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Updated Oct 20, 2023

Tips on Choosing the Right Location for Your Business

Make this crucial decision with thought, care and research.

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Sammi Caramela, Business Operations Insider and Senior Writer
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This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.

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Choosing a location is one of the most important aspects of starting a brick-and-mortar business and ensuring its long-term success. Location is particularly crucial for retail stores and restaurants that rely on foot traffic, accessibility, atmosphere and the right clientele. 

We’ll share how to analyze your requirements and options to choose a space where your employees, customers and business will thrive.

TipTip
If you're opening a retail store, focus on placing your establishment in an area where your target audience spends its time. A great location isn't great if it's inconvenient for your customers.

How to choose the right business location

When you’re starting a business, selecting the right location can be the difference between success and disappointment. If you’ve already completed your business plan and chosen an awesome business name, take the following steps before signing a commercial lease or buying commercial real estate

  1. Set a budget for your business location: Pinpoint how much of your business budget you can spend on a commercial lease or building purchase. You don’t want to fall in love with a location you can’t afford.
  2. Outline your business’s specific needs: Your business type and industry will inform your location’s specific needs. For example, if you’re starting a restaurant, your needs will be very different from a sales office that requires an office layout with ample conference room space and private offices. Will your parking area need to accommodate many employees and customers? List your requirements to avoid wasting time evaluating properties that won’t fit the bill.
  3. Determine crucial tax implications: Consider any prospective area’s state and local tax implications. Depending on your industry, it may be wise to seek a location inside or outside a specific zone or municipality to enjoy tax benefits.
  4. Research government incentives: Federal and state incentives for small businesses exist in some industries. Choosing a specific location may qualify you for certain incentives. If so, it behooves you to focus your location search on a specific area or business-friendly state
  5. Research your target audience: Where do your customers live and work? It’s crucial to choose a location your target market can easily access or frequently visit. Understanding your customer base will inform your location decision. If you’re partial to a specific area but aren’t sure if it’s a match for your target audience, thoroughly research the area’s demographics to gain a clear picture of product or service demand and disposable income levels. 
  6. Research an area’s specifics: If you’ve found an area in your budget that’s amenable to your target audience, dig deeper. For example, understanding the area’s zoning laws is crucial. Look at zoning maps so you understand what business activities are allowed. If you’re a retail store or restaurant, considering commercial zoning proximity to residential areas can be essential to ensure direct access to foot traffic. Make it your business to know an area inside and out.
  7. Plot competitors’ locations: If you want to move forward in a specific area, perform a competitive analysis to assess the competition’s presence and gauge demand for your offerings. You don’t want to move in next door or across the street from a fierce business rival. However, you may not be able to avoid the competition entirely. Understanding your situation is key. 
  8. Analyze individual properties: Once you’ve settled on an ideal area and found individual properties to consider, start comparing their pros and cons. Vet specific properties’ qualities, including office or building size, furniture, parking lot size, amenities, lease terms and more. Is the actual building or space somewhere your team and customers will enjoy spending time?
TipTip
If you've established a retail location, take advantage of location-based services to deliver proximity-based marketing and boost foot traffic.

Factors to consider when selecting a business location

Before signing on the dotted line, numerous additional factors will influence your business location decision. Some may not apply to your specific industry, while some will be crucial determinants.

Consider the following factors before making your business location decision.

What other businesses are nearby?

Beyond understanding where your competitors are, it’s crucial to consider other nearby businesses. Specific business types may complement your offerings, especially if you’re a retail location or restaurant. You may share customers with similar demographics or your neighbors may be excellent allies. 

For example, choosing an office location near a deli and a dry cleaner can provide conveniences for your employees. If you’re a florist, nearby proximity to a baker may lead to customer overlap. Collaborating with other businesses in your location is a bonus that can help create a prosperous economic environment for all.

Does the location provide good foot traffic? 

Excellent foot traffic can be the crown jewel for specific small businesses, including retailers and restaurants. Foot traffic can boost the success of your local marketing strategies and help your business grow. Assess your chosen location’s foot traffic by visiting the area at various times to see how the crowds ebb and flow. Will your business benefit from the foot traffic level? If you’re weighing several great business locations, foot traffic may become a deciding factor. 

Key TakeawayKey takeaway
If your business has multiple locations, tailor your local marketing strategies further by creating individual landing pages specific to each location.

Is the location convenient for vendors and suppliers? 

If your business relies on frequent inventory infusions, proximity to your vendors and suppliers can be critical. An inconvenient location may lead to frequent delays and unhappy customers who can’t get the items they want. 

Is your location accessible to employees and customers?

Customers and employees must be able to access your location ― particularly if you’re operating a retail brick-and-mortar store. Evaluate any potential location’s on-site parking and accessibility to highways and major roads. 

How crucial is your business location?

This may seem like an obvious question but consider how the location will impact your business. A retail store’s location may be much more critical than a company’s office headquarters. Consider your customers and employees and how the business’s location will impact them. If the specific location doesn’t matter as much, you can place more importance on things like building amenities and affordability. 

TipTip
Once you've moved into your new business location, set up a Google Business Profile so people can find you, learn about your offerings and map your location.

Will your business receive ongoing shipments of goods?

If you’re working in the industrial sector or running a business that receives large supplies of goods, it’s best to choose a location with warehouse storage space and easy delivery options for clients and customers. A business that specializes in shipping and holding goods needs specific structural amenities, such as loading docks.

Will you conduct meetings at your business site?

Consider how your clients will utilize your location. If you meet with customers regularly, you need an accessible location with reception areas, waiting rooms and conference rooms. If no clients ever visit, you may instead prioritize things like a robust business phone system and technical infrastructure. 

Will your customers and employees need dedicated parking?

Consider your company’s size when choosing a business location. Your employees will likely have to drive to your location. If that’s the case, is parking available? Similarly, if you’re meeting regularly with clients and customers, you need convenient parking options for them. Sometimes, the most important aspect of a business location is its free, convenient and accessible parking options.

Why your business’s location is important

Your location is critical to your business’s success for many reasons: 

  • Visibility: Depending on your chosen location, you might make your company more (or less) visible to its target demographic, directly impacting your revenue. 
  • Customer connections: Additionally, operating a business in a convenient location can help you connect with more customers and develop lasting relationships with them.
  • Employee satisfaction: Despite the rise of remote work, many businesses have in-office employees who must spend a great deal of time at the office. A convenient site with an excellent atmosphere and location can help keep employees happy. 
  • Professionalism: Your business location will speak to clients. A professional, attractive location can improve your reputation and how customers see you. However, a shoddier office in an inconvenient location won’t do you any favors. 

According to Statista, in-store and brick-and-mortar retail accounts for 85 percent of total retail sales, demonstrating the importance of foot traffic. If your retail store is in an inconvenient or inaccessible location, you could be missing out on a huge chunk of potential sales.

TipTip
After establishing your new location, get involved in your community by sponsoring local events to increase local brand visibility.

Getting the most out of your business location

Whether your business deals with customers or is more of an employee-centric office environment, your business location matters. It’s crucial to thoroughly assess how location impacts your operations and choose somewhere that meets your specific business needs. 

Depending on your business type, your location should be inviting and professional, creating a positive association for customers and employees alike.

Matt D’Angelo contributed to this article.

author image
Sammi Caramela, Business Operations Insider and Senior Writer
Sammi Caramela is a trusted business advisor whose work for the U.S. Chamber of Commerce and others centers around creating digestible but informative guidance on all things small business. Whether she's discussing cash flow management or intellectual property, work trends or employer branding, Caramela provides actionable tips designed for small business owners to take their entrepreneurship to the next level. Caramela, who also lends her expertise to the financial outlet 24/7 Wall St., has business management experience that allows her to provide personal insights on day-to-day operations and the working relationship between managers and independent contractors. Amidst all this, Caramela has found time to publish a young adult novel, develop a poetry collection and contribute short stories to various anthologies.
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