The top considerations when choosing your business location

Business Location Factors

When starting up a business, you always hear the classic advice of location, location, location. Cliché, as it may sound, choosing the right location, can make or break your business, and it could make the difference between feast or famine. Depending on the type of business you’re considering setting up, there are several things you should keep in mind when choosing the right location.

Do you really need an upscale commercial space, or will a far-flung location with lower rent suffice? Is the infrastructure and ambiance of the place important? Are there similar businesses in the area? If the answer is yes, how they are doing? Reflect on the following essential business location factors in order to guarantee a profitable, stable, and successful trade:

1. Local ordinances and zoning

Before you start looking at physical locations, do your research and make sure that the type of business you’d like to open is actually permitted in the area you’re considering. Municipalities are becoming stricter when it comes to the types of businesses that can be opened in certain areas, and zoning ordinances and community restrictions are commonplace, especially in areas with a high residential count.

If you’re considering a commercial location, zoning issues shouldn’t be much of a concern, but local ordinances can affect the operations of your business. Some cities require special permits and various licenses before you can open your business there. Guidelines mandated by the local government should equally be followed, such as the required distance of your shop from a school, proximity to public parks, operating hours, etc.

Here are some tips when checking local ordinances and zoning:

  • Contact your zoning department and discuss your business with them.
  • Check the city ordinances, rules, limitations, and exceptions with City Hall.
  • Keep a copy handy of all the requirements and guidelines that apply to your trade.
  • Take note of special considerations such as required structures, taxes, etc.

2. Market and Demographics

In terms of business location factors, you’ll also need to keep in mind the market and demographics of the community. Demographics refer to the age, gender, income, occupation, spending power, and other characteristics of the population.

Along with market statistics, knowing the current demographic profile of the location will help to establish the viability of your business. Will the community be able to support your trade? Will you have a growing customer base in that area? Are there development projects in the area that will contribute to your shop’s accessibility? What is the average income in that location? How do people spend their money and what do they usually buy?

It’s a good idea to check the community’s profile by determining their following attributes:

  • Purchasing power and degree of disposable income present within the community.
  • Means of transportation, such as whether people own vehicles or rely on public transport.
  • Average age and population such as young professionals, retirees, students, etc.
  • Recreational activities, hobbies, and family status in the area.

3. Foot traffic

Defined as the number of people passing by a business on a given day, foot traffic is another important factor you need to consider when choosing a location. The majority of businesses rely heavily on foot traffic, especially those in the retail and service industry. Restaurants, shops, malls, salons, bars, and all other types of businesses need to be highly visible in order to attract more customers.

Measuring foot traffic is not a simple process, and the question of which spot will bring in more customers is always relative. For one thing, there are several factors you’ll need to check such as which time of day has the most traffic, the average age of pedestrians, peak hours, and lease charges. The use of tally counters and security cameras are good but they can be both tiring and time-consuming. Luckily, there are modern tools out there to help measure foot traffic.

  • Use aggregators like LocationGenius to measure and compare demographic information of passersby.
  • For analysis and in-depth comparison of the foot traffic of two locations, use web-based tracking systems.
  • RetailNext provides in-store traffic data, outdoor foot count, and customer shopping behavior using Point of Sales (POS) hardware.

4. Proximity to other businesses

The proximity of your shop to other establishments also plays a huge role when taking into account business location factors. Setting aside the competition, it’s best to choose a location for your business with nearby shops that complement your products or services. For example, setting up a chic shoe store near a popular trendy clothing shop could be beneficial for your business, as the traffic they generate can bring customers directly into your store.

On the other hand, surveying the area can also open up various business possibilities according to the establishments currently operating within the area. Building a parking lot in a high-density area with lots of establishments that lacks space for parking could be a good and profitable idea.

The vicinity should also provide convenience to you and to your workers:

  • Does it have restaurants and grocery shops for your employees?
  • How about a nearby daycare center for employees with children?
  • Are banks, schools, malls and other establishments easily accessible?

5. Total cost for your location

Small businesses and startups are often tied up with the idea that “low rental cost is great for business,” but this isn’t always the case. It’s true that rent has a huge effect on your expenses, but there are other things you’ll need to consider. You’ll need to think about the required improvements, utility costs, and infrastructure upgrades for which you’ll be held responsible for.

Always look at the big picture and don’t focus on one expense alone (i.e. the rent). Location A might be more affordable in terms of cost per square foot, but what if that area yields lower visibility? Saving on rental cost but sacrificing the potential of your trade will often lead to slow and stagnant returns. When it comes to business location factors, overall cost including insurance for your commercial building should always be studied and planned accordingly.

  • Determine how much rent you can afford and the average rent in that area.
  • Add up the cost of communication tools and availability of providers since you’ll need them for business operations.
  • Check the electricity, outlets, condition, and quality of the space. Adding or modifying these things can add up and increase your expenses.
  • Does it have free parking for customers or will that be an additional cost?

Here you find all tips summarized:

Infographic Business location factors