Location, location, location — it’s true in real estate, and it’s true when selecting a brick-and-mortar storefront for your business. Whether you’re opening a service business, a retail store, or a restaurant, these are the six factors that you absolutely must consider when choosing a business location:
Retailers and restaurants make most of their money from passersby. Greta Dvorak, an aspiring Dunn Brothers Coffee franchisee in Minnesota, considers vehicle traffic one of the most important aspects of selecting her location.
According to Dvorak, “We need about 20,000 cars to pass us every day to be a profitable drive-through-based coffee business. Whenever we’re looking at a potential site, we google the traffic records from the department of transportation.”
It’s not just the traffic that matters, but also the time that it picks up volume. “We need about two hours of steady traffic passing by in the morning,” Dvorak says. “That would yield up to 150 drive-through sales each weekday.”
The sheer volume of traffic driving by a location could dictate your business’s success.
In general, more traffic means more profit. Your business won’t survive tucked away in the corner of a deserted mall.
2. Does the Location Work for Your Customers?
Of course, passersby aren’t enough to build a thriving business. You need to convert that traffic into customers. That means choosing a convenient and comfortable location.
“At a bare minimum, we need 1,400 square feet to build our coffee shop, but we prefer more,” Dvorak says. “Our vision for the shop is to create a space for people to gather. We want to have floor space that makes it easy for customers to have meetings and private conversations. We want them to feel comfortable working on their blogs at one of our tables.”
Potential customers need to be able to conduct business without going too far out of their way or waiting in long lines. If they access you by car, they need to get into and out of your parking lot quickly. Your brick-and-mortar location needs sufficient parking and easy access for your customers.
3. Does It Work for You?
Your business location must work not only for your customers, but also for you. You need to find the correct building for your infrastructure needs.
Does your business have significant inventory? You’ll need a back room or a warehouse of some sort. Do you need bathrooms for customers? What about food preparation space? How will you deal with garbage? Is it legal for you to operate your business there?
Business owners need to find a location that allows them to operate their business without undue hardship. This means you need to consider the lease you sign and the zoning laws before choosing a location. Most small-business owners are advised to consult a lawyer to confirm whether a location will work for them.
As a business owner, it’s imperative to find the right price. This could mean negotiating rental rates. It could also mean thinking creatively about buying and developing land yourself “We’re open to renting, but we’ve had to say no to great locations because the cost of renting is just too high,” Dvorak says. “Rates are high because retail zoning in our area is very limited. Right now, we think we’ll probably buy land and develop it.”
A building with the right costs will determine whether or not Dvorak’s franchise is ultimately successful. “I spoke with one franchise owner who explained that with 230 sales tickets a day, he’s losing money, but with 280, he’s making a ton. Every dollar that doesn’t have to go to rent means were that much more likely to stay in business.”
Consider the cost of utilities, taxes, and rent when you’re analyzing locations for your small business.
5. Community Demographics
Most brick-and-mortar businesses depend on the local community to form their core customer base. As a business owner, you need to find out two things about the people who live and work near your potential business location:
First, determine whether the local population will be open to the product or service you’re offering. The easiest way to figure out if you’ll be successful is to see if similar businesses have succeeded nearby. Of course, you may be the first to test the waters in a specific area. In that case, you should do as much analysis as possible to determine whether people who live or work nearby match your ideal customer profile.
Second, it’s a good idea to find out if the area is thriving economically. It’s less risky to locate your business in a city with high employment and a growing business climate.
Areas with robust wages mean your customer base will probably have more disposable income to purchase your product with.
Some businesses manage to survive in areas facing general economic decline, but those are the exception. Most businesses need an economically thriving neighborhood in order to turn a profit.
Most small businesses avoid being next door to competitors, but it can actually help. If customers are already used to buying a certain product, you can benefit from the marketing efforts of the established competition. Your competitors have a base of customers who have a proven appetite for your product. By locating your business near competitors, you can grow the overall size of the market and try to take market share from your competitors by offering a superior experience.
Dvorak is trying to create a delicate balance when considering her business location. “I don’t want to be in the same parking lot as a competitor, because I want my product to be distinct,” she says. “However, a block away is fine because I know my product is better. Of course, I would need better accessibility for my customers, too.”
The Bottom Line
When it comes to selecting the right location for your business, you need to do your homework. Your business plan won’t work equally well in every location, and you don’t want to commit to a long-term lease if the location doesn’t fit your business model.