Every seasoned entrepreneur will tell you that a good location is one of the main factors in making any business a success.
Most of the time, the location can even be a reflection of the business itself. This makes it very important to exercise due diligence when choosing where to establish your business. Just because a building looks eye-catching or an office listing is very cheap does not mean that you should automatically go for it.
While different types of businesses have different location requirements, there are some universal factors that you can consider when making your selection. Below are some considerations that can guide you in your search.
1. Demographics
When choosing a location, the first step is to identify your target customers then find out where they are located. This makes it easier to attract foot traffic and lower your marketing costs.
Even if you have the most innovative or creative business idea, if you open it in a location where very few people need or want what you’re offering, then the chance at succeeding will be very slim. For instance, it wouldn’t be wise to open a school supplies store near a retirement village where there are no school-age kids around. It would be more logical to find a location near schools and residential areas.
When studying a location, ask around and do your research about what type of people live or work nearby. It will also be useful to know the age, gender, and the average income of the people in the area. This will help you determine whether the people in that location could afford your product or service.
You wouldn’t want to start a luxury product business in a low-income community nor would you open a discount store in a high-end community.
2. Accessibility and Security
Whatever the nature of your business is, these are two factors that should not be overlooked. Before signing a lease or buying a commercial property, you should ask the following questions:
a. Is the location easy for customers to find?
As a customer, it can be very frustrating when you can’t find the shop or office you need. At the same time, it can also be very time-consuming for businesses to keep answering inquiries on how customers can get to them.
You have to consider this issue from the very start and choose a location that your customers will easily find whether through Google maps or known location markers in the area.
b. Is the location convenient for customers?
Another factor that you have to check is whether the location is convenient and if it is easy to get to. If your office is located on the upper floors, is there a working elevator in the building?
You wouldn’t want your clients to climb five flights of stairs just to get to you. If you’re opening a restaurant, is there ample parking area for guests? Always put yourself in the shoes of your customers and think about their convenience.
c. Is the location secure for employees and customers?
Security is certainly a critical factor in choosing a business location. Your business should be in an area where your employees and customers will have peace of mind when going to your establishment.
You also have to make sure that your business investments will be secure as well.
3. Building Infrastructure
The condition of the building or physical structure where you are establishing your business should also be a primary consideration.
There are times when commercial spaces are priced so cheaply because you need to spend a lot of money to restore or renovate the space. While it is quite common to spend on interior fixtures and renovations, avoid buildings with structural issues as this will not only be costly but is also unsafe.
You have to check whether the building has limitations or restrictions that could cause potential problems in the future. Are there zoning regulations in that area?
Depending on the nature of your business, you should check whether you can legally operate in certain locations. This could affect your business operations if you are unaware of such rules.
Another important consideration is whether the building observes Minimum Energy Efficiency Standards. Check with the landlord whether the building’s Energy Performance Certificate or EPC rating passed minimum standards because, in the UK, buildings must be energy efficient or improve their efficiency in order to be legally rentable.
In addition, operating in a building that is energy efficient can significantly lower your utility bills, which is beneficial to your business.
4. Functional Space
While having a sleek-looking office or a beautifully designed shop is all great, make sure that you prioritise function over form to improve workplace productivity. In choosing a business location, make sure that the space available can address all of your business requirements.
If a space is too small, this can be uncomfortable not only for you and your employees but also to your potential customers. This can also hinder your daily operations and affect workplace productivity.
On the other hand, a space that is too large for what you need is not a smart way to use your resources. Larger spaces mean higher rental fees as well as higher utility bills.
You have to visualise how you conduct your daily operations to determine the appropriate size you need. Here are some questions you have to ask to help you out:
- How many employees do you have? Will they fit in the space?
- Do you have large machines and fixtures that need to fit in the space?
- If you are planning to expand in the near future and add more employees or machines, can the current space accommodate this?
- If you are receiving customers, is there a waiting area where they can comfortably stand by?
Aside from just the size of the space, you also have to consider the specific requirements of your business. For example, if you have a bicycle repair shop, you have to choose a space that is on ground level with a garage-like environment so that customers can easily take their bikes inside. It will be impractical to get a space on an upper level of a building as it will be inconvenient for customers to haul their bicycles up to your level.
If you are opening a digital marketing agency, choosing an office in a downtown business district where there is access to high-speed internet and other relevant facilities is a sound decision.
It wouldn’t make sense to open such a company in the middle of a shopping district where spaces are mostly designed to serve as brick and mortar stores.
5. Competition
Is there already an existing business offering the same products or service in your desired location? How established is this business in that area?
Opening a business in an area where you already have a direct competitor can be challenging especially if you are a service-oriented company. This means you will be up against an older company with loyal customers and you have to work double-time to attract these customers away from this company.
Unless you have a remarkable competitive edge over the older business, this scenario can add unnecessary pressure on your new venture.
There are certain businesses, however, that benefit from being in close proximity to their competitors. Clothing stores, restaurants, food stores, and other retail shops often cluster together as this can attract more business. This is called clustering. Clusters promote both competition and cooperation, however, clustering is usually only effective if the companies have unique things to offer.
A good example is a shopping mall food court where there are different food offerings at every stall but it is rare to find two Chinese eateries or two fish and chips shops in the same food court.
The goal of clustering is to offer consumers a choice but offering the exact same product or service could be problematic as this can cause a price war which will not be advantageous to either business.
6. Complimentary Businesses
The clustering strategy can be advantageous if you choose to be around complementary businesses. The businesses situated around your location can greatly affect your business. This is the reason why you should assess the different establishments surrounding your desired location.
Ideally, the type of business must benefit from other stores. For example, if you are opening a beauty salon, having it in a shopping area that mothers usually frequent would be advantageous.
On the contrary, opening a beauty salon in an area filled with gadget shops, car accessories shops, and other stores targeted for men may not help bring in customers.
If you are opening in a brand-new location, it will also be useful to check what other stores will open around you. You wouldn’t want to open a hip gastropub, only to find out that a funeral service company is opening right next door.
7. Location History
If you are looking at a commercial space that is not brand-new, make the extra effort to research the previous tenants of the space. If possible, you can talk to the previous tenants or just ask the neighbouring establishments.
What is the reason why space is vacant? Was there a problem with the location? Does the location attract enough foot traffic? Are there any hidden issues that you should know about?
It is, of course, possible that it is vacant because of harmless reasons. Maybe the previous tenants needed to expand their business or the owners had to relocate. However, it is better to be sure than to be sorry so doing this extra step will not hurt you.
Location, location, location!
Choosing the right location is an important decision that can make or break your business. It can be challenging and frustrating to shortlist ideal venues that will fulfil all your business requirements and at the same time, fit your budget.
Taking the above factors into consideration can hopefully help make the process much more bearable and stress-free.
