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Tell me everything about entering the laser tattoo removal business in Denver, Colorado: total market opportunity or size, competition and their pricing models, and barriers to entry such as regulatory hurdles.
Hi! Thanks for asking Wonder to conduct a deep dive into the laser tattoo removal market in Denver, Colorado.
The short answer is there are 21 laser tattoo removal companies in Denver, generally pricing their services per session based on tattoo size. While it appears saturated, there are areas with no current businesses operating and a robust forecast for market size potential and growth. Regulation in Colorado is fairly relaxed, with only a medical professional required to generally "supervise" the business, not on-premise. Below you will find a deep dive into my findings.
NUMBER OF COMPETITORS
According to Yelp listings, there are 21 laser tattoo removal studios already existing in the Denver metro area (I removed 3 studios that were in Boulder and Louisville). Looking at the geographic distribution, they are fairly well distributed throughout the city, with an obvious concentration on the heart of the city. There appears to be a void of studios in some outlying areas, however: Aurora, Littleton, Golden and Morrison are all areas lacking any laser removal studios (well, Littleton does have one, but for such a populated suburb, this is still a 'void'). Aurora and the whole of eastern/northeastern Denver metro is the most notable gap.
PRICING MODEL(S)
In order to check pricing models, I examined a few of the best-rated studios according to Denver A-List from CityVoter. #1 rated Rethink the Ink starts at a flat fee of $49 per session, with packages and discounts available upon consultation. They also offer a price match guarantee from any local competitor. Discounts are available for new customers (BOGOF) and military.
#2 rated Ink-Be-Gone is far more transparent about their pricing. Larger tattoos cost $50 per square inch for the first 4, tattoos between 5-10 square inches are a flat rate of $250, and larger ones are custom-priced. Smaller tattoos run $200 for eyebrows, $50 for tear drop removal, $50 for small dots on the hand and $100 for 3"x2" name tattoos. All costs are per session. Service personnel get a 10% discount.
#3 What Were You Inking is a little less revealing about their prices, simply stating that typically around 5-10 sessions are needed, with sessions "as low as $150 per session". Tattoos are classified as small, medium and large for the purpose of pricing. They also offer a guarantee of if the tattoo is still visible after the number of treatments quoted, they will continue the removal process for free.
#4 Chroma Collective simply states that sessions run from $99 to $250, depending on the size of the tattoo, and usually 5-10 sessions are needed. They also are a tattoo studio, so they can offer cover-ups and alterations.
As you can see, the pricing model is all done 'per session', with a full price being available after initial, free consultation. Cost per session is based on the size of the tattoo, with some studios starting as low as $49, going up to $250+ for larger tattoos.
REGULATORY LANDSCAPE
Aside from usual business regulations, Colorado has specific statutes that govern laser tattoo removal businesses. FDA regulations rule that that the "alteration of human tissue by the use of a Class IIIb or IV laser is the practice of medicine. The only person who can practice medicine is a licensed physician."
Colorado law states that a laser removal clinic must be supervised by a practicing physician, who lives in the same community as the business. The physician does not have to be on site during its use. Additionally, a non-medical professional can own the business. Persons operating the laser must have a cosmetology or aesthetician license.
While not mandatory, it is also recommended laser removal studios have malpractice insurance. Most physicians supervising a studio would likely require this anyway, to protect themselves and their licensing.
TOTAL MARKET SIZE
Finding a market size for the Denver metro area proved difficult. As you may imagine, there are no freely available pre-compiled market research reports on this. We could approach this calculation either top-down or bottom-up.
*Bottom-up
Apparently 45 million Americans have tattoos, or 18.1% of the adult population. We also know that 36% of 18-25 year olds and 40% of 26-40 year olds have tattoos. As many as 17% of people with tattoos seek to have them removed.
18-25: 56,478 x 36% =20,332
26-40: 168,839 x 40% = 67,536
40+: 230,636 x 18.1% = 41,745
TOTAL: 129,613
If around 17% of these seek laser tattoo removal, this is a market size of 22,034, or more if the number of people seeking removal grows. Technavio predicts the market globally to grow 15.85% until 2021, and we also know that Denver's population is growing (1.9% annually, currently).
Finding a market value in dollars is a little tricky, given the variable nature of the cost of tattoo removal. Additionally, it's hard to say how many of those 22,034 seek tattoo removal every year. As a ballpark, Motley Fool uses a 'conservative' estimate of $1,000 per removal, which would be $22,034,000 potential market size.
Quanta builds a revenue model a little different, using around $1,200-1,600 per treatment. Assuming one technician could perform 3 treatments an hour, that would $600 per hour. Since lasers are so expensive, we are going to estimate that each company only has one laser. If they are open 8 hours per day, 6 days a week, this is $28,800. Times this by 52 weeks a year, equals $1.5 million revenue potential for one studio. Obviously, not every appointment slot is going to filled, nor are all studios open this many hours. However, we're going for a ballpark estimate here.
CONCLUSION
To wrap it up, a laser tattoo removal studio in Denver could possibly earn $1.5 million of the around $22 million market potential. With both the laser tattoo removal industry and the population of Denver growing, there is good market potential for a well-placed laser removal business. While there are already 21 competitors in the whole Denver metro area, there are fairly large geographic areas with one or no current tattoo removal businesses.
I hope this is helpful. Please feel free to ask Wonder if you have any more questions!