Location, Location, Location
 By Terry M. Blair

When you’re deciding where to set up your small business, it’s all a matter of real estate. And everyone knows real estate boils down to three fundamentals: location, location, location.

Despite the liberation offered by fax machines, phones and the Internet, businesses still must be physically located somewhere. Even mail order customers rightly get a queasy feeling when the only contact information for a business is a P.O. box. Conversely, a street address, even if never visited, conveys stability and accountability.

But apart from instilling customer confidence, there are other practical and sometimes rarely considered benefits when it comes to locating your business. Keep these tips firmly in mind when scouting the perfect location for your startup business.

The basics

• Visibility – If your business depends on attracting foot or vehicle traffic, be sure that your sign or display window is clearly visible. It’s impossible to lure passersby who don’t know you are there.

• Volume and speed – Related to visibility are the twin considerations of how much foot and/or vehicle traffic passes nearby, and how quickly it moves. A sign post alongside a freeway isn’t as likely to attract impulse shoppers as it is along a foot path in a congested retail strip. Don’t pay a premium for a so-called “frontage” location if the amount of traffic is too low or the passersby flit past too quickly.

• Cost – Speaking of paying, there is no more difficult factor to calculate when choosing a location than how much to pay. Higher rent doesn’t necessarily translate to higher sales. But landlords may charge lower rent for a reason, and if the reason is that the location simply isn’t customer-friendly, you could be better off paying more for a better location. Your best gauge may be to survey existing businesses like your own at prospective locations. But keep in mind that too many businesses too much like yours may be competitors that drain away business.

• Accessibility and convenience – If your customers can see your business from the roadway, and if it’s easy to find on a map, you still haven’t delivered them into your showroom. Will they need parking that you don’t have? Must they climb two flights of stairs or traverse a steep incline? “So near, yet so far,” is not the sentiment you want to hear.

• Draw – If yours is the only antique store within 100 miles, you may draw customers from that entire region. But if yours is the tenth flower shop in a 10-block area, you better be able to turn a profit on sales to customers on your block.

• Security – Customers have to be pretty hungry for what you sell to risk danger. Most won’t. If your business relies on being open in the evening, is the immediate vicinity well-lighted and safe? Is the walk to and from the parking lot and your front door short enough to instill confidence? Is crime rampant in the neighborhood, and are security guards highly visible as a deterrent to crime?

Sometimes overlooked

• Restrictions – What a sad day. After signing your lease, you discover that government or real estate covenants, conditions and restrictions prohibit you from erecting the sign that would make your business visible from the roadway. Thoroughly explore all restrictions on use and expansion before committing to a contract.

• Flexibility – Just as important to meeting your current needs is the necessity for accommodating growth. If your business plan is accurate, will the current facility meet your planned five-year expansion? If not, why sign a five-year lease? Also, don’t forget to find out upfront whether you can scale back your location (and your rent) if your business itself needs scaling back. Don’t get stuck paying for space you don’t require.

• Vendors – Don’t forget to factor in your suppliers and vendors. If trucks delivering your merchandise can’t park within a block of your shop, how are you going to stock your shelves?

A mistake to avoid

• Term limits – Carefully consider the length of any lease. Today’s great deal may not be so great in three years if sales decline. With all else equal, long-term leases may offer better annual rates, but they become a burden if you want to get out of them to take advantage of a better location that opens up later. Negotiate shrewdly. Don’t pay too much, but don’t pay too long either.

(Posted January 2006)

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