The business location of your establishment is where customers evaluate and ultimately receive your product or service. While this may not matter much for people who work virtually, or who run a business that drop-ships from a third party, location is critical for restaurants, retailers, and many service businesses.
Ironically, while "place" is often the most permanent of the four P's, it's also often the most overlooked, which is why finding the right location for your business can make a huge impact on its performance.
How to Choose the Right Location for Your Business
Finding a place for your business is about more than just choosing a building. You also need to consider the location. Perhaps opening your business in your home town, or even your part of town is a given, but you consider the big picture. Here
- State: Income taxes and sales taxes vary greatly from state to state, as do regulatory requirements. Is the state you live in friendly to entrepreneurs? To the specific type of business you want to run? Now might be the time to consider a move if it isn't, or possibly to open your business in a nearby state if you live near a state line.
- City: Rent and other costs, availability of labor, taxes, regulations, and government economic incentives can also vary greatly from city to city, even within the same state. Or maybe a small town is the perfect spot for your business. Entrepreneur Magazine publishes an annual list of the Best U.S. Cities for Small Business. Under 30 CEO also has a list of the best cities for young entrepreneurs.
- Part of town: What kind of commute is involved? Is the part of town consistent with the image for your business? Rent varies greatly according to location.
- Location relative to streets, parking, and other businesses: Do you need to be visible and/or easily accessible to pedestrian and automobile traffic? Will being close to businesses that draw a similar clientele help your business? For example, a sporting goods store or health food store might do very well next to a gym.
- Type of location: Do you need office space, retail space, or a warehouse? Retail is generally the most expensive of the three.
12 Factors to Consider in Choosing Your Location
There are many factors to consider in finding the location for your business. While cost is obviously a major consideration, you must also think about these 12 incredibly important factors that'll affect your business.
When you're in the process of finding a location for your business, think about for whom the location will be important. Will the location be a major factor for...
- You: The space for your business has to work for you, or it won't work at all. If a space doesn't feel right, find another place for your business. Remember, you're the one who has to work there every day.
- Your customers: The space also has to work for your customers, or it won't work. No customers = no business.
- Your employees: This issue may not be as critical at first, especially if you don't have any employees yet. But the ability to attract and keep good employees will be affected by your location.
- Strategic partners: While this may not seem like a big issue, the reality is that strategic partnerships happen more easily when the partners are local to each other. Why do you think that certain areas become hubs for certain types of businesses, such as Silicon Valley for the tech industry?
- Potential investors or buyers: You may not even be thinking about that yet, but potential investors looking at the long-term value of the business will consider location as part of their financing determination.
- Cost: Most obviously, can you afford it? Also, consider whether your customers and employees can afford it. For example, is there free parking or is it expensive? Will higher rent cause you to charge higher prices to your customers? That's not necessarily a bad thing, but it is a factor to consider. What about taxes? Income taxes and sales taxes vary greatly from state to state, county to county, and even between municipalities. The cost can also be impacted by whether or not you buy or rent the property
- Convenience: Is it easy to find? Is parking close by? Consider your clients and customers. If you're dealing with pregnant mothers and the elderly, they may have a different concept of "convenient."
- Safety: This is an increasingly important issue for both customers and employees. Is the parking close by and well-lit? Is there security on the premises?
- Prestige: Would a downtown address add credibility? Will wealthy clients favor a business in their own neighborhood? Some places even provide virtual offices with prestigious addresses, such as Beverly Hills, Silicon Valley, or Manhattan.
- Traffic: Retailers and restaurants love it, office workers don't.
- Facility requirements: Do you have any special needs, such as high power consumption or specialized wiring? Do you need meeting space, but only occasionally? You might consider a shared office suite (often called executive suites) in that case.
- Zoning: Many cities have strict zoning requirements that limit the types of businesses that can operate in a space. Make sure your business is even allowed there before you sign the lease!
As you can see, a fully informed decision involves a fairly complex matrix of issues. Determine your priorities, keep an open mind about your options, and do your research to make one of the most important decisions you'll make for your business.