Once you’ve landed on a great business concept and fleshed out your business plan, the next hurdle may be figuring out your business location strategy. After all, a great location can give your business a huge advantage—or it can hold it back.
How do you find the ideal location for your new or expanding business? Here are five important considerations:
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Demographics
Who’s the target audience for your business? Knowing the answer to that question can help you identify whether a particular area is the right fit for your business. For example, if you’re opening an ice cream shop and determine that families with young kids are your most likely customers, you’ll ideally want to find a neighborhood with lots of them.
“When determining what area is the right fit for your business, look at factors such as age, income levels, education and population growth,” says Boyd Rudy, a broker and team leader with the MiRelo Team Keller Williams Realty in Brighton, Michigan.
The U.S. Census Bureau’s QuickFacts tool offers free demographic data on every state and county, as well as cities and towns with a population of 5,000 or more. It includes age, income, employment and homeownership status data—among many other data types.
Moreover, look at the quality of the neighborhood itself, Rudy advises. “Consider factors like safety, community support, proximity to amenities, and the overall vibe of the area,” he says. “A positive neighborhood environment can contribute to the success and reputation of the small business.”
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Accessibility
The type of business you have or plan to start will directly affect how important accessibility is. A restaurant or retail boutique, for example, will generally want a location in a highly foot-trafficked area—whether a Main Street-like retail district or a shopping center—so they get plenty of walk-in exposure from people stopping at nearby businesses.
If you have that type of business, you’ll want to look at other nearby businesses and how many customers they generate. “Assess the number of pedestrians in the area, nearby attractions, neighboring businesses and the potential for increased foot traffic in the area,” Rudy says.
On the other hand, a business that’s less reliant on foot traffic from nearby businesses and more reliant on, say, its reputation, referrals or advertising—such as a medical office or a dance studio—may do just fine tucked into an office building or corporate office complex.
And don’t forget about parking. As so many consumers today rely on driving, it’s important to find a location with enough parking spots available to meet your customer demand.
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Proximity to competitors
Most small businesses should avoid locating themselves too close to direct competitors—so they don’t lose potential customers to those businesses. But that’s not always the case.
In some cases, there can be advantages to being near competitors. For one, if you’re confident you have a stronger business model and customer offering, you might be able to win customers away from the nearby competition.
Moreover, some businesses—like car dealerships or furniture stores—can benefit by being close to each other, as shoppers like to have a central location for comparison shopping.
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Price
For small businesses, the cost to lease or purchase commercial real estate is often a big factor—and you need to make sure your business revenue will be able to easily cover it.
Keep in mind that you might be in a better position to negotiate with commercial landlords than you think—as vacancies in commercial properties have grown significantly in many parts of the U.S. over the past few years.
Beyond being able to negotiate a lower rent, some landlords will throw in extra incentives such as rent-free periods, tenant improvement allowances and free parking.
Moreover, some communities have developed economic development grants to small businesses that lease space in them. So it’s worth looking into whether your town or county offers such grants.
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Growth potential
If your business takes off, you may need more space. While you can wait to cross that bridge when you get there, it usually makes sense to consider it when choosing your first location, Rudy says.
“If the small business has potential for growth or expansion, consider whether the location can accommodate future needs,” he says. “Assess factors like available space for expansion, leasing terms and flexibility to make necessary changes as the business grows.”
Because your location can make or break your success, you don’t want to take the decision too lightly.
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