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"Location! Location! Location!" Does this mantra REALLY apply to you and your potential new business?


Whether you run a surf shop in an urban centre or a mail order kids-wear company from the suburbs, the location of your business is a key concern.

Working out how the placement of your business may affect its success should be one of the first steps in your business plan. Before you embark on buying any new business, ask yourself the following questions to ensure its location is appropriate to your needs.

Is location relevant to your new business?

In the buzz of the acquisition process, the temptation may be to buy a business in a popular (and often expensive) area, regardless of whether that particular spot suits your projection of potential custom or not.

In some cases, location can be the vital factor that leads to feast or famine. In others, high street positioning is far less important than finding affordable rental space.

And for many businesses, location is irrelevant. Van based services, which travel to the customer (plumbers, electricians etc) mail-order companies and web-based businesses would do far better to channel what they save in rent into their customer experience and profit margins, and settle in a cheap and out-of-the-way spot.

What type of location does your business need?

Once you have established that location will affect your custom, have a look at the area around your new business and make sure that the right criteria and demographics are in place.

The very nature of your business will determine how you attract customers. A coffee shop in Cape Town will depend largely on foot traffic, for example, and will need to be in a position where there are plenty of pedestrians passing by during opening hours. 

A car repair shop, on the other hand, would do better on a popular driver’s thoroughfare, where it is highly visible and easily accessible from the road.

Sometimes, it pays to invest in a business where there are similar enterprises around. A women’s fashion boutique will be well placed near other clothing stores as shoppers tend to spend a few hours browsing in a certain area.

However, too many rival businesses can also be fatal – getting the balance right between choosing a spot with healthy competition, and one where you may be edged out of the area requires delicate judgement.

Bear in mind that neighbourhoods can change dramatically in a short space of time – buying a bijou gift shop in an area which has suffered economically, or conversely investing in a pawn shop in a newly gentrified location, are obvious oversights.

Safety will also be a consideration for your customers and employees alike – consider the crime rate in your chosen location and think carefully about how that might affect your business and it’s image.

Can you afford it?

Whether you are buying a property and paying a mortgage or taking on a rental lease, it is vital that you factor these payments into the financial side of your business plan.

Estimate how much you think you can afford to pay for your property each month, bearing in mind your projected revenue and other outgoings.

In terms of rent – spend some time researching the average costs in your desired area and make sure you are not paying over the odds.

Chatting to property agents is a good idea during your planning process. They will be able to give you a figure for the average cost of retail space per square foot in your area and you can then use this information to compare the viability of your chosen business with similar enterprises in different locations.

Does you chosen location have the right facilities?

So you have settled on a business and are happy that its location is entirely suitable to your particular business. Just don’t forget to check that the place has the basic requirements for the way you want to operate.

If your business will rely heavily on web-based activities, make sure you have sufficient communications wiring. Is the space connected to a fibre optic network or wired for a higher volume internet connection such as ADSL line? Having to bring in a provider of your choice may be an expensive extra cost.

Check that the electricity supply is sufficient and if you are a catering business, that the kitchen equipment will facilitate what you want to achieve.

If you anticipate that most of your customers will travel by car, you will need to be sure there is enough parking at your chosen location. It’s also worth checking that the local planning authority will actually allow you to set up business where there is, in their opinion, inadequate parking.

Finally, check that you are legally allowed to operate in your chosen area. Many locations have zoning rules that exclude certain types of businesses. The previous owner may have overlooked this, but you don’t want to be the one paying the price.

Ultimately, deciding whether a specific location is right for a certain business will take some serious market research and a good dose of common sense. After this, you should be in just the right position for a sure shot at success.

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