levels

The Numbers: States like Pennsylvania (12.8%), Michigan (12.5%), and New Jersey (12.4%) have the highest health care concentration, indicating strong industry presence and potential market saturation.

So What? High concentration signals where your industry thrives and may be approaching saturation. Operating in high-concentration markets provides access to industry clusters but also intense competition. Understanding saturation helps you choose markets that match your competitive capacity.

How to Use This: Target markets where your industry has 10-12% concentration for proven demand and industry clustering. Consider markets with 5-8% concentration for balanced opportunity and competition.

Location Strategy Must Account for Saturation

The Numbers: The difference between the highest-concentration state (Pennsylvania, 12.8%) and lower-concentration states (Wyoming, 9.2%) is 39%—meaning Pennsylvania has over a third more health care concentration.

So What? Concentration directly impacts your competitive position. High-concentration markets offer industry clustering benefits but also more competition. Your location choice should match your competitive capacity and growth stage.

How to Use This: For established businesses with competitive advantages, high-concentration markets offer proven demand. For new businesses, moderate-concentration markets (8-10%) often offer the best balance of opportunity and competition.

Red Flags

• Extremely High Concentration (20%+): May indicate over-reliance on single industry, making market vulnerable to sector downturns
• Rapid Concentration Increases: Markets with rapidly increasing concentration may be approaching saturation
• Single-Industry Dominance: Markets where one industry represents 30%+ of businesses may lack economic diversity

Green Lights

• Moderate-to-High Concentration (10-15%): Balanced markets with strong industry presence and proven demand
• Diverse Industry Distribution: Markets with no single industry representing >20% offer stability and multiple opportunity sources
• Growing Concentration with Total Growth: Markets where industry concentration is increasing alongside total business growth signal expanding opportunity

How to Use This Data

Follow this step-by-step process to calculate business concentration indices and make data-driven location decisions:

Step 1: Identify Your Industry and NAICS Code

For Industry-Specific Analysis: Determine your NAICS code. This allows you to filter CBP data to see exact concentration levels for your industry.

Action: Look up your NAICS code at census.gov/naics.

Step 2: Calculate Concentration by Geography

Compare concentration levels across your candidate locations:

• State-level: Get broad concentration comparison
• County-level: Identify specific markets within states with varying concentration
• Metro-level: Analyze metropolitan areas for urban concentration patterns

Action: Create a spreadsheet with your top 10 candidate locations. Calculate concentration (Industry Establishments ÷ Total Establishments × 100) for each. Rank by concentration level.

Step 3: Assess Market Saturation

Evaluate what concentration means for your industry:

• High Concentration (12%+): Strong industry presence, customer density, but more competition
• Moderate Concentration (8-12%): Healthy representation, balanced competition, proven demand
• Low Concentration (<8%): Limited presence, potentially underserved opportunity or limited market size

Action: For each candidate location, assess whether the concentration level matches your competitive strategy and growth stage.

Step 4: Compare Concentration to Total Market Size

High concentration doesn’t always mean oversaturation. Consider both concentration and total market size.

Action: Create a matrix scoring each location on concentration (industry presence) and total market size (opportunity). Rank by your strategic priorities.

Step 5: Make Your Location Decision

Combine concentration analysis with other factors to choose your location.

Action: Create a decision matrix scoring each location on: concentration (30%), total market size (30%), business climate (20%), and personal fit (20%).

Common Use Cases

Scenario 1: Starting a New Business → Focus on markets with moderate concentration (8-10%). These markets offer proven demand without extreme competition.

Scenario 2: Expanding to New Markets → Compare concentration across candidate locations. Target markets with 10-12% concentration for industry clustering advantages.

Scenario 3: Seeking Underserved Markets → Consider markets with low concentration (<5%) that may offer opportunity, but carefully verify market size and customer base.

Questions to Ask Yourself

• What matters more: industry clustering (high concentration) or less competition (low concentration)?
• Can I compete effectively in a high-concentration market, or do I need lower competition?
• Does my business model benefit from industry clustering and networking?
• Am I entering an established market or creating new demand?

Action Items Checklist

• Identify your NAICS code and calculate concentration for your industry in top 10 candidate states
• Analyze county-level concentration for specific markets within target states
• Assess market saturation levels (high/moderate/low concentration) for each location
• Compare concentration to total market size for each candidate location
• Research business climate and policies in candidate markets
• Verify market size and customer base for low-concentration candidate markets
• Consult with Business Initiative for location strategy guidance

Industry-Specific Recommendations

Health Care (NAICS 62): Target markets with 10-12% concentration. Health care benefits from industry clustering for talent and customer density while avoiding extreme saturation.

Professional Services (NAICS 54): Focus on markets with 10-15% concentration. Professional services benefit from business density for B2B opportunities.

Retail Trade (NAICS 44-45): Look for markets with 8-12% concentration combined with high population density. Retail needs customer density, but too much concentration can hurt margins.

Accommodation and Food Services (NAICS 72): Target markets with 7-10% concentration in areas with tourism or high employment. Restaurant success depends on foot traffic, not just concentration.

Common Mistakes to Avoid

Mistake 1: Ignoring County-Level Data Focusing only on state-level concentration misses critical local market differences. Always analyze your specific county.

Mistake 2: Choosing Based Solely on Concentration High concentration doesn’t always mean best opportunity. Consider both concentration (industry presence) and total market size (opportunity).

Mistake 3: Not Considering Multiple Metrics Concentration by establishments may differ from concentration by employment. Analyze both metrics to get complete picture.

Mistake 4: Overlooking Market Size Low-concentration markets may have less competition but also smaller customer bases. Verify total market size before choosing low-concentration markets.

Mistake 5: Ignoring Growth Trends Current concentration shows today’s industry presence, but growth trends show tomorrow’s opportunity.

Optimization Strategies

For Maximum Industry Clustering: Target markets with 12%+ concentration in your industry. These markets offer strong industry presence and clustering advantages.

For Balanced Approach: Focus on markets with 8-12% concentration. You get proven industry presence with manageable competition and expansion opportunity.

For Underserved Opportunities: Consider markets with <5% concentration that may offer opportunity, but carefully verify market size, customer base, and industry demand.

Timing Considerations

Best Time to Enter High-Concentration Markets: When you have capital and competitive advantage ready. High-concentration markets reward quality and differentiation.

Best Time to Enter Growing Markets: Early in the growth cycle. You establish presence before markets become saturated.

When to Reassess: Review concentration data annually when new CBP releases become available. Market positions change.

Resource Recommendations

For Market Research:

• Census Bureau County Business Patterns (official CBP data source)
• NAICS code lookup tools (identify your industry classification)
• State economic development websites (local market insights)

For Location Support:

• Business Initiative location strategy services
• Local chamber of commerce (county-level business information)
• State Secretary of State websites (business registration requirements)

FAQs - Frequently Asked Questions About The Business Concentration Index: Market

In Summary

Our comprehensive exploration of the business concentration index: market saturation by industry (2022) has revealed critical insights into business patterns, market size, and industry distribution that can inform business strategy.

See business concentration indices to understand market saturation by industry. This analysis reveals competition intensity th

By understanding these statistics, you can make data-driven decisions about market entry, competitive analysis, and location strategy.

This analysis reveals important patterns and trends that inform business strategy and help identify opportunities.

Applying the insights from this article can have several practical benefits:

• Strategic Planning: Use this data to inform market analysis and competitive positioning.
• Competitive Analysis: Compare your market position against industry benchmarks.
• Risk Assessment: Understand market size and business density to assess opportunities.

By leveraging the information outlined in this article, businesses can gain a competitive edge and make more informed strategic decisions.

Ready to take action based on this data?

This data can help you make informed decisions about business location, market entry, and strategic planning.

Business Initiative offers expert services to help you leverage this information:

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