Disclosure: This content is reader-supported, which means that if you click on any of our links, we may earn a commission.
One of the most exciting aspects of starting a business is finding the perfect location. But as exciting as it is, it is also a monumentally important decision. As you can see, the location of a business can determine its success.
This guide covers all the factors you need to consider when choosing a business location in detail. We will also guide you through the process of choosing a location step by step. With all this information, it will be hard not to choose the perfect location for your business.
Why your business location is so important
It is important to get the right location from which to run a successful business.
First, your location affects operating costs and revenue. For example, some companies require a certain amount of foot traffic to make money.
Similarly, attracting more customers will choose a location in an area that reflects your company’s brand or image. Which will place your business in an area where your target market is located.
Moreover, the right placement can even help you attract top talent to your business.
Finally, changing locations can be expensive and inconvenient for staff and customers. So you have to do your best to get the area right the first time.
4 factors to consider when choosing a business location
There is a lot more to think about when choosing the right business address than you might have previously thought. Here we outline the long list of factors you need to take into account so you can choose the perfect location for your business.
1. Staffing needs
Of course, you want top talent to come and work in your business. So the first thing to consider is whether the location will appeal to potential employees.
Will it be convenient for the staff? Are there public transport stops nearby? Is there parking for those driving? If you can easily get to your area, it will affect whether a potential employee accepts the job.
What kind of place do people in your industry also like to work in? When you think of modern start-ups, for example, you think of open, collaborative settings in cool spaces, e.g. Converted warehouses in trendy neighborhoods.
Whether or not you need workers with specialized skills can be a factor as well. Certain areas may be known for high concentrations of workers with special skills. And on the other hand, there may be areas of skill gap that you want to avoid.
For example, a LinkedIn survey found that many professionals specialize in economics, politics, and security in Washington DC But there are too few people with sales, manufacturing, and health management.
You should also consider the labor costs associated with an area as they sometimes vary from region to region.
2. Customer’s requirements
Certain types of businesses, such as restaurants and retail, require high foot traffic. Thus, you need to use the place of business to be on a main street.
Overall, it makes sense to be where your target market is spending its time. To give you another example, if you run a B2B business, it would be a good idea to find a place near office complexes and the like. That way, it is convenient for clients to visit you internally and vice versa.
You should also consider the atmosphere of a particular place. Let’s say you hope to run a boutique or creative business. You may want to find something in the local art district.
It is a good idea to study the demographics of an area. Maybe your target market includes new families or millennia or whatever it may be. You may find a place close to where your target market lives, ie. where there will be a greater demand for your products or services.
You also need to consider customer convenience, such as parking and accessibility needs.
Suitability of the site or building
The suitability of a physical location depends on the needs of your business.
Consider what you need to operate. For example, you may need storage space, an office for workers, and a convenient place to meet with customers.
There may also be zone laws in certain areas that prevent you from operating your business type in that location. So you have to do your research.
How easy it is for suppliers to reach your business premises may also be necessary if you are dependent on transportation services.
Another factor to consider is the image of a location. Let’s say you cater to an advanced clientele. In this case, you need a large or luxurious place to suit your business.
Also, consider whether a place has room for expansion. Quite simply, you can demand more space if you expect your business to grow fast.
You should check if there are competitors nearby. You can be happy to offer your alternative to the existing local businesses. Or you may want to establish your customer base elsewhere.
Are there also similar or complementary companies nearby? If your target market visits these companies regularly, they may also stumble across yours as well.
4. Financial issues
Of course, whether you can afford a particular place of business is an important factor. Coveted places are obviously more expensive. You need to find the right balance between affordability and fitness.
Depending on the type of business you intend to run and local regulations, there may be tax benefits when choosing a particular location. Similarly, you can benefit from public incentives if you open up in a particular area.
So it is definitely worth researching local financial rules and talking to other local business owners in similar situations to find out more.
How to choose a business location
As you can see, there are many factors to consider when deciding on a business location. You can (and should) get into that nitty-gritty.
Below are the basic steps that will help you choose the right place for your business.
1. Describe your operational needs
You need to consider the needs of your business to ensure that you have the right features and facilities in place. Otherwise, the company will not be able to live up to its full potential.
There may also be increased costs associated with acquiring any extras you need. For example, you may need to install additional facilities on site if you can not find an affordable property with the facilities already in place.
Your operational needs refer to the tools and resources you need to serve customers, house employees, and turn inputs into outputs. In other words, what you need to turn labor, capital, or commodities into goods or services.
Make a comprehensive list of your requirements. Not all placements have all the features you need, so organize your list in order of importance.
Here are some examples of the features and facilities you may need:
Storage, e.g. High-security storage, cold storage, storage Meeting place for staff and / or clients High-speed Internet An area for break rooms Office space, e.g. Open plan or bellows Reception area Easy access to suppliers Industrial kitchen Multiple bathrooms that can accommodate staff size
All in all, you need to be as specific as possible about your business requirements.
2. Consider the type of company location
With your operational requirements at hand, you can make the most basic decision: what kind of business premises you need. This is a crucial decision as it helps you narrow down your placement search and determine a ballpark figure of what a placement will cost.
The main types of business locations are:
Retail – a storefront, shopping mall, kiosk, airport location, event venues Commercial – office space, executive suite, business park Industry – warehouse, factory, manufacturing Hospitality – accommodation, hotel, restaurant
These are the basic types of sites that you can use as a starting point for your search. You can then of course get into the finer details of the facilities and features at each location.
You may also want to keep in mind that new types of businesses are available these days. You can consider shared spaces, collaboration spaces and other more creative options if they suit your business.
3. Find out your budget
Your budget is an integral part of your overall business budget. This budget includes capital, expected earnings and expenses. You need to determine your budget if you are hoping to get a business loan or an investment.
Remember that when it comes to a business, there will be variable expenses and fixed expenses. These variables include e.g. Costs for utilities and maintenance. So you need to include these expenses in your budget.
The fixed monthly cost of a place depends on the type of premises, size and area. You also need to decide if you want to lease or buy, and then include rent or mortgage in your budget.
There are pros and cons to each of these options. If you decide to buy, you have a long-term operating base for your business that you can change with fewer restrictions.
However, if you decide to lease, there are fewer upfront costs and you will probably not be responsible for the general property maintenance. You need to decide which is the best strategy for your business.
If you are looking for a small business loan to help with the cost of a commercial property, you can start your research online. Lendio is a loan market with over 75 providers.
You can sign up in minutes and its experts will help you get the right loan for your business. It covers a range of financing options from commercial mortgages to SBA loans to credit lines.
4. Examine the area
The last thing to do is research some critical elements about the area you are looking for. This way, you can refine your choice of place and choose a place that gets you the most customers and makes the most sense for your business.
At this point, you should know your target audience. Look at the demographics of a given area to see how well it reflects your target customers.
You will be able to find a lot of relevant information through the US Census Bureau’s website. Search by city, zip code, or state to find ages, income levels, and other social characteristics. Local government websites also contain this kind of information.
Ideally, you choose a place where the demand for your services or products is high while the competition is low.
Next, visit local government websites to learn about rules, zoning laws, taxation and benefits or incentives. Keep an eye out for anything that could hinder operations or lead to legal or financial problems in the future.
It is also a good idea to research local suppliers and vendors. You will be able to reduce operating costs by having suppliers close by. In addition, it is easier to create personal relationships with local suppliers and vendors.
Now you know what factors to consider when choosing a location for your business. Plus, you have outlined all the elements that are important to your business specifically. So you can start looking for commercial websites, perhaps with the help of a commercial real estate agent.
You may also want the help of a lawyer to assist you on this journey. They can help with advice on the legal restrictions and taxation issues associated with acquiring a commercial property.
They will also take care of legal documents and advise you on contracts before signing on the dotted line. Take a look at our guide to the best online legal services to find providers that offer a more affordable service without losing the all-important personal approach.
Another important step in acquiring a commercial property is getting insurance. We researched lots of providers to come up with the best business insurance plans for different types of companies.
Happy property hunt!