Disclosure: This content is reader-supported, which means if you click on some of our links that we may earn a commission.
One of the most thrilling aspects of starting a business is finding the perfect location. But as exciting as it is, it’s also a monumentally important decision. As you’ll see, the location of a business can determine its success.
This guide covers every factor you must consider when choosing a business location in fine detail. We’ll also walk you through the process of selecting a location step by step. With all of this information, it’ll be difficult not to choose the perfect location for your company.
Why Your Business Location Is So Important
Getting the right location from which you can run a successful business is vital.
First, your location impacts operating costs and revenue. For instance, some businesses require a certain amount of foot traffic in order to turn a profit.
Similarly, choosing a location in an area that reflects your company’s brand or image will attract more customers. As will placing your business in an area where your target market resides.
Furthermore, the right location can even help you attract top talent to your business.
Finally, changing locations can be expensive and inconvenient to staff and customers. So you need to do your best to get the area right the first time around.
4 Factors to Consider When Choosing a Business Location
There’s way more to think about when choosing the right business location than you may have previously thought. Here, we’ll outline the long list of factors you must take into account so that you can choose the perfect location for your business.
1. Staffing Needs
Naturally, you want top talent to come and work at your business. So the first thing you need to consider is whether the location will appeal to potential employees.
Will it be convenient for staff? Are there public transportation stops nearby? Is there parking space for those who drive? Being able to get to your area easily will impact whether a potential employee accepts the job.
Also, what kind of place do people in your industry like to work in? For example, when you think of modern startups, you think of open, collaborative settings in cool spaces, such as converted warehouses in trendy neighborhoods.
Whether you require workers with specialist skills may also be a factor. Certain areas may be renowned for high concentrations of workers with particular skills. And on the other side of things, there may be areas with skill gaps that you wish to avoid.
For instance, a LinkedIn study found that many professionals specialize in economics, politics, and security in Washington D.C. But there are too few individuals with sales, manufacturing, and healthcare management skills.
You should also consider the labor costs associated with an area as they sometimes vary from region to region.
2. Customer Requirements
Certain types of businesses, such as restaurants and retail, demand high foot traffic. Thus, you’d need the business location to be on a main street.
Overall, it makes sense to be where your target market spends their time. To give you another example, if you run a B2B business, it’d be a good idea to find a location near office complexes and the like. That way, it’s convenient for clients to visit you in-house and vice versa.
You should also consider the atmosphere of a specific location. Let’s say you hope to run a boutique or creative business. You might want to find something in the local arts district.
It’s a good idea to research the demographics of an area. Perhaps your target market comprises new families or millennials or whatever it may be. You might find a location close to where your target market lives, i.e., where there will be a higher demand for your products or services.
You must also consider customer convenience, for example, parking and accessibility needs.
3. Suitability of the Site or Building
The suitability of a physical location is dependent on the needs of your business.
Consider what you need to operate. For example, you may need warehouse storage space, an office for workers, and a suitable space to meet with clients.
Also, there may be zoning laws in certain areas that prevent you from operating your type of company in that location. So you’ll need to do your research.
How easy it is for suppliers to reach your business premises may also be necessary if you rely on transport services.
Another factor to consider is the image of a location. Let’s say you cater to a high-end clientele. In this case, you’d need a grand or luxurious site that’s fitting for your business.
Furthermore, consider if a location has room for expansion. Quite simply, you may require more space if you expect your business to grow quickly.
You should check if there are competitors nearby. You may be happy to offer up your alternative to the existing local businesses. Or you may wish to establish your customer base elsewhere.
Also, are there similar or complementary businesses nearby? If your target market visits those businesses regularly, they may just stumble across yours, too.
4. Financial Matters
Whether you can afford a specific business location is obviously an important factor. Sought-after locations are, of course, more expensive. You need to find the right balance of affordability and suitability.
Depending on the type of business you intend to run and local regulations, there may be tax benefits when you choose a certain location. Similarly, if you open up in a certain area, you may benefit from government incentives.
So, it’s definitely worth researching local financial regulations and speaking 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 the nitty-gritty.
Below are the fundamental steps that will help you choose the right location for your business.
1. Outline Your Operating Needs
You must consider the needs of your business to ensure you’ll have the right features and facilities in place. Otherwise, the company won’t be able to live up to its full potential.
There may also be increased costs associated with acquiring any extras you need. For instance, you might have to install additional facilities on-site if you can’t find an affordable property with those facilities already in place.
Your operational needs refer to the tools and resources you require to serve customers, house employees, and turn inputs into outputs. In other words, what you need to turn labor, capital, or raw materials into goods or services.
Make a comprehensive list of your requirements. Not every location will have every feature you require, so organize your list in order of importance.
Here are some examples of the features and facilities you may require:
- Storage, e.g., high-security storage, cold storage, warehouse
- Meeting space for staff and/or clients
- High-speed Internet
- An area for a break room
- Office space, e.g., open plan or pods
- Reception area
- Easy access for suppliers
- Industrial kitchen
- Multiple bathrooms to accommodate the size of your staff
All in all, be as specific as you can about your business’s requirements.
2. Consider the Type of Business Location
With your operating requirements at hand, you’ll be able to make the most fundamental decision: what kind of business premises you require. This is a vital decision as it’ll help you narrow down your location search and determine a ballpark figure on what a location will cost.
The main types of business locations are:
- Retail – a storefront, mall location, kiosk, airport location, event venues
- Commercial – office space, executive suite, business park
- Industrial – warehouse, factory, manufacturing
- Hospitality – accommodation, hotel, restaurant
These are the basic types of locations that you can use as a starting point for your search. You can then, of course, get into the finer details regarding the facilities and features of each location.
You may also want to bear in mind that new forms of business locations are available these days. You might consider shared spaces, co-working spaces, and other more creative options if they’re appropriate for your business.
3. Figure Out Your Budget
Your budget is an integral part of your overall business budget. This budget comprises capital, projected earnings, and expenses. You need to determine your budget if you hope to get a business loan or investment.
Remember that when it comes to a business location, there will be variable expenses and fixed expenses. These variables include the costs of utilities and maintenance, for example. So you’ll need to factor these expenses into your budget.
The fixed monthly cost of a location depends on the type of premises, size, and area. You’ll also need to decide whether you wish to lease or buy, then include the rental or mortgage repayments in your budget.
There are pros and cons to each of these options. If you decide to buy, you’ll have a long-term base of operations for your business that you can modify with fewer restrictions.
But if you decide to lease, then there are fewer upfront costs, and you likely won’t be liable for the general property maintenance. You must decide which is the best strategy for your business.
You can sign up in a matter of minutes, and its experts will help you source the right loan for your business. It covers a range of financing options from commercial mortgage lending to SBA loans to lines of credit.
4. Research the Area
The final thing to do is to research some critical elements about the area you’re looking in. This way, you can refine your choice of location, choosing a spot that’ll get you the most customers and makes the most sense for your business.
By now, you should know your target audience. Look at the demographics of a given area to see how well it reflects your target customers.
You’ll be able to find a lot of relevant information via the US Census Bureau website. Search by city, zip code, or state to find ages, income levels, and other social characteristics. Local government websites also carry this kind of information.
Ideally, you’ll choose a location where demand for your services or products is high while competition is low.
Next, you need to visit local government websites to learn about regulations, zoning laws, taxation, and benefits or incentives. Look out for anything that may hinder operations or lead to legal or financial issues in the future.
It’s also a good idea to research local vendors and suppliers. You’ll be able to reduce operating costs by having suppliers close by. Furthermore, it’s easier to foster in-person relationships with local vendors and suppliers.
Now you know what factors you must consider when choosing a location for your business. Plus, you’ve outlined all of the elements that are important to your business specifically. So you can begin looking for commercial sites, perhaps with the help of a commercial real estate broker.
You may also wish to enlist the help of an attorney to assist you on this journey. They can help with advice about the legal restrictions and taxation issues related to acquiring a commercial property.
They’ll also take care of legal documents and advise you on contracts before you sign 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 forfeiting that all-important personalized approach.
Another vital step in acquiring a commercial property is getting insurance. We researched a ton of providers to come up with the best business insurance plans for different types of businesses.
Happy property hunting!