What is a business location?
The location of a business is the place where it is situated. There are a number of factors that need to be considered in choosing a location for a business. The ideal location would be one where costs are minimised. The entrepreneur would need to look at the advantages which each area offers as well as any government help which might be available.
The Analysis
What realtors say about residential real estate also applies to many small businesses: the three most important considerations are location, location, location.
Location is especially important for businesses in the retail and hospitality trades because they rely a great deal on visibility and exposure to their target market. However, location is also important for service and manufacturing ventures, which have such costs as advertising, promotion and distribution that are a direct result of where they are located.
How important is foot traffic?
Service businesses may not have the foot traffic and high visibility requirements of retailers, but their location has to be convenient for customers and their employees need adequate parking.
Manufacturers are concerned with keeping operating cost down, and that means locating near key suppliers in areas accessible for pick-ups and deliveries. When choosing the best location for your business, your first step is to target the right community.
You can analyse the community you’re thinking about by considering the following questions:
- Is the population base large enough to support your business?
- Does the community have a stable economic base that will promote a healthy environment in which your business can grow?
- Does the demographic profile closely match that of the market you wish to serve?
- What are the community attitudes or outlook?
Deciding on a demographic profile
A community’s economic base can have a direct impact on your opportunities. People move from one community to another for better job prospects, more money, better schools and a host of other reasons.
To evaluate a community’s economic base, check census data and other business statistics for the following information:
- The percentage of people employed full-time and the trend in employment;
- The average family income; and
- Per capita total annual sales for goods or services similar to yours.
Red Flags
You can also learn a great deal about your prospective community by looking and listening. Some red flags to pay attention to include:
- The necessity for high school and college graduates to leave town to find suitable employment;
- The inability of other residents to find local jobs;
- Declining retail sales and industrial production; and
- Apathetic local business owners, educational administrators and other residents.
Favourable signs
- The opening of chain- or department-store affiliates;
- Branches of large industrial firms locating in the community;
- A progressive chamber of commerce and other civic organisations;
- Good schools and public services;
- Well-maintained business and residential premises;
- Good transportation facilities with access to other parts of the country; and
- Construction activity accompanied by a minimal number of vacant buildings and unoccupied houses for sale.
It’s important for you to understand the demographic profile of your potential customers in order to properly evaluate a community for location.
It’s important for you to understand the demographic profile of your potential customers in order to properly evaluate a community for location.
To see if the community you’re considering offers a population with the demographic traits necessary to support your business, look at the community’s:
- Purchasing power: Find out the degree of disposable income within the community.
- Residences: Are homes rented or owned?
- Means of transportation: Do prospective customers in the area own vehicles, ride buses or bicycles, and so on?
- Age ranges: Does the community consist primarily of young people still approaching their prime earning years, young professionals, empty nesters or retirees?
- Family status: Are there lots of families in the area or mostly singles?
- Leisure activities: What type of hobbies and recreational activities do people in the community participate in?
Where to find information
Detailed demographic information is available from the Census Bureau. You can also get this kind of information from established businesses within your industry or from a trade association.
Many associations also have local or regional chapters that serve members in a variety of ways, with everything from newsletters to lobbying actions.
In addition, you can find figures about consumer expenditure from trade associations and government bodies, depending on whether you’d like to establish how much people are spending on household or home appliances, or you wish to source categories of expenses – from alcoholic beverages and restaurant meals to pensions and life insurance.
Then you can group consumers by income, household size, race, gender, and other characteristics relevant to your business. When you’re satisfied that the community you plan to serve has the qualities to support your business and is convenient to your customers, start searching for a site
Lease Types
A commercial lease is a contract which stipulates the terms under which business premises are leased to tenants. Short term and long-term leases are available and prices are normally charged at a rate per square metre.
There are different types of leases:
- A lease is a rental agreement for a property;
- Ground or land lease is a rental agreement for the use of land;
- Lease with the ‘option to purchase’ is a rental contract which allows the tenant to purchase the property during the period of the lease.
- It is highly recommended that you seek advice from a qualified professional who is involved in commercial property before signing a lease. It’s a big step which must be carefully planned and executed.
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