31.3.2021

Factors to Consider When Choosing a Business Location

Written by Austin Chegini

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Starting a business takes a ton of work. You will likely spend months on tasks like writing a business plan, securing financing, and getting your legal documents in order. However, one of the most important tasks for a business owner is choosing the right location. 

Where you start your business will affect your earning potential, market impact, operating expenses, and more. Likewise, your location can also restrict how you do business and even jeopardise your business altogether if it prevents you from generating enough revenue. 

Let’s look at what to consider when choosing a business location and how to find the best place to set up shop. 

Eight factors to consider when choosing a business location

1. Geographic location

To start, you need to start your business in an area that positions you in close proximity to your target market. According to Access Development, 93% of consumers travel 20 minutes or less to make their everyday purchases. This trend is similar between urban and rural consumers, although rural shoppers will travel somewhat greater distances for certain goods. 

Suffice it to say, you need to stay within this 20-minute window when choosing a location. But how do you calculate this distance? 

As you browse locations, refer to your business plan and visit your market analysis section. Based on your findings, choose a part of town that holds your largest consumer base. Set this as your target hub, and use a tool like Google Maps to ensure all prospective commercial buildings are within 20 minutes of this market. 

Remember: Urban shoppers will likely walk or take public transit to reach your business. Make sure to measure by this standard when planning your 20-minute window.

2. Operational needs

Next, you will want to look for an office or building that matches your business model. While you can certainly run a store in an old restaurant, it is best to find a retail space for a retail business. Similarly, you can always renovate a building to suit your operational needs, but this is expensive and not worth it unless necessary. 

Some core aspects to look at include:

  • Kitchen: If you will prepare meals, does the kitchen have enough space to hold your appliances and team?
  • Floorplan: Does the building layout match your operational style? Does it have enough offices, bathrooms, or other items you need?
  • Size: Will you have enough space to display your products or seat guests?
  • Storage: How much inventory will you keep in the stockroom? Can you easily organise and navigate this space when full?

3. Rent cost

Once you narrow down your selection of locations, you will want to compare costs. If buildings are located near one another, your lease will likely be near the same price. 

According to Hartman Income REIT, most businesses should pay 10% or less of gross income for rent. For example, if you generate $20,000 revenue each month, your rent should ideally be $2,000 or less. 

You will need to compare value when factoring in rent costs. Ask yourself these questions to see if the rent price is worth it:

  • Is parking included? 
  • Are any utilities included? 
  • Does the property have any energy-saving features?
  • Will one space cost more or less to heat and cool than another?

4. Security

Some businesses need more protection than others. A jewelry store might need a large safe and high-tech alarm system, while a small restaurant may simply need a sturdy lock. 

As you compare locations, see what existing security features are in place. Furthermore, ask the property owner if you can install security cameras, add security gates, or upgrade the property in any other way. 

Likewise, evaluate the overall safety of the area. Some neighborhoods have higher crime rates than others. If doing business in these areas, make sure you take the proper precautions to prevent theft or property damage. And if you have a type of business that is prone to theft, you may want to consider another area.

5. Competition

Should you open your store near a competitor? Common sense might say no, but you actually can benefit from selling near similar businesses. 

Did you know that the average CVS store is less than a mile away from a Walgreens? Likewise, did you know that the average Lowe’s is less than four miles away from a Home Depot? 

Why is this?

Consumers like having choices. They also like convenience when they shop. This is why malls and shopping centers are so popular among retailers. 

Think about the typical outlet mall. There are dozens of retailers selling similar products, yet the majority are profitable. Why is this? 

Generally, these stores benefit from the large consumer demand in the area. Shoppers know the location has plenty of choices, so all stores benefit from the high foot traffic. If these stores were alone on the side of the road, how many consumers would visit for a t-shirt or pair of jeans? 

So, when you consider where to open your business, make sure that the area has a healthy level of competition so you can benefit from the consumer demand. 

6. Growth potential

Look at your one-year and five-year goals. Do you plan to grow your business or even open more locations? 

You want to choose a business location that allows you to expand your service as needed. A restaurant may eventually want to offer outdoor dining. Similarly, a store may want to offer a more diverse inventory. 

If a sudden spike in demand will necessitate moving locations, it might be a good idea to choose the large location first. While this may be more expensive than choosing a small location, it can help you save money in the long run. 

7. Accessibility

How easily can customers visit your business? The more accessible it is, the more appealing it can be to shoppers. 

Some common accessibility concerns include:

  • Parking lot size
  • Distance to major highways
  • Distance to public transportation
  • Convenient parking for delivery trucks

8. Utilities and infrastructure

You want to choose a location that has the technology and amenities you need to do business. Opting for the wrong building could lead to discomfort, poor service, and even disruptions. 

Consider these important factors:

  • Utilities: Can you get reliable electricity, internet, phone, and other services? 
  • HVAC: Does the heating and cooling system work well? 
  • Power: Can you run all your appliances without tripping the circuit breaker? 

Don’t forget about your point of sale

Any new small business will need hardware and software to manage daily operations. A point of sale system, or POS, is a must-have device for operating a retail or hospitality business. 

The type of system you choose can affect your business. An old system can slow you down, while a new system can help you do business better.

With a modern POS, you can:

  • Accept cash, card, and contactless payments
  • Manage inventory and see real-time stock levels
  • Sell online via e-commerce or online ordering platforms
  • Track staff work hours and run payroll
  • Access your system from any internet-connected device

Whether you need a desktop, tablet, or handheld device, Epos Now has it all. Contact us today to learn about our POS solutions.

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