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Location, Location, Location; Where to locate your Business

Written by, Samuel K. Burlum, Investigative Reporter
and author of The Green Lane, a syndicated column
Published on 04/15/17, a www.SamBurlum.com Exclusive

Source: Before picking out a location to start your business, consider the many factors of its potential location, as this issue is a key contributor to a business’s success or failure.

Now that you have chosen the type of business to establish and the products and/or services you will be offering for sale, it is time to determine a location for your business. Most small business owners choose a location based on their own perception of where they think the business might be a good fit. The reason for this is that many small business owners make this decision and choice about their business location based on emotion. Maybe you like a particular community or town, or maybe you spent your childhood there and the location is in close proximity to family and friends. Today business owners need to rely on data to help them make the best decision on where to locate their business, so that the business has the most optimum chance in succeeding.

The reality and hard disappointment is that your business will not survive if you are relying on only your friends and family to patron your enterprise. New relationships in a potential business location’s community will be the driver to client acquisition, for if you are specializing in a product or service, you will want to make sure the demographic of the potential consumers within that market region will be a good fit for your offering. For example, if you are offering high end hand crafted furniture, you would want to locate your business in a town or community where the population would appreciate your value creation and have the disposable income to spend money on your goods or services.

You might want to consider a store front location in a community or town surrounded by upper middle class home owners that appreciate hand crafted quality and are willing to spend the money on higher quality goods. This community may or may not be the same community or town in which you live. Your target market is one of the most important factors in deciding where your business will be located.

In addition to aligning your business products and services with the ideal clientele, you should consider additional contributing factors to how well your business may do in a specific location. Ask yourself, “will this potential location transfer the message of my brand image?” Consumers need to identify your business from miles away, and in a quick moment of time. Does the location provide the best representation for your business? For instance, if you have a business that makes and sells clothing, would you rather have a store front designed as a welcoming specialty boutique or would you rather be located in an office building where foot traffic may be limited?

You need to review your competition. Though it is true that your business is indirectly competing against every cash register in the world, on a local level you may want to examine the proximity and amount of competition. If you plan to open a barber shop or hair salon you will want to make sure the local area is not saturated with many of the same type of businesses. A saturation of the same type of businesses in a small local proximity means you will need to invest more money into customer outreach and marketing; a necessity most business owners find as only a luxury.

In turn you may want to consider indirect competition. These are businesses that may be in the same industry sector, however they may not offer the exact same product lines or services that you do. A pharmacy and a natural food and health store would be considered indirect competition, as they might be able to complement each other. The pharmacy may offer health and wellness products via traditional medicine, while the natural foods and health store might carry a complete line of natural homeopathic remedies and products. This is healthy competition because it offers the consumer real alternatives and choices on how to solve their health and wellness concerns. You will also notice many businesses such as a dry cleaner, a bank, post office, pharmacy, and take out restaurant in the same strip mall or plaza as a large grocery store. These are complementary businesses, as they may cater to the same customer multiple times and for different reasons; usually the convenience of having these entire day to day customer services in one place.

If your business requires employees to help operate the day to day functions of the business, you might want to research the availability of qualified labor market candidates.  Many business owners complain that good help is hard to find, and that can be due to the limited number of potential employees to choose from that may be a proper fit for the business. If you do find the ideal employee, how far would they have to commute to your location? What perks or incentives would you have to offer employees for them to sacrifice time in the car in commuting to your business each day?

Many business owners think in two modes: the here and now, and the vision of twenty or thirty years from now. In the event your business is successful, a move to a larger location after you have sunk tens of thousands of dollars retrofitting your space today can be a costly mistake if you fail to initially plan your growth. If you think your business needs one thousand square foot today, the likelihood it will need to double its size of space in a year, if it is successful, is highly likely; especially if your business is retail oriented.

A hardware store carries thousands of products and bar codes. Every local corner neighborhood hardware store I have visited in the past five years has starved for additional space; with products being stacked to the ceiling. This is because new products for home use are constantly being offered. The more product choices, the more brands your retail space offers, the more potential clients you may get to patron your store. Think in terms of three to five years down the road. If a space is too big, it is usually more negotiable to back out of space with a landlord than bump your business neighbor out of their current location so you can take over their space.

How close are you to your vendors and/or suppliers? If being within a range of distance to your vendors/or suppliers makes a difference to you, then this factor will also be a determining factor of where your business is located. If you use a third party to manufacturer your goods and need to have a close relationship with members of your supply chain daily, then your location should be within a day’s drive of your suppliers. If your goods are delivered to you from a national warehouse, then the cost of delivery and freight may be a factor.

Safety should also be considered. Your employees would not favor working in a neighborhood that has a high crime rate. Your business could also fall victim to crime, as looters and thieves may see your retail location as a target for their caper. Rents in high crime areas may be less, but the risk may be higher.

Will the potential location offer enough parking for your customers and employees? Many towns have a requirement on how many parking spaces a business location must have based on the square footage the business occupies. Traffic should also be examined. Is there enough vehicle traffic nearby that will provide exposure of your business to potential customers? Is the potential business location on a busy Main Street or located in the back ally of a down town cluster, blocked off by other industrial settings?

Before signing a lease, check with your local zoning and planning department to see if your type of business would be permissible at the potential business location. Not all commercial buildings are created equal. Some towns and cities have very strict zoning laws regulating where specific types of businesses may be located, as well as the permissible use of different types of commercial facilities.

Once you have conducted our preliminary research, now it is time to take a hard look at cost. There is the upfront cost of renting a business location such as the monthly rent/lease cost, property taxes and property maintenance fees.  There are indirect costs that can creep up over time and chew into a business owner’s profits. These costs include the hidden cost of preparing the space for your business use. Most commercial space will need to be finished or renovated to accommodate the business purpose. Alterations are considered improvements to a property and will be taxed accordingly. Other taxes such as sales and use tax, payroll tax, business income tax, will vary state to state.

Is your business location in an economic business development (EBD) zone? These zones are established by public policy and either receive tax break incentives for local job creation and/or has additional local licensing fees, which the business is required to pay; these licensing fees are sometimes used to aid in relief of the cost of workforce development and on the job training.

Minimum wage also varies state to state. Many businesses may offer higher starting wages than minimum wage. Minimum wage is usually reserved for very low skilled jobs, sometimes fulfilled by either students or retired seniors that desire to work for part time income. The rise in minimum wage in some states made it impossible for some small business owners to hire help because the rate of minimum wage might be higher than the return on investment on the job tasks assigned to the employee.

Another vital piece of data every business owner needs to know regarding the town or region their business potentially might be located, is if the area is business friendly. This concept extends beyond just the potential customer. Having a clear understanding about how laws and regulations are imposed upon businesses as well as how fees, penalties, and fines are assessed to businesses is critical in knowing how much of your profits may be at risk to hungry government representatives eager to increase government revenue via enforcement actions.

So, what states are the best and worst for your potential business location?  There are several reports that vary in opinions of the “best” states for small business locations. I say if your business solves a problem and provides a common product or service critically needed by any community, and as long as you are customer service driven, then your business has a chance of being successful.

One of the best ways to find out if a local town, city, county, or state is profitable for your business, is to go interview business owners in your industry sector on their experiences of why they like or don’t like their business location. You can ask them a series of questions such as: how long they have been in their location, the potential customer foot traffic that visits their store front, the cost of how much marketing they must invest in order to reach potential consumers, staff turn-over, regulatory climate, and other common business concerns important to your industry sector.

Samuel K. Burlum is an Investigative Reporter who author’s articles related to economic development, innovation, green technology, business strategy, and public policy concerns. Samuel K. Burlum is also a career entrepreneur, who currently is the CEO and President of Extreme Energy Solutions Inc., a green tech company located in Ogdensburg, New Jersey. Samuel K. Burlum lends his expertise as a Consultant and Managing Director of ESLC Inc., a consulting firm to start-up companies, small businesses, and mid-size enterprises, providing advisement in several areas including strategic business planning, business development, supply chain management, and systems integration

 

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