Building Your Wealth
How To Strategically Select Your Business's Location
If you're experiencing success as a business owner, you might be inspired to expand your horizons and increase profits by opening an additional store in a new market. Just be careful to approach the location selection process the same way you did with your first business. If you don't put a lot of thought into your decision, you may run into issues down the road.
When choosing your next location, there are several things you should think about to set yourself up for success. For instance, do the location demographics reflect your target audience? Are you looking for a large plot for a manufacturing facility or a small site for an office building? Where are your competitors located? By answering questions like these, you can get a better idea of what you're looking for.
Here are four key considerations to help you choose the best location for your next business opportunity:
Your workforce will be an integral part of your company. As such, considering workforce development opportunities can help you home in on specific locations. For instance, does the economy in the area support affordable housing and a reasonable cost of living? Will employees have access to schools, museums, parks, and playgrounds?
Although you might plan to hire remotely, it's important to think through what your business needs. "Even with the rise of remote work, your business expansion plan should factor in the prospective region’s talent pool," Missouri Partnership CEO Subash Alias writes in a Chief Executive article. "Some roles can be performed from anywhere, but you might need local employees who can commute to your new location during the workweek."
So think about what qualities you want your future employees to have. Do they need to be creative? Flexible? Innovative? Should they share the same vision and goals as your company? Search for locations with workforces that align with your ideal employees. If you find a community that's a good fit, you'll have an easier time hiring and recruiting.
Your business model is another important factor to consider. What do you need from a daily operations standpoint? Matt D’Angelo, a small business freelance writer, poses this example: "If you're working in the industrial sector, or you're running a business that receives large supplies of goods, pick a location with warehouse storage space and easy delivery options for clients and customers. A business that specializes in shipping and holding goods needs certain structural amenities, like loading docks."
You should also evaluate the infrastructure of the locations you're considering. Are you looking at an existing building? Does it have the ability to support your modern business's high-end technology needs? Does it have central air, heating, and cooling? Stairs and an elevator? If you're considering building on a new site, is there ample room for parking? Will it be easy for employees, customers, and purveyors to get to you? Is the site certified and "shovel-ready"?
Finally, you'll want to look into the success—or lack thereof—of previous businesses in the same location. If multiple businesses failed in the same area, you should do some research and find out why. If there's a chance you could fail for similar reasons, you'll want to look elsewhere.
Your location needs to fit your budget, and this includes any hidden or surprise costs. "You might think this goes without saying, but the rent price is not all you need to consider when it comes to money," an Enterprise League blog says. "When choosing a business location, you must consider the hidden cost of doing business as well. Renovations, taxes, utility upgrades, minimum wage requirements, and economic incentives are costs that can increase your costs or save you some money.”
Hidden things that can factor into your startup costs may vary based on location. For instance, local business and property taxes will vary by state. You may also need to navigate unexpected renovations or building costs, such as installing a water softener system if the region's water supply has too many minerals. If you're choosing an area that's notoriously expensive, you'll likely need to pay employees a competitive rate. After all, 67% of full-time employees in the U.S. expect their salaries to factor in cost of living.
Location can also factor into your marketing and advertising costs and plans. The way you market your business will vary based on the demographics in your area, such as age, gender, occupation, and household income. If the community isn't a good target audience for your business, you may need to spend more on marketing or reconsider your location.
It’s important to think about places in terms of scalability, too. If you're nestled between several other stores or located on the 20th floor of a high-rise building, it'll be harder to attract customers.
"You may find a business location that isn’t in a convenient or high-foot-traffic location," a ZenBusiness blog says. "If so, you may need to compensate. This may require extra marketing so that customers know where and how to find you. Online business listings, print advertisements, websites, and social media platforms are all helpful tools."
If you’re thinking about expanding your business, you’re on the cusp of a very exciting time. But before you choose your next location, it’s important to consider what workforce development opportunities are available, what your business model needs to succeed, which hidden costs might pop up, and how a location could impact your marketing and advertising plan. Once you consider these factors, you'll be in a better position to choose the best location for your business.
The contents in this article are being provided for educational and informational purposes only. The information and comments are not the views or opinions of Union Bank, its subsidiaries or affiliates.