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How to Choose a Business Location

Tillie Demetriou
5 Oct 2022

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, if your business location isn't well-chosen, all of that work could be for nothing.

Where you start your business affects your earning potential, market impact, operating expenses, and much more. Similarly, your location can restrict how you trade and even jeopardize 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.

What is a Business Location Strategy?

A business location strategy is a plan that takes into account the factors that will affect where you start and grow your business. This can be as simple as knowing which city or country you want to do business in, or it could be a detailed analysis of the specific street, neighborhood, or building that would be most advantageous for your company.

Let's say you're opening a boutique and you want to find the ideal business location. You might want to be in a high-traffic area with a lot of foot traffic and plenty of other retail businesses nearby. However, you also need to consider the cost of real estate, state and local taxes, local zoning ordinances, parking, and other operating expenses in that location.

Alternatively, if you're a small business owner who works remotely, your ideal business location might be a small town with a low cost of living so you can keep your overhead expenses down.

Benefits of Picking The Right Business Location

There are many advantages to choosing an advantageous business location. Here are some of the key benefits:

Increased Earning Potential

A well-chosen business location can directly impact your bottom line by increasing foot traffic, making it easier to attract customers, and improve your visibility.

Reduced Operating Expenses

A strategic business location can also help you reduce your operating expenses, such as by being in a cheaper rent district or having access to more affordable labor.

Improved Market Impact

The right business location can also help you make a bigger impact in your target market. For example, if you're trying to reach a local market, it's important to choose a location that's convenient for your target demographic.

Greater Efficiency

A strategic business location can also make your business operations more efficient. For example, if you're located near suppliers or customers, you'll be able to cut down on transportation costs and time.

Essentially, finding the right business location means being in the right place at the right time to maximize your chances for success.

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8 business location factors to consider

When trying to find the right business location, it's important to consider all the factors that will affect your company. These include:

1. Geographic location

Firstly, your business location needs to be 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 for everyday purchases[1]. This trend remains true for urban and rural consumers, although rural shoppers will travel longer distances for specific goods.

Suffice to say, the right location for your business will be inside this 20-minute commuter window for as much of your market as possible. But how do you calculate this? 

As you browse business 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 transportation 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 still run a convenience store in an old restaurant, it’s best to find a space with a design based on a retailer's needs. Alternatively, you can renovate a building to suit your operational needs, but this is expensive and not worth it unless you will make enough savings on other costs to counteract this expenditure. 

Some core aspects to look at include:

  • Kitchen: If you will prepare meals, does the kitchen have enough space to hold your appliances, ingredients, and team?

  • Floorplan: Does the building layout match your operational style? Does it have enough office and staff rooms, facilities, and the necessary utility access?

  • 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 organize and navigate this space when full?

Remember: If you plan to host clients or customers in your business location, first impressions matter. Consider the state of the building and whether it reflects well on your business.

3. Rent cost

Once you narrow down your selection of business 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[2]. For example, if you generate $20,000 revenue each month, your rent should ideally be $2,000 or less.

Rent will likely be your largest bill each month, so getting a good deal on rent will be a decisive factor in your business’s success. 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?

TIP: If you want to save on rent, consider looking for a space that is close to capacity. Businesses that are moving or downsizing may be willing to give you a great deal on their old space.

4.State and Local Taxes

When looking at business locations, don’t forget to factor in state and local taxes. Depending on the area, these taxes can have a significant impact on your bottom line.

Some states have no income tax, while others have high sales tax rates. Make sure to research the tax implications of each location before making your final decision.

Some ways to reduce your tax burden include:

  • Choosing a location in a enterprise zone

  • Hiring employees who live in the enterprise zone

  • Investing in energy-saving equipment

5. Security

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

As you compare options for your business location, 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 to make it suitably safe. 

Likewise, evaluate the overall safety of the area. Some neighbourhoods have higher crime rates than others. If your business location falls into 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.

6. Competition

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

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. So having nearby businesses could actually bring more foot traffic to your store.

Think about the typical shopping center. 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? 

This might not be true for all kinds of business. For instance, an area's demand for convenience stores will not necessarily rise with increased competition. So consider both positive and negative elements of competition when assessing a possible business location.

7. Growth potential

Look at your one-year and five-year goals. Do you plan to grow your business or even open more business 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 or build a bustling takeaway service. 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.

Growth can be helped or hindered by all kinds of factors besides the building itself. The size of the town or city may influence the potential to open more branches that expand your customer base, while the ability to open and market online services can make your base city irrelevant to growth.

8. Accessibility

How easily can customers visit your business? The more accessible it is, the more appealing it can be to shoppers. Customers hate to struggle to reach the business, which can extend the travel time unnecessarily and make the experience stressful.

Some common accessibility concerns include:

  • Car park and street parking availability

  • Distance to major highways

  • Distance to public transportation

  • Convenient parking for delivery trucks

Knowing there’s a nearby car park or bus stop puts potential customers at ease as they don’t have to figure out how they will reach the business. Without this convenience, they may choose to go to an easier-to-reach competitor.

Final Thoughts

So there you have it. These are eight factors to consider when choosing a business location. By taking the time to assess each of these elements, you can make an informed decision about the best place to set up shop.

Don't forget that the perfect business location does not exist. There will always be trade-offs, so weigh your options and choose the location that is best for your specific business.

Don’t forget about your point of sale

The latest POS systems save businesses time and money by helping staff and management do more tasks in less time, allowing them to focus on customer service and making sales.

Epos Now solutions bring the many different strands of trade under one simple, effective system. Users can modify the flexible hardware and software options to create bespoke setups that work around the needs of the business.

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