For on-the-go businesses, such as roofing companies, concrete designers, or cleaning businesses, a facility's location is important. A central location in close proximity to customers can reduce the time between appointments and minimize wear-and-tear on company vehicles. For fixed-location operations, such as retailers, restaurants, and entities dependent on foot or vehicular traffic, a good business location is critical.
In this article, we focus on the considerations that are important to fixed-location businesses. However, owners of on-the-go enterprises can find some important takeaways, too.
What do I need to consider?
Some of the factors you should consider when selecting your site include:
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DemographicsThink about your target customer base. Is that population growing or shrinking in your area? How many people within your market have enough disposable income to become frequent customers?
Spend time exploring sites like Neighborhood Scout and Areavibes, which are often great sources of information. |
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Population DensityTry to determine which parts of your target market see the most foot and vehicular traffic. Look for pockets of activity, and try to stay focused on those areas as you search for vacant land, buildings, or storefronts. |
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Proximity to Popular Roadways or Points of InterestFind the parts of your city in which your target customers tend to spend their time. What hobbies or routine activities would they be doing that might compel them to stop by your location? Would proximity to a hospital, office park, mall, or another site benefit your business? |
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Proximity to CompetitorsIdentify the businesses in your market that compete directly with your own. Where are they located? Could that area support multiple similar businesses? Would close proximity help or hurt your bottom line?
While you're working through this exercise, try to determine which competitors are succeeding and why. Look into the kinds of buildings in which they operate, the businesses that neighbor them, and the traffic patterns around their site. Are there ideas you can borrow in finding your own site? |
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Proximity to Complementary BusinessesThink about the kinds of businesses your target customers might already be visiting that could entice them to stop by. For instance, would your coffee shop perform well near a gym? Would your fast-casual restaurant do well in a mid-range shopping plaza? Would your car wash see a steady stream of traffic near a high-volume car dealership? |
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VisibilityMap out the roadways and areas that a large percentage of your target customers use on a regular basis. Are properties available along that route? How much more do those properties cost than less visible locations? Do you believe you can make up for the price premium by being in your customers’ line of sight? Or, could a lower sales volume at a less costly site still position your business for profit? |
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Building Capacity RequirementsDetermine how much space you need to operate your small business. Will you require a large amount of space to house an oversized kitchen or dining tables? Will you need large loading bays? Can you operate from a small storefront, or will you need a large retail space? |
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AccessibilityThink about how customers tend to access businesses like yours. Do many rely on foot traffic? If so, you may want to focus on buildings that are sited along commonly traveled sidewalks or paths. Will your business depend on automotive traffic? Here, you’ll need to find locations that cars can easily enter and exit without working against traffic. Will you need a pass-through window or a drive-through bay? If so, you’ll need to look into freestanding buildings or end units of multi-unit complexes. |
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ParkingDetermine how many parking spaces you’d like to have available for your customers. Can you find a site with a dedicated parking lot? Would your customers be willing to park in a nearby garage and walk to your site? Would a lack of parking turn your customers away? |
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CostCalculate how much you can afford to spend on your lease or commercial real estate loan each month. Be sure to factor in the out-of-pocket site improvement costs you’ll need to pay before determining how much you can afford. |
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Future Development ConcernsContact your area’s land use office in your and ask questions about plans for commercial developments. Are any competing businesses breaking ground in the area? Are any new points of interest being constructed? Or, are there plans to remove nuisance structures? |
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Zoning RequirementsFind out which parts of your target market are zoned for your type of business. Your commercial real estate agent should be able to help you identify properly zoned options and explain the local process for having other promising properties rezoned for commercial or retail operations. |
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Vacancy PatternsTalk to a commercial real estate professional about the turnover that storefronts in your area experience. Are there parts of your market that experience frequent vacancies? Can you determine whether those vacancies are related to a store’s concept or the location itself? |
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Other TraitsDetermine if there are other qualities you hope to find in a building or parcel of land. For instance, is it important to you to find a site that needs minimal improvements, or are your design specifications so specific that you’ll need to invest significantly in any location you choose? |
You’ll need to consider two other important factors, too:
Whether to lease, buy, or build your site.
Depending on the real estate that’s available—and a host of other factors—you’ll need to decide whether to lease a storefront, buy a freestanding building, or acquire land and build your business location from the ground up. Acquisition costs, construction costs, renovation costs, permit needs, tax considerations, and timelines are some of the many factors you’ll need to consider. Our guides, Lease or Buy: How to Make the Right Call for Your Small Business and How to Attain Financing for Your Small Business’s Construction or Renovation, can help you with this important decision.
Whether to operate from a stand-alone structure or a multi-unit facility.
Your business may perform better in certain types of structures than in others. Consider whether you’d prefer to be located in a freestanding structure, a strip mall, or within another entity, such as a mall, airport, university, or hospital. The costs of these options can vary significantly, but careful assessment can help you determine which option will help you serve your customer base most effectively.
Will location choice affect my ability to attain financing?
If you’re using bank financing to cover any portion of your startup costs, you should share your proposed location with your lending officer before making an offer. This is especially important if you plan to use their funds to buy land, acquire a building, or make renovations. Many banks want to ensure that the location you choose is favorable and likely to succeed. A great location gives them more reason to believe that you’ll see traffic and generate enough cash to make your loan payments and live up to the terms they provide.
Who else should I talk to before making a selection?
Numerous other people can offer valuable insight as you search for a business location. These include:
Your real estate agentYour real estate agent may know about properties soon to hit the market, and they may help you make sense of the turnover that has taken place at any site you consider. Further, they can advise you on how to position an offer in light of local economic conditions. |
Local real estate developersLocal real estate developers can be an invaluable source of information. Major developers in your area will know of commercial developments in the works that may fit your criteria, and they’ll be able to tell you about the availability they have in their existing developments. |
Local zoning and planning boardsYour city’s zoning and planning boards may be able to help in two ways. First, they can share information on the sites of future and existing developments in your territory, which may include sites that haven’t been on your radar. Second, they will be able to advise you on the process of having a property you’re interested in rezoned for commercial or retail use. |
The local chamber of commerceYour region’s chamber of commerce can help you connect with local government officials and business leaders who can serve as resources through your startup process. The chamber may also help you learn about area laws and regulations affecting businesses in various parts of your target market. |
City engineersCity engineers may have a wealth of information on the projects that are taking place in your target market. They can share insights on how new bridges, roads, or infrastructure projects may redirect traffic flows through the region. This critical information can help you discern which sites are valuable today and which may be valuable in the future. |
The area’s transportation bureauYour city or county transportation office may have statistics on traffic patterns, traffic counts, and pedestrian traffic near your preferred site. Depend on their expertise to pinpoint traffic concerns and areas of opportunity. |
Other business ownersTalk with other area business owners about their business location searches. Ask why they chose their current site, what they learned, what they’d do differently next time. |
People who live or work in your marketWhether or not you live in your target market, you can benefit from talking with others who spend time in it. Ask about crime and traffic problems in the area, the kinds of businesses they’re interested in seeing in vacant storefronts, and their perspectives on why other businesses have failed or succeeded in the area. |
The local police departmentYour city’s police department will have valuable information on any site you consider. Ask about crime history, crime rate trends, or traffic concerns that could impact your business’s success. |
Your attorneyYour attorney may not help with site selection, but they can help you review the terms of any lease you consider and point out anything that’s out of the ordinary. They can also help you negotiate the price and terms of your lease agreement. |
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One of the best ways to gather insights on a location is with a tool like IdealSpot. For about $350, you can learn about consumer demographics, traffic and mobility patterns, area spending, and market indexes for a single location. Be sure to check out a sample report (you can do that here). If you decide to proceed, use code owner_actions to save 15% on your purchase*.
Restrictions may apply. This offer is available for a limited time. Visit idealspot.com to learn more. |
I think I found a good business location. What should I do?
First, spend a good deal of time at the site you’ve selected. Visit the location on multiple days of a week and during various hours of a day to gauge the traffic patterns, foot traffic, and frequency of customer visits to neighboring businesses.
If you will be leasing a site, ask the site’s owner about any restrictions that are in place for construction or modifications to the building. Landlords may have strict requirements about renovations, so it’s important to know whether you’ll be able to make improvements before you commit to a business location.
Then, obtain and review the property specs and lease agreement. Share this information with your attorney and ask for help reviewing the terms and negotiating the purchase price. You can also read our article, Your Go-to Guide to Commercial Leases, to learn about key terms, red flags, and opportunities for negotiation.
Would you like to connect with an attorney to discuss business location concerns? Consider working with Contract Counsel. Check out their website here.
What’s next?
After selecting your business location, you should attain the financing you need to begin construction or site renovation. Read our guide, Cover Your Small Business Construction or Renovation Costs, to review your options and proceed with the choice that’s right for your business.
Starting a business is a complicated process, but we have articles and advice that can help you with every action you need to take. Log into your owner’s portal for free, personalized guidance that will help you make your venture a success.
