Determine Where to Locate Your Business
Determine Where to Locate Your Business
Location matters. Whether you sell products or services that depend on customers visiting your location, or whether you simply need office or manufacturing space. Establishing or relocating your business to a great location could determine its ultimate success or failure. After all, great products might sell themselves but customers still need to walk in your door.
Deciding where to locate a business is critical for most retail and service companies, but it is also critical for other forms of business. Factors like zoning, rent, taxes, access to great employees, etc., should all be considered. The following is an overview of how to find the best location for your business.
Start the process by determining your needs. Your requirements will drive many of your other decisions. Consider:
- The size and layout of the space you need.
- Type of structure and appearance; less important if you only need office space, much more important if you depend on walk-up traffic.
- Special requirements: ceiling height, loading docks, etc.
- Utilities access: unusual power, water, or other utilities requirements.
- Parking and access for employees, customers, and disabled persons.
- Basic and additional facilities: restrooms, kitchens, break areas, etc.
- Flexibility for expansion or alteration if your needs change.
Take the time to list all your requirements. A location that does not meet your short-term needs (much less your long-term needs) isn't suitable no matter how appealing it might initially seem.
Cost is always a factor. You may think you've found the perfect location, but what if you can't afford it? Then it's not the perfect location after all. Cross it off your list, or file it away for consideration down the road.
Type of Business
Once you understand your requirements, consider your company's type of business. For now focus on overall concerns. We'll consider factors like cost later.
- Retail. First, and most importantly, your location must attract customers. Focus on finding locations potential customers notice and frequent. Look for locations where you can take advantage of shoppers attracted by other businesses. You may or may not want to be located near competitors. (Sometimes groups of similar businesses attract more customers. For example, many cities have a "motor mile" area with a number of car dealers located along the same strip.) Also consider the image you wish to project. Your business "neighbors" and your general location can greatly affect how customers perceive your business. Above all think about customers; without customers you have no business.
- Service and/or knowledge-based. Service businesses can be a little more flexible than retail businesses when searching for the right location. If you won't depend on walk-up customers, focus on a location that can benefit from being near other companies in your industry. Choose a community or area providing the technology infrastructure you need and that appeals to your employees.
- Manufacturing. Look for locations with convenient transportation (especially for trucks), local resources you can draw from, the presence of companies that can support your particular needs, and a strong labor market.
Once you know your requirements, look for locations appropriate for your type of business that also meet those requirements. No matter how perfect a potential retail location, if it's too small, it's not right for your business. Create a list of locations that meet your needs and your type of business.
Consider Economic Development Zones
Congress gives States the right to set aside special economic development zones, which can be a whole community or just a portion. Each State establishes the boundaries of its zones and sets special rules. The incentives differ widely from State to State. Development zones are usually geared to attract manufacturing businesses. Often retail, child care, entertainment and service companies are not eligible for zone benefits.
Economic development zones are areas offering tax incentives, credits, and other benefits for businesses that establish or expand in that area. The goal of most economic zones is to spur economic and job growth. Depending on the type of business you run, an economic zone may offer significant advantages:
- Enterprise Zones. Enterprise zones typically exempt business owners from paying property taxes, but other tax breaks may also apply. Generally the tax break lasts for a fixed number of years, most commonly from three to as much as fifteen years. Other incentives might also be offered, like low-interest loans, credits for training new employees, or subsidized utilities.
- Empowerment Zones and Enterprise Communities. The government-sponsored Empowerment Zone and Enterprise Community program makes grants to distressed communities and those communities can use that money to provide incentives to local businesses. The nature of those incentives varies according to the locality.
- Free Trade Zone. Free trade zones allow businesses to avoid import and export taxes. Typically a free trade zone is located near major transportation hubs like interstates, airports, and railways. Locating a business in a free trade zone can dramatically affect profits, since the business will not pay customs fees and taxes on imports and exports. As you can guess, the goal of a free trade zone is to encourage imports and exports while encouraging the use of major transportation hubs.
Check with city or local government offices to learn about any economic development zones (and other community or government-sponsored incentive programs). If the incentives are attractive, an economic development zone might be the perfect place to locate your business.
In most cases you won't find the perfect location so the location you choose will require at least a few compromises. Before you get too deep into the process, take a moment and prioritize your requirements and needs. For example, you may decide factors like these are most important:
- Wages and salaries. Think about your short-term and long-term needs. Does the local workforce meet your requirements? Can you afford to pay more to attract talented employees?
- Supplier and vendor access. Some businesses rely heavily on their suppliers and vendors; if you need quick turnaround you'll need to be close to critical vendors. For example, if you run an auto repair shop and the local parts distributor is several hours away, you'll experience significant job delays (or will have to create your own parts inventory).
- Infrastructure. Some locations already have the services you need; others may require upgrades or major installations. What can you do without? Which services are critical to your business?
- Local government considerations. Taxes and fees often vary from area to area and even town to town. Differences in property tax rates, business license fees, and taxes on inventory and cash receipts can significantly impact your company's profitability. An extreme but common example is taxes on tobacco products; some cities tax those products at a relatively high rate; locating your business just outside the city limits could be the difference between profit and loss. Make sure you understand the total cost of doing business in the areas you consider.
Create a Short List and Investigate Further
Once you have prioritized your needs, develop a short list of locations to investigate thoroughly. How will you decide the best location? Answering these questions about each location on your short list will help you make the right choice.
- Is the location zoned correctly for my type of business?
- Does the location meet my basic layout requirements?
- Does the location meet all my current space requirements: retail, storage, office, workroom, break room facilities, etc.?
- Will the location meet my future needs if my business grows as planned? If so, for how long? What are my options if I need more space?
- Do the existing utilities meet my requirements? Will I need to make upgrades? If so, who will pay for those upgrades?
- Is the location convenient for me and my employees?
- Does this location have the best demographics for customers and employees?
- Are competitors nearby? What impact will their presence have (positive or negative) on my business?
- Does the location enhance the reputation of my business?
- How easily can I ship or distribute my products? Does the location include adequate shipping and receiving facilities for my needs?
- How easily can suppliers make deliveries? Will stocking and replenishing supplies or inventory be difficult and time-consuming?
- Is sufficient parking available for customers and employees?
If it helps, feel free to rank or score each location on your short list for each of the questions above. It's hard to find the perfect location. Ranking each potential location will help clarify your thinking.
Finally, Factor in Cost
Once you have ranked the locations on your short list, now consider cost. All other considerations being equal, choose the less expensive option. Keep in mind that cheaper is not always better. For example, a location that is more expensive in terms of lease cost but that also provides better access to potential customers and lower utilities costs might be the best choice. Weigh the costs and benefits of each location. Some differences may be worth paying more for; others will not. Consider your requirements and your goals. Think critically about what you really need to help your business succeed and then factor in costs and expenses and determine what you can afford.
The result should be the right location for your business.