When you are planning to set up a new business, one thing you will need to take into serious consideration is where you want to run that business from.
You will quickly discover that the location of the business is just as important to business survival as all the other elements of your business plan, if not more so.
I have seen a lot of businesses close down as a result of making the mistake of opening at the wrong location. You can significantly improve business survival chances by simply choosing your operational location carefully.
So what is the right location?
The right business location is one that enables your business to efficiently service your customers in the most cost-effective manner.
With that definition in mind, let us now consider some of the factors that we need to take into account when making location decisions.
1. Too far from customers
You are in business to serve customers. If you are too far from your customers it will mean that you will not be able to service those customers efficiently. Your customers will struggle to reach you and that means you will not sell products.
It may, therefore, cost you more to try to solve the logistics problem by moving your products to where potential customers are, in an effort to boost sales. Therefore two key points arise here. That is;
Low sales due to inaccessibility,
High Logistic Solutions` costs.
Therefore it is imperative that you know, and fully understand where your customers are found when making business location decisions. Locate your business as close to your potential customers as you possibly can. Trust me it will make your life a lot easier.
2. Too close to competition
One of the silliest mistakes that some new start-ups make is to open their businesses too close to competition. Now I can fully understand that you may be thinking that it is a good location for your customers to easily reach you.
Well, even so, you should not open your business close to your competition unless you are certain you have a comprehensive, winning, competition strategy. However, I doubt that will be the case.
If you are starting a new business, your focus should be on making your learning curve as less, stressful and painful, as possible.
As a newbie, you will basically be fighting for business survival on many fronts, and the last thing you need is your competition implementing counter measures to reduce the effectiveness of your strategies.
Therefore locate your start-up as far away from competition as is logically possible.
3. Too far from Suppliers
Your business has to be strategically located so that your suppliers can reach you fairly easily and quickly.
You need to be close enough to suppliers so that you can minimize your inventory replenishment time and delivery costs. You may be getting orders so fast that you may need additional inventory quickly.
If you are located too far from your suppliers, then you may miss the opportunity to increase your revenue.
Also, by strategically being close to your suppliers, it means you can hold minimum amounts of stock thus reducing stock-holding costs.
4. Inappropriate Location for your business type.
If you are starting a corporate law firm and you open your office in a cheap, run-down office building, in the roughest part of town, you are hardly going to inspire any confidence to corporate clients.
You will certainly not get any business. You, therefore, would need to rent offices in an up-market state of the art office building that will project the right kind of image.
You have to locate your business in an area that is suitable for the caliber of clients and customers that your business is trying to attract.
You have to make sure that your business is located in an area that has all the necessary facilities to enable your customers to have a pleasant experience at your business.
If a large number of your potential customers are car drivers, then you will need to have a good parking area available. Make sure your location has other important facilities such as customer toilets, baby changing areas, and access to good transport links.
It`s all about improving your customers` experience of your business so that they will come again.
Safety is a crucial consideration when making location decisions. The area you pick has to have a high safety rating.
You will have to make sure that the area you choose is a safe one for your customers to come to. An area that is notorious for muggings and thieves is not the best place to locate your business.
Not only will it be bad for your customers but will also pose risks to you and your business. Your insurance costs will most likely be very high in such areas and that will mean reduced profits.
7. Too expensive
You should not get a business location that costs too much for your new business to sustain. Yes, the city center is the hub of business and we all want to be situated at the heart of it all.
But if your business cannot generate enough revenue, then you may find yourself in some serious cash-flow problems. While all the above factors need to be considered when deciding on a location, the single most important consideration has to be the cost.
If you cannot afford to pay your rent, your business will be forced to close. Hence above all other considerations, you must make sure that you can afford the location that you choose.
That being said, you must not choose a location simply because it is cheap. While the price is essential, location decisions should not be based on price alone.
It`s about looking at all the factors that affect the location and then making a decision. It may be necessary to pay slightly more for your location if it satisfies all the other factors.
Inversely, it can be catastrophic to pick a location that has negative pointers for all the other factors but is available cheaply.
Therefore always base location decisions on equal consideration of factors we have discussed here.