How to Pick a Business Location

Detailed guide with helpful information on how to pick a business location. Also includes tips, FAQs, and checklist.

Updated on October 29th, 2019

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Selecting the right location for a business is critical to its success and requires careful thought and thorough research. Factors to consider include the type of location you are looking for, the fit between the area and your business image and style, your target market, the socioeconomic character of the area, and your budget.

Poor location is one of the 12 major causes of business failure. Research shows that 9% of start-ups fail because of an unsuitable business location.

The suitability of a location depends on the business. Retail stores rely on high-traffic areas for increased sales, access to talent is a top consideration for tech companies, and independent restaurants demonstrate better success rates in areas with a low concentration of restaurants.

A well-chosen business location is a competitive advantage for any business. Read on to learn how to pick a suitable business location.

How to Pick a Business Location Checklist - Free PDF Download

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How to Pick a Business Location:

1. Decide on the type of business premise.

Depending on the nature of the business you plan to start, you will be looking for premises that meet your business needs.

Location Type

Description

Home office

Very small businesses, partnerships, or business start-ups may opt for a home office, which offers more flexibility than rented office space and is a cost-effective option, especially if the business has very few employees.

Commercial office space

Commercial business space is a good option if your business does not rely on heavy consumer traffic and you are looking for premises to accommodate work stations, boardrooms, and the like.

Traditional retail store or kiosk

Suitable for businesses that sell directly to consumers. Businesses that rely on in-store customer visits to sell goods and services generally have very specific spatial requirements and are best located in high-traffic areas.

Mobile or pop-up store

Ideal for businesses that do not require permanent premises. Mobile and pop-up businesses have the advantage of being able to follow their target market and set up in selected locations to maximize visibility and sales opportunities.

Industrial site

Industrial sites are suitable for businesses that require large areas for their operations, such as manufacturers of goods, storage facilities, and freight or logistics companies.

Determine your Property Needs - Free Worksheet

Use this worksheet to help you identify which kind of property meets your business needs.

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2. Look for areas that align with your business image.

When you are scouting for suitable areas, be sure to consider the reputation and vibe of the neighborhood, and whether these fit with your brand image and style. For example, a district that is popular with bargain hunters for its thrift stores would be ill-suited for an expensive, high-end fashion boutique.

3. Find out about local ordinances and zoning restrictions.

Zoning ordinances determine how properties in defined geographic areas can be used. Contact your local city office, county office, or city attorney's office to find out about the zoning laws and restrictions for the area you are considering before you make any decisions. You might find out that properties in a specific area may not be used for commercial purposes.

4. Research traffic and demographics.

It is crucial to evaluate the degree to which a specific area is likely to yield potential customers.

Traffic refers to the number of people passing through a specific area, either on foot or in a vehicle. The key advantages of a location in a high-traffic area are high-visibility, which presents a source of advertising, and the increased possibility of walk-in customers. Learn more about foot traffic.

Compare the demographic profile of the area's population and traffic to your customer profile. Find out about the type of people who live, work, and shop in the area and evaluate whether they fit into your target market.

5. Scope out nearby competition and businesses.

Look at what other businesses in the area are doing and who their customer base is. If your business is similar to others in the area, you will have to actively compete for the same customers. It is better to look for an area in which your business proposition is different enough, so as not to have direct competitors in close proximity, and to be placed among businesses that complement yours.

6. Define property requirements.

As you begin to look at specific properties, you will assess whether these meet the needs of your business. Compile a list of all the must-have and nice-to-have requirements to help you evaluate the suitability of a property. Consider factors such as:

  • Accessibility for customers, employees, and suppliers.
  • Proximity to your target market.
  • Sufficient parking.
  • Facility requirements: air conditioning, electrical system, maintenance, etc.
  • Possibility for future expansions or additions.

7. Determine your budget.

Now that you have a few suitable properties in mind, make sure you enquire about any location-specific costs in addition to the lease, rent, or purchasing price. Such costs might relate to maintenance, utilities, or parking.

8. Select a property.

Once you have an idea of the total costs of each property, you can make an informed decision as to the most suitable property. Balance costs with the importance and necessity of other factors, always keeping your business's bottom line in mind.

FAQs:

How do I find the best location for my business?

  • Decide on the type of business premise you need.
  • Look for areas that align with your business image.
  • Find out about local ordinances and zoning restrictions.
  • Research traffic, demographics, and economic characteristics.
  • Scope out nearby competition and businesses.
  • Define property requirements.
  • Select a property that meets your budget.

Read our detailed guide on how to pick a business location.

What are the factors to be considered in choosing a business location?

  • Availability of the required premises.
  • Competitive landscape.
  • Local laws and zoning restrictions.
  • Proximity to your market and target audience.
  • Traffic and demographic profile of the area.
  • Accessibility for customers, employees, and suppliers.

Learn more about how to pick a business location.

How do I find all businesses in my area?

  • Do an online search.
  • Check with the local Chamber of Commerce.
  • Go for a walk to have a look around the area.

Why is business location important?

The location of a business can be critical to a business's success because it can influence potential revenue and the cost-efficiency of operations.

What are the 7 location factors for industry?

  • Power supply.
  • Transport and communication network.
  • Access to the workforce.
  • Access to the market.
  • Political factors.
  • Availability of raw materials.
  • Circumstances.

Why would a business want to locate in an area that offered lower taxes?

Businesses, such as factories, may want to take advantage of tax incentives that a city or county offers for locating in a specific area to lower their tax liability.

How important is location in retail?

Location is highly important in retail as it can provide a competitive advantage through increased visibility and close proximity to the target market.