Thursday, April 5, 2012

How important is location to business success?

For years, real estate developers have recited the mantra of "location, location, location," and start-up businesses do well to take heed. Location is often the single most important determinant of a company's success or failure. Place your brick-and-mortar building in a prime locale and, other things being equal, the firm will have a greater chance of accomplishing its objectives. Set it down in the wrong place, and the business may struggle for years.

What factors should you consider when deciding where to locate your fledgling business?

Type of company. If you're starting a roofing business that plans to provide services at clients' homes, location may not be as important as, say, a barbershop that takes walk-in customers. The same might be true of a company that deals mainly with suppliers and vendors (a wholesaler, for example) versus a firm that generates revenue from drive-by traffic.
Demographics. A careful study of your customer base should factor into the location decision. A child care service that caters to busy professionals will need a location that makes drop-off and pick-up easy and secure. A store that sells geriatric supplies to senior citizens may want to make easy access a priority. If your customers are mostly teenagers, a mall setting may fit the bill.

Competitors. Ever notice how fast-food restaurants are often clustered along the same highways or near the same malls? Hotels and motels often locate near each other as well, in close proximity to airports and freeways. It may seem counter-intuitive, but placing your storefront close to your competition is often a wise choice. You can take advantage of your competitor's marketing, and customer traffic they've generated may spill over to your store. If Home Depot doesn't stock that widget, your specialty hardware store is just around the corner.

Affordability. Be realistic and find a location you can afford. A spot in an upscale mall might be great for snagging boutique customers, but if those clients don't bring in substantial revenue, rental costs may eat your business alive. You might be better off locating on a busy street near your target demographic. By renting a more affordable space, you'll ensure that more of your income stays in the company.

Above all, remember: There's no substitute for doing your homework — before you put down roots.

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