Choosing a business Location, Community cannot long feed on itself, it can only flourish with the coming of others ‘Howard Thurman’
Businesses that perform their function where a customer is located (e.g.: gardeners, plumbers, painters, etc…), as well as operations that do not require direct face-to-face contact with clients (website-based businesses, writing, virtual assistants, online tasking, etc…), usually only require a small workplace (such as a spare bedroom or a garage) from which administrative and preparatory operations can take place or where materials are stored. The money saved if these types of businesses don’t pay rent can then be passed on to customers.
For many entrepreneurs, however, being located in a convenient, well-travelled, public place that customers can easily travel to is vital to business survival. This is because potential customers will usually forgo a business if it’s too far away or they’re forced to hunt for it. Equally as important is that whether a business is located in the middle of a city, the top right-hand corner of a phonebook, or an Internet web page, a good location should always meet two important criteria:
1. it should be visible and accessible and,
2. it should require minimum decision-making on the part of the customer.
Questions to Ask When Choosing a Business Location
The first step in choosing a good business location is to identify the wants and needs of the desired customer base. A location must then be found that meets these needs. For example, most businesses dependent on customer visits should be easily accessible by foot, public transportation, and cars.
Questions than can help guide an entrepreneur through the criteria of a good location include:
- Is the local economy growing?
- Are building and construction on the increase?
- Will the reputation or layout of the town or neighbourhood help or hinder trade?
- Will customers be driving their cars or walking?
Most customers value ample parking space, proximity to public transportation routes, or sites that promote heavy pedestrian ‘walk-by’ traffic. Additionally, it should be determined if nearby businesses will draw or repel the type of customer the business is seeking. Up-market restaurants, for example, have been known to do poorly when situated near churches, schools, graveyards, factories, or businesses that produce odors or noise. Likewise, retail operations may find it tough going in front of fire hydrants or bus stops because these obstacles can hinder deliveries. The proximity of competitors is another concern. Can your proposed business flourish next to a larger, flashier, and more cost-efficient operation? If not, perhaps it should be situated where it has a greater chance of succeeding. Additional considerations for choosing a good business location include:
− The Local Job Market. If your business will rely on the employment of others, consider what type of skills you’ll need (as well as the number of employees you’ll need) and find out if there are people that fit these requirements in your area. A location that has minimally qualified job applicants usually means that more money may have to be offered to attract suitable staff from far away. Remember, it’s not the fault of the town or area in which you’ve located if you can’t find skilled employees.
− Home. Apart from possible tax advantages, operating out of a home is a good way to conserve cash or allow for a bit of breathing space before a costlier, more expansive premise is acquired. Note, however, that planning or zoning permission may restrict customers from traveling to a house or apartment because many neighbourhoods prohibit customer traffic in residential areas. Likewise, many neighbourhoods ban the displaying of signs, which may be the only way customers can find your business. Check local laws before turning a spare bedroom into a work place (which zoning restrictions may prohibit even if no customers will be visiting).
− A Local Area may be more advantageous in contrast to setting up shop in another town or city. This is because community contacts are vital. Knowing the people in a local area helps form the nucleus of a customer base and may provide an additional edge with a local bank. Whether or not you set up shop in a familiar or unfamiliar area, however, consider joining the local Chamber of Commerce, a nearby Visitor and Convention Bureau, a regional business association, a city council committee, or some other local business organization. Several of the business owners consulted in the writing of this book stressed that the key to their success lay in networking with these types of organizations.
− City Centers offer a mixed bag of advantages and disadvantages. Advantages include possible inexpensive rents or leases (perhaps due to the area being run-down), renovation possibilities (which could result in tax breaks), and accessibility to nearby businesses and workers. Disadvantages include lack of parking, possible shortened consumer shopping hours (most people tend to leave city centres after their workday has ended), and building itself, which may require renovation work.
− Shopping Centers and Malls offer space that is usually rented (or leased) per square meter or square foot. Prices can range from the affordable (a few thousand dollars per year) to the very expensive (several hundred thousand dollars per year). Advantages include plenty of prearranged parking space, lots of walk-by trade, and a location close to businesses that draw in like-minded customers (for example, clothing stores often do better when grouped with similar shops). The disadvantages of operating in a shopping mall or shopping center include unseen expenses hidden in lease agreements (e.g.: heating, air-conditioning and ventilation costs, annual real estate tax assessments, monthly maintenance fees, and merchants association dues that pay for shopping center promotion and event costs). Therefore, before moving into a shopping center or mall, read and understand the fine print on the lease agreement (see Leases, below). Further worries include the fact that in the USA, shopping malls have been closing at an alarming rate due to the alarming number of retail bankruptcies and department store downsizing. Green Street Advisors 2017 Mall Outlook estimates that more than 300 malls in the USA will close over the next few years. That being said, some of these malls are now being repurposed and subdivided into thriving areas for smaller businesses. (Gustafson, 2017) The message: do proper research before investing in what could be a volatile location.
− Stand-Alone Premises (defined as a free standing building that can be owned or leased) are sometimes less expensive than shopping center rents when it comes to monthly payments. A stand-alone structure may also provide the additional advantage of allowing an entrepreneur to purchase the property rather than lease it. For example, five or ten years of leased space in a shopping mall may total half a million dollars, which will never be seen again. Yet that same amount of money invested in a mortgaged building may be returned in the future – along with a profit – when the building is sold. As always, make sure a stand-alone structure has parking availability, is easy to find, and is close to customers. Additional concerns include checking to ensure that the structure is sound and that the roof doesn’t leak – as well as determining if there is ample electricity and wiring and adequate communication availability
− Industrial Parks are ideal locations for warehouses or manufacturing centers that need access to convenient transportation routes. Because industrial parks consist of many businesses placed together, they can also provide a leg-up on business networking. Some governments even subsidize the costs of moving to, and working in, a local industrial park. Check local industrial real estate offices for details.
− Business Incubators are buildings that house several separate firms under one roof, thereby allowing expenses such as utilities, maintenance, receptionist duties and other services to be shared by several companies. Because local governments or business promotion agencies often subsidize business incubators, interested entrepreneurs should consult a local business real estate broker for more information.