Finding the right business location is one of the many important steps to take when setting up a business.
Looking for the prime location involves considering everything from the more obvious elements like costs, to the unexpected things like consumer demographics.
For a lot of businesses, their location is just as important as what they sell.
It’s easy for customers to make assumptions about a business based purely on its location–so before even having a chance to communicate with them, they have a good idea of whether or not you’re the right business for them.
It defines a lot of other circumstances:
Who your customers will be
Access to raw materials and other services
The type of competition
Availability of the right employees
Look at the business costs.
A lot of businesses are limited by their funds, so budget plays a big role when selecting the right location.
The more basic costs include rent and utilities, but also examine whether or not the location offers all the necessary equipment for running an efficient business–the responsibility of implementing a faster internet connection or adding specialist equipment is in your hands.
However, costs are not the only things that come into play when picking a business location–it is just a small part of the bigger picture.
A lot of cities offer incentives for small businesses to locate there, in the form of grants or subsidies. This can be extremely helpful when starting out, and it likely means a lot of other small businesses will be close by, which can be beneficial, but more on that later.
The SumUp Small Business Index gives you a comprehensive overview of the top 100 European cities to launch a small business in. Discover what cities offer the most government incentives, where competitors are situated, and get closer to finding the right business location.
Incentives, as well as limitations, need to be taken into consideration when choosing a location. Some cities have restrictions on specific business operations, others have regulations in place that make setting up more costly.
Then look at the business history of a location. A lot of locations may look promising, but the venue history could prove otherwise.
Setting up a restaurant in a location where 5 restaurants have previously failed might mean that there is an underlying cause that will lead to a similar outcome, no matter the quality of the restaurant.
Once the physical location has been considered, it’s time to start thinking about other environmental factors.
The location of a business has a huge impact on its footfall.
Before selecting the right location, identify the target market and their whereabouts. Being close to customers could be key to running a successful operation.
The area demographics provide insight into the economy, showing the spending habits of the typical consumer, allowing for an analysis of both the means and desires of potential future customers.
We’ve looked at costs and customers, now we have to think about the competitors.
The location dictates whether there will be a lot of competition or absolutely none, and distance to competitors might seem like a good thing, but being near to similar businesses can be beneficial.
Situating close to a competitor means fighting for the same foot traffic, but the foot traffic is also in that area for a reason–the chances of finding a competitor-free area populated with an ideal target market is very slim.
Being close to competitors is a reality almost all businesses have to face.
And it doesn't mean that you’ll lose out every time, there are other ways to attract customers–this is where your pricing strategy can help.
Aside from benefiting from the same amount of foot traffic, locating close to the competition brings various other advantages, especially through the eyes of suppliers–who can be more flexible and inexpensive when they only have to travel to one location instead of several.
It also creates a ‘bubble’, attracting even more like-minded businesses who will support similar ventures, from technology to improving the economy and quality of life of the wider area.
We see this in Silicon Valley, where there are so many innovative startups in one location that now tech companies are setting up in the area with the aim to provide these businesses with solutions for their employees, offering better learning and training facilities and modern transport options.
The benefit of the ‘bubble’ is also visible in smaller, more rural towns, where small businesses might share an office space in order to cut costs.
Big businesses also gain from this, but that doesn't make them invincible, in fact, there are a lot of ways that small businesses can compete with their larger competitors.
Does the benefit of locating far away from the competition outweigh the advantage that being near them brings?
Some businesses will decide not to decide, and instead push for multiple locations.
The number of mobile businesses is on the rise, and they are increasing in diversity–from the traditional handyman, to coffee and food stands, modern businesses don't always have to be stationary.
A lot of businesses also need to think about their employees, taking their needs into consideration when deciding where to set up.
Will they be able to comfortably commute? What else is available for them in the surrounding area?
When considering consumer demographics, think about the kind of employees you might be attracting, and along with that start to see what kind of expectations and requirements they might have from an employer–from the average wage to employee benefits.
So when looking to find the right business location, don’t forget:
Look at your costs
Find out what incentives are on offer
Look at your customer demographics
Analyse the business competition
And remember it's not just about the consumer