Every business’s business location is everything and can make or break a business. Think about it – if you can’t be seen or can’t get to your current or potential customers easily, how can they buy from you? Choosing where your business operates should never be taken lightly, because it can impact your future business.

Here we’ll share expert tips and advice on what you need to consider when choosing your business location, regardless if it is for the first time or expanding to a new location. With our help choosing a spot for your business that works for customers and owners alike will be a breeze.

Business Location Factors

Picking the right spot for your business is super important because it can make or break your success. I think a good location will bring more people walking by, make your business look better to customers, and help you save money on running costs.

However, if you choose a bad spot, your business will suffer and you might lose a lot of money. So, you need to understand all different location factors that can impact your business.

For example, a high percentage of total retail sales are from in-store and brick-and-mortar locations, making the choice of a physical location even more critical for retail businesses.

To select the right business location, you must take into consideration location factors that generally can be split into two types: internal and external.

Internal Location Factors

Internal factors are about what your business needs to operate, how much money you can spend, and who you want as customers.

For example, I have seen many businesses that need lots of people walking in to buy stuff, and they must find a place with high foot traffic, while other businesses I worked with needed big storage areas so they looked for geographic spots with plenty of square footage that, at the same time, would make their distribution costs lowest possible. This was really important because if they didn’t get this right, they would spend too much money moving their products around, so at the beginning, they didn’t believe me when I told them how important this was.

External Location Factors

External factors include what’s happening in the local market, who your competitors are, what taxes you’ll pay, and what zoning rules say you can do.

Simply, you must understand your local market because it can help you find areas with good economic conditions that match what your business is trying to do. Also, knowing about state and local taxes or zoning laws can stop some problems with money and legal stuff later on. What I can say from my own experience consulting for small, medium, and large companies is that businesses who don’t pay attention to these external things often have many bad things happen to them down the road.

So, by looking carefully at all these location factors, you can pick a spot that works for what your business really needs. I’ve seen many good businesses transform into great ones with the right location, and bad locations can make even great business ideas perform poorly.

Required and Desired Location Criteria

Also, you can combine internal and external factor with required and desired criteria for the location for your business.

Required Location Criteria

Required criteria are those that must exist because they directly can impact your business success. If the location does not have all of the required criteria, it should not be considered as an great location for you.

For example, for a restaurant business, required criteria can be to have location with a specific population density of more than 50,000 people within a 3-mile radius. As you can see, this required criteria is something that directly impacts your business bottom line because everything below will not be acceptable.

Desirable Location Criteria

On the other hand, desirable criteria are those that you would like to have but are not essential for the business’s success.

Desirable criteria for the same restaurant can be tax implications when choosing a business location, for example, lower income tax rates.

What is more important is that each industry require unique and specific location factors that are important. For example, something important for a local or national brand of retail store is often totally irrelevant to a manufacturing or web development company.

Zoning Laws as a Factor for Business Location

Zoning laws, however, are a factor for every business and should be researched early in the site selection process. It is important because in almost every case, where you can locate your business will be dictated by local zoning ordinances in your community regardless if we talk about existing businesses or new business location.

Each location is usually zoned in one of four different zones:

1. Residential zone, such as homes, or apartments, is the most important factor to consider for retail stores because it will ensure good foot traffic.
2. Commercial zone is related more to office space, where many large, medium, and small business have their offices.
3. Industrial zones are the locations mostly for manufacturing business, and choosing a business location for them will be based on those places.
4. Agricultural zones are locations for farming, for example.

Within each category, there are additional classifications. For example, the commercial category would include different codes for office space, restaurants, retail outlets, etc.

Business Location Strategy for Growth

A location strategy is a plan that considers the factors that will affect where you start and grow your business. A well-developed strategy can help you choose a location that meets your business needs and supports your growth plans. To develop a business location strategy, you need to consider your business goals, target audience, and operational needs.

Your strategy should also consider local market conditions, competition, and state and local taxes. Researching the market will help you understand the demand for your product or service and identify areas with a prosperous economic environment. Assessing the competition will allow you to find opportunities to differentiate your business and carve out a niche in the market. Additionally, understanding state and local taxes can help you plan for financial sustainability.

By considering these factors and developing a well-informed business location strategy, you can choose a location that supports your growth plans and helps you achieve your business goals.

Steps to Create a Location Strategy

Now that you know there are different factors to consider when it comes to your business location, whether it is for tax benefits or local government economic incentives, you must create your strategy.

1. Identify Your Target Market and Research Where Your Target Audience Is

Before you start looking for a location for your business, you need to know your target market inside out. That means knowing their demographics, buying habits, and lifestyle.

Once you know your target market, research where they are. For example, if your target audience is millennials, look for locations near universities or hip urban areas. If your ideal customer is a busy professional, a business district would be more suitable.

Remember the key is to put your business where your ideal customer lives, works or hangs out. So in-depth market research and demographic profiling is a vital step in the location selection process.

Related: Real-life Organizational Decision-Making Examples

Here you must focus on demographic information to find out how many people within the analyzed location area, the age, sex, income, profession of the residents, and so forth.

2. Consider Growth Potential for Each Area

When you want to select a business location, it’s crucial for you to consider the potential growth of the identified area. Does it align with your business goals and long-term success plans?

Simply, a location with a prosperous economic environment can align with your business goals and contribute to your business’s long-term success.

For example, a city center location may bring you better opportunities for growth because there is a high foot traffic and close proximity to all essential and necessary services. In such a way, this location is an ideal business location for retail stores or office space.

3. Examine Any Existing Competitors in Those Areas

In any big and small business, you need to keep an eye on the competition. You can find out what they’re strong at, what they’re weak at, and how they operate. This information will help you make informed decisions about your own business, including what products or services to focus on, how to price them and how to be different in the market.

Seeing what your competitors are doing will give you creative solutions to common problems and a better understanding of the industry as a whole. Before you open your doors, make sure you take the time to research any existing competitors and nearby businesses in the area – it could be the difference between success and failure.

Also look for ways to differentiate your business from nearby businesses by creating a unique selling proposition. This could be products or services that are not available in the local market or a better customer experience. For example, if there are many businesses offering the same products, you could focus on exceptional customer service or innovative product features to stand out. Knowing the local competition and market conditions will help you position your business and attract more customers.

4. Make a List of the Ideal Locations for Your Business Activities

After you research, the 4th step is to make a list of places that meet your business needs and fit your budget.

Cost is a big factor in your decision. Whether you’re looking at traditional storefronts or more unusual retail space options, the cost must fit your budget. If you are startup or small business, you will always have a limited financiela resources.

It doesn’t matter if you’re renting or buying, you must make sure the cost fits your budget and doesn’t waste your business’s money. Prices can vary greatly between areas and even within the same area. So, you must consider what you can afford before you decide.

Here you must consider:

• purchase price or monthly rent,
• any hidden costs like taxes,
• renovations,
• utility upgrades.

These costs can add up big time so you must consider them in this step.

5. Analyze Foot Traffic and Customer Accessibility for Each Location on the List

Foot traffic is key to a retail business. A busy location will drive sales and revenue, a quiet location will drive losses. To measure foot traffic of a location, you can visit the area at different times and count the people walking by. You can also use online tools and data to analyze the foot traffic of the area.

Customer accessibility is another important factor to consider when choosing a location. Your customers should be able to get to your location by car, public transportation, or on foot. A location with limited parking or poor public transport links will discourage customers and harm your business. Being accessible will increase customer satisfaction and repeat business.

6. Research the Local Regulations and Laws

In the process of selecting a business location, it is necessary to familiarize yourself with all local regulations and laws. It is important because different regions have different legal rules and restrictions when operating a business, which can significantly impact your day-to-day operations. This may include:

• Health and safety guidelines
• Building codes and zoning requirements
• Licensing or permit requirements
• Tax regulations

These laws are often complex, so it’s best to seek the advice of an experienced legal advisor for help. Failing to do this may lead to costly fines and other penalties that could put your business at risk.

7. Evaluate Accessibility to Essential Services

Accessibility to essential services is another vital factor when choosing an ideal business location. A city center location can provide excellent access to essential services such as banks, post offices, and internet providers. Additionally, security features are important to assess when choosing a business location, as they can protect your assets and ensure the safety of employees and customers.

Suppose you base yourself near suppliers or other businesses with the same or similar target demographics, it can also bring customers to the area and your company if you locate it there. In that case, that proximity can greatly affect your daily operations, helping you run your business more efficiently.

Your business needs to be accessible to customers, employees, and suppliers. Make sure the location is easy to find and provides convenient public transport or car access. Also, consider whether necessary services such as banks, post offices, and internet providers are nearby.

20 Questions You Must Respond When You Consider Location

Now, I want to share a list of possible questions that can help you in your analysis and selection of the great location for your small business. However, remember that based on your specific business type some questions will be more important and some will not be for you when choosing a business location.

1. What is the area of operations of your small business?
2. What type of business space do you need?
3. Do you have information related to demographics?
4. Did you have enough information about foot traffic and speed of the traffic?
5. How accessible is each area?
6. Are there competitions and neighboring stores?
7. What about the visibility of the location?
8. Is there enough parking space?
9. What is the labor climate in the area and how will it impact your employees?
10. What is more essential for you to locate your company near raw materials or your customers and clients?
11. Do you need unloading and loading docks?
12. What are utility access and rates?
13. What about transportation and its infrastructure?
14. Did you know tax rates?
15. Are there some specific environmental regulations?
16. What is the quality of life in the area?
17. Is the local community financially stable?
18. Are the retail stores strong in financial aspects?
19. Should you need to locate in the city or outlying areas?
20. Are there other wholesalers that target the same clients?

Common Mistakes to Avoid When Choosing Business Location

At the end, let’s discuss briefly about some mistakes you must avoid when it comes to where to locate your company.

Mistake #1: Locate Your Company On the Cheapest Location

Even on the cheapest location, you can spend less money, still, if your location is important for your success, this can be a mistake. I’ve seen many entrepreneurs make this mistake, selecting where they will locate their company based only on prices.

So, conduct the research and consider factors we have discussed above to find the optimal place based on your budget and your business requirements.

Mistake #2: Select Location Because it is Close to Your Home

Many entrepreneurs choose a location close to home in order to minimize commuting time. Yes, this is a legitimate right to look for your individual requirements. However, you are not selecting a place where you will live, but a place where you will locate your business. So, don’t make this mistake.

Mistake #3: Locate Your Business in an Available Location

Sometimes you can come to only one available space, and in most cases, an entrepreneur goes with “give whatever you can”. If the space is not something that will pass the required criteria, then you will make a big mistake that will impact on your success.