Choosing a Successful Location for Your Business
Here's how to choose affordable space for your business that suits your company's needs.
Because there's no universal rule for choosing a good business location, it's important for every business
owner to figure out how location will (or won't) contribute to the success of the business -- and to choose
a spot accordingly. While there are many issues to consider when you're looking for space to house your
business, make sure you ask yourself these four important questions:
- Is location important for the success of your business?
- What type of location is best for your business?
- How much rent can you afford?
- Is your proposed location appropriate for what you plan to do there?
Is Location Important for the Success of Your Business?
For some businesses, the classic advice "location, location, location" is right on the mark --
location can mean the difference between feast or famine. But for other enterprises, location may be
much less important than finding affordable rental space. In fact, location is almost irrelevant for
some businesses: service businesses that do all their work at their customers' locations (such as roofers
and plumbers) and businesses that have little contact with the public (such as mail-order companies,
Internet-based businesses, and wholesalers). If these types of companies can pass on rent savings to
their customers and their profit margin, picking a low-cost spot in an out-of-the-way area might be an advantage.
What Type of Location Is Best for Your Business?
The key to picking a profitable location is determining the factors that will increase customer volume
for your business. Ask yourself questions such as:
- Will customers come on foot?
- Will customers drive and, if so, where will they park?
- Will more customers come if you locate near other similar businesses?
- Will the reputation of the neighborhood or even of a particular building help draw customers?
Keep in mind that different types of businesses attract customers in different ways. One key distinction is
foot traffic versus automobile traffic. For example, if you're opening an urban coffee shop, you may assume
your customer volume will be highest if there's lots of pedestrian traffic nearby during the hours you plan
to be open. On the other hand, for an auto repair shop, the choicest locale is a well-traveled street where
the shop will be seen by many drivers who can easily pull into the lot.
Also consider whether it would benefit your business to be around similar businesses that are already drawing
the type of customers that you want. A women's clothing store, for example, would no doubt profit from being
near other clothing shops, since many people shopping for clothes tend to spend at least a few hours in a
Ultimately, the perfect location for any business is a very individual matter. Spend some time figuring out
the habits of the customers you want to attract, and then choose a location that fits.
How Much Rent Can You Afford?
Chances are that you'll rent rather than buy a space for your business. Most small start-ups
don't have the funds to purchase real estate, and it's usually not a good idea to saddle your
business with high interest payments in any case.
One obvious and important concern when looking for commercial space to lease is finding a place
that you can afford. When you projected your financials (as part of your business plan), you should
have estimated how much rent your business would be financially able to pay each month, given its projected
revenues and its other expenses.
How to Determine the Average Rent in Your Area
Brokers and agents are great sources of information on rental costs in various neighborhoods. They'll generally give you an
average figure for the cost of commercial space per square foot per year in a given area. Once you have this figure, you can
compare it to the costs of other spaces you're considering.
If you haven't done so already, research the average rental costs in your area to make sure the
amount you budgeted for rent makes sense, given the cost of commercial space in your area and how
important location is for your business. For example, if you determined that location is very
important to your business, make sure your budget will allow you to rent good space given the
average cost of space in your area. If not, you may have to rework your business plan.
Is Your Proposed Location Appropriate for What You Plan to Do There?
When choosing business space, the biggest consideration is sometimes not where it is but what it is.
The building facilities need to be appropriate for (or adaptable to) your business. For example, if
you're planning to open a coffeehouse, you need a place with at least minimal kitchen facilities.
Unless you can convince the landlord to put in the needed equipment -- plumbing, electrical work,
and the rest -- it's highly unlikely that laying out the cash to do it yourself will be worth it.
In short, if a building lacks something major that is essential to your business operation,
you should probably look for something else.
Another consideration that's important for many businesses these days is having modern
phone and other data lines available to the business. When you're considering a specific
space, ask the agent or the landlord for information about communications wiring, such as
whether the space is connected to a fiber optic network or is wired for DSL or a T1 line
(high-volume Internet connections). Also, find out to whom the landlord has sold the rights
to the risers (wire conduits) in the building. A commercial landlord cannot enter into
exclusive contracts with a single telecommunications provider such as MCI or AT&T. However,
to bring in another provider of your choosing could be expensive.
Electricity and Air Conditioning
Besides high-tech communications wiring, don't overlook plain-old electrical power as an important
consideration in choosing a business space. Make sure that any space you're looking at has enough
power for your needs, both in terms of the number of outlets in your space and the capacity of the
circuits. If you'll be running machinery or other electricity-hungry equipment, find out from the
landlord how much juice the circuits can handle and whether a generator is available during power
outages. Also, if you'll keep sensitive computer equipment at your office, ask the landlord how
many hours of air conditioning are included in the terms of your lease, and negotiate longer
hours if necessary.
Adequate parking is another common need for many businesses. If a significant percentage of
your customers will come by car and there isn't enough parking at your chosen spot, it's
probably best to look elsewhere. In fact, the city planning or zoning board might not
allow you to operate in a space that doesn't have adequate parking.
Finally, the location that you choose needs to be legally acceptable for whatever you plan to do there.
A certain spot may be good for business, but if it's not zoned for what you plan to do, you're
asking for trouble.
You should never sign a lease without being sure you'll be permitted to operate your business in that
space. Your city planning or zoning board determines what activities are permissible in a given
location. If your zoning board has a problem with any of your business activities, and it's not
willing to work out a way to accommodate your business, you may have to find another space.
Planning to Work From Home?
Working from home can be much simpler than renting a separate office space, but it might put
you in violation of zoning and other laws that regulate residential and business spaces. Be s
ure you're familiar with the laws that affect home businesses, as well as other legal
issues such as the home-office tax deduction.
To read and printout a copy of the Form please link below.
Checklist: Evaluating Retail Real Estate