The Importance of Location to a New Business
Location is one of the most important aspects to setting up a new business and can in fact often make or break a new venture.
A well chosen location can attract customers, help a business survive in difficult economic conditions and dictate costs in almost all areas of the business including labor, production and marketing.
Choosing the right location for a new business however requires extensive research and planning due to the fact that the needs of different businesses are extremely diverse.
Cost and Availability
First and foremost, cost is the deciding factor in where most businesses are located. New businesses for the most part are operating on a strict and limited budget for the first few years they are in operation, and might be doing so without making a profit.
Secondarily, any business owner eager to start a new business or who needs to relocate is ultimately limited by what space is available, and in a successful area this is going to be limited.
Proximity to suppliers
The closer a business is to their suppliers, the more flexible they can be in terms of production, and the less raw materials they need to store at any given time.
This of course needs to be weighted against proximity of customers as one isn't always close to the other.
At the very least though, a business needs to be able to be able to cheaply and efficiently receive supplies and or raw materials. Generally urbanized areas can make shipping and receiving difficult due to relative lack of space and increased transportation time and costs.
Proximity to Customers
Dependent on the kind of product a business offers, passing trade and public visibility may play a big role in securing enough trade to stay afloat.
Because of this a business location should weigh up the cost of a location against the need for public awareness.
Prime locations such as city centers will attract more customers in most cases, but will undoubtedly be a lot more expensive in terms of fixed costs. Equally for some businesses locations in highly build up areas aren't feasible due to space required.
Locations on the outskirts of built up areas tend to be cheaper but aren't nearly as visible. As well as space being more reasonable, logistics can tend to benefit from locations that don't suffer from the congestion of big towns and cities.
Assessing competition is essential before deciding on a business location. If competition is too strong in a given area, growing a customer base will be extremely difficult without either a unique selling point or a very big marketing budget.
Equally if there is no competition in a given area, further research into potential sales might be considered. It could be that the reason there is no competition is that there isn't enough local demand to support it.
Generally when people read the term labor costs they immediately think of companies relocating abroad in order to take advantage of cheaper labor. Even within one country though the cost of labor can vary greatly depended on factors such the local economy or union presence.
The immediate temptation of any business is to tend to look for the cheapest labor available although this isn't always a realistic option. Depending on the product a business is offering, it may need to be located in an affluent area in order to attract customers. Equally in some areas cheaper labor might mean difficulty in finding enough employees with specialized skills.
- Shoestring Business Startup
A business starting on a shoestring will develop financial discipline, which will help it become more profitable sooner.
- How To Use Creative Thinking In A New Business Start...
This article is one in a series, I have been working on as I pursue starting my own new business venture. I feel that by sharing what I know and, what I have been currently researching, not only will it be helping me look more closely but I might...
- Starting a new business: How to start a small busine...
Owning your own business in the past was something that many of our grandparents considered to be a dream. If one had a store of their own then they were looked upon as a steady person, maybe not well off but okay etc. That business owner became a...
- How to Use Operations Management Tools in Business
Operations Management tools, when properly implemented, reduce cost, waste, and risk. They are essential to business success and profitability. Here's how to use them!