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How to Choose a Business Location
Kody Wirth | Oct 25, 2023
Choosing the perfect business location is more than finding a place that looks like you envisioned.
It’s about being in a competitive location that helps grow your business, staying within budget, and meeting local and state regulations and laws.
In this guide, we’ll work through key questions to narrow your location search and provide additional resources to help you find the right spot.
1. What location type fits your business?
To start your search, you should understand the different types of business locations.
- Retail: These are storefronts, malls, or commercial streets suitable for businesses that rely on foot traffic and visibility to attract customers.
- Office space: Suitable for businesses that rely on something other than walk-in customers. It can be a shared office space, a serviced office, or a dedicated office in a commercial building.
- Industrial: These are locations suitable for manufacturing or warehousing businesses. They are usually located outside the city center and have heavy machinery and storage facilities.
- Home-based: Suitable for businesses that do not require a physical storefront or office, such as online businesses or freelancers.
- Pop-up: Temporary spaces that businesses can rent for a short period, often used for testing a new market or for seasonal businesses.
- Mobile business: For businesses operating from vehicles, such as food trucks or mobile services.
Identifying what physical setup best fits your business will make your search more focused and efficient. If you’re unsure which location type fits your needs, the remaining questions should provide additional clarity.
What to consider when selecting an office space
When deciding on an office space, you should review the size, infrastructure, style, and physical location.
2. What’s your budget?
The next step in narrowing your location search is to bring your budget into the conversation.
Your budget will determine the locations you can afford and solidify the areas feasible for your business.
Understanding your budget involves more than knowing how much you can afford to pay on rent. It also includes your startup and operational costs and additional charges to make the location viable for your business.
Tip: To truly understand your financial position, we recommend you create a financial forecast.
Here are some additional questions to answer:
- Will you have to do extensive renovations before you can move in?
- How much are state and local property taxes? How much are income and sales taxes?
- Could you pay less by choosing to start up in another state?
- Can you afford to pay your employees at least the minimum wage?
- Do you qualify for any government economic programs or incentives? Might you qualify somewhere else?
A clear and comprehensive understanding of your budget and all associated costs will enable you to make an informed decision about your business location. It will also help you avoid any unexpected expenses.
Budget-friendly alternatives for your business location
Is price the most significant factor when selecting a location for your business? Narrow down your search with typically lower-cost options like coworking spaces and non-traditional rental properties.
Why you should consider a coworking space
Coworking spaces provide far more benefits than cheaper-than-usual rent. From networking to improved facilities—sharing space may be a significant growth opportunity for your business.
Understand your startup costs
Know what it will cost to rent or purchase a space for your business and handle any renovations to meet your needs.
Create a financial plan
Understand how the cost of your location will impact your finances by forecasting your potential sales, expenses, personnel costs, and cash flow.
3. Does it meet customer expectations?
Your business location plays a significant role in shaping customer perception. It’s not just about the physical place but how the location aligns with your brand image and the expectations of your target market.
Your location should resonate with your target audience and meet their expectations regarding convenience, accessibility, and overall vibe.
For example, an artisanal coffee shop would fit well in a trendy, artistic neighborhood or near cultural spots where customers seek a unique, cozy atmosphere. It wouldn’t work in a busy commercial area or near fast food chains and big box stores where cost and speed are likely more important to consumers.
It’s essential to conduct market research to understand the preferences and expectations of your target market. Consider factors such as:
- Demographics of the area
- Presence of competitors
- Atmosphere of the neighborhood
Remember, your location is an extension of your brand. Choosing a location that aligns with your customer’s expectations will help you attract and retain them.
Identify your target customers
Learn what areas your customers frequent, how they travel, and the type of environment they enjoy to help inform your search for the right location.
How to conduct market research
Make your research efforts fast and focused by knowing what it takes to conduct effective research.
4. How safe is the location?
Don’t underestimate safety when choosing a location. A location viewed as unsafe can deter potential customers, make it challenging to attract and retain staff or lead to a higher risk of theft or vandalism.
Here are a few ways questions that can help you gauge overall safety:
- What is the crime rate in the area?
- Is the area well-lit, especially during the evening?
- Is the location easily visible from the road or other businesses?
- Is there a high level of foot traffic in the area?
- What is the overall reputation of the neighborhood?
Remember, choosing a location that is both actually safe and perceived as safe by your target audience is essential.
How to set up a safe working environment
Making your business safe goes beyond selecting a better location. Here are seven ways to cultivate a safer working environment.
5. Is there increasing demand?
Choosing an area that is thriving and poised for growth is crucial for the long-term success of your business. Growing demand indicates a healthy economy, leading to increased foot traffic, higher sales, and a good network for partnering or networking with other companies.
Here are some key questions to consider:
- Is the population in the area growing?
- Are there new businesses opening in the area?
- Are property values increasing?
- Are there any planned infrastructure developments or investments in the area?
- Are there opportunities for networking or partnering with other businesses?
A real-world example of this is the tech boom in Silicon Valley.
The area became a hub for technology companies, attracting a highly skilled workforce, and led to increased demand for services and housing in the area.
The best places for high-growth businesses
While the growth opportunities in specific cities change yearly, it’s worth knowing what locations have historically nurtured fast-growing startups.
6. Is the location accessible?
For a location to be truly accessible, it should be easy for you, employees, vendors and suppliers, and your customers to reach your business.
Since accessibility needs vary, here are some key questions to consider:
- Is convenient parking available?
- Is the location easily accessible by public transportation?
- Is the location near other businesses or attractions that your target market frequents?
- Are there any physical barriers that could make it difficult to access your location?
You likely don’t need to answer “yes” to every question for a location to work. Just be sure that a lack of accessibility won’t negatively impact your sales, recruiting, or brand perception.
7. Are you able to legally do business at this location?
Ensuring that you can legally operate in a given location is crucial.
To determine your legal ability to conduct business, start with zoning regulations and ordinances. These affect your ability to purchase the property, make changes, and even operate your business there. Remember, many of the same zoning laws apply even if you plan to operate your business from home.
To determine the zoning of a property, contact your local planning agency or consult an attorney. A simple online search may also provide a zoning map of your area.
Additional legal considerations include:
- Business licenses and permits: Ensure you have obtained all necessary licenses and permits, including a business license, health permit, fire department permit, signage permit, etc.
- Building codes and regulations: Ensure the building complies with all local building codes and regulations. This may include compliance with fire safety standards, accessibility requirements for people with disabilities, and other structural and safety standards.
- Landlord approval: If you rent the space, ensure that the landlord approves of the nature of your business and any modifications you plan to make to the property. This may involve negotiating a lease agreement that clearly outlines the permitted uses of the property and any restrictions.
- Restrictive covenants: Restrictive covenants are legal obligations imposed on a property by a previous owner or the homeowners’ association and may include restrictions on the type of business that can operate on the property, the hours of operation, noise levels, etc.
- Insurance: Necessary insurance coverage may include property insurance, liability insurance, business interruption insurance, etc.
Remember, it is essential to thoroughly research and understand all legal requirements and restrictions before finalizing your business location.
Additional resources for choosing the right location
13 tips to identify a great business location
Do you need help figuring out how to start your location search? Try exploring one of these business location factors, courtesy of the experts from the Young Entrepreneur Council.
How to establish a business in a new location
If you’re changing the location of an existing business, you likely have some idea of what to look for in a location. So, your focus should be on what it will take to reestablish your business successfully.
Start your location search
Knowing what kind of location you want and what you need to consider is all very well, but where do you go to find a physical business location? While not an exhaustive list, here are a few ways to get started:
- Your local SBDC
- The local Chamber of Commerce
- Walking the neighborhood, keeping an eye open for rental signs
- Commercial real estate agencies
Finding the right location is one of the final steps to start a business. Now it’s time to solidify your team, get your marketing strategy in place—and ensure that opening day at your new location is well-staffed and well-attended.