How to Choose a Business Location

Location, location, location: Why it matters.

If your business relies on foot traffic, you want a good, clean, easy-to-access location that leaves a positive impact on your clients. When researching the best location, consider how many competing businesses are in the area, potential zoning ordinances, permits, taxes, and government incentives.

Additionally, business owners should find locations where they can easily access supplies and fulfill shipments.

Questions to ask before you begin your research.

Will you rent or buy your space? 

There are many pros and cons of renting versus buying your business space. If you’re unsure how long you intend to be in the specific location, renting can help you decide whether the location is right for your business. Renting makes it easier to move your business, and there is less risk if you close, since you aren’t financially responsible for the property. Additionally, when renting, you don’t need to worry about maintenance or repair costs for the building. 

However, renting can put limits on how you decorate your space and showcase your business. Renting also means your business location is at the mercy of your lease with the landlord. 

Are you expanding to a second location? 

A successful second location is more than replicating your first location. Consider the logistics of shipping and receiving and how you can improve upon your original location. Renting can be a better fit for a second location as the shorter commitment and lower financial risk offer ease of moving in and out of the new location.  

If you’re expanding, is there market demand in your new location? 

When expanding to a new location, review car and foot traffic at the potential location and get a read on the local competition. Establish a network in the area, connect with the community, and reach out to nearby business owners to find out what unique challenges and opportunities businesses nearby are experiencing.  

Are there any government or tax incentives for investing in a new business location right now? 

Don’t overlook benefits the city or state might offer to businesses. Research local grants, incentives, or tax credits your business can qualify for by opening in a specific location. Additionally, consider state-specific small business loans you might qualify for. For instance, if you are expanding your business, the U.S. Small Business Administration specializes in loans to help underserved entrepreneurs.

Factors to consider before choosing a location for your business.

A great location is out there—you just need to know how to find it. Let us help.

There are plenty of factors to consider when evaluating a location for your business. You could look at everything from the curb appeal to the smell outside to the subway tile bathroom. It’s a lot to think about.

While these things are all important, some considerations are going to be more important. Below, we’ll walk you through the top 11 considerations you should think deeply about before choosing a final location for your retail business.

Zoning regulations

Figure this step out first. You don’t want to get too invested in the perfect retail business location, just to find out your business activity isn’t allowed there.

Look to see if retail stores can use the location. Then, look at proximity to commercial and residential zoning. Closeness to other commercial businesses could help you earn extra foot traffic, while nearness to residential zoning can help nearby customers access your store in less time.

Take care of the logistics of zoning, and then you’ll be free to look at the other factors.

Cost of the location.

Price should be one of your first considerations. It doesn’t matter if you find the perfect home for your retail business if you can’t afford it. You’ll need to calculate different costs to determine affordability:

• Rent – How much will the monthly rent cost?
• Terms – What terms are associated with the lease? Will you need to sign for two years or on a month-by-month basis?
• Fees – Are there any other fees associated with the property? Are there additional fees for trash pickup or receiving deliveries at the location?
• Remodeling – Is the space move-in ready, or does it need substantial upgrades to prepare for business?

Factor in all of these costs to create better apple-to-apples comparisons when evaluating locations.

Set a budget before you start shopping around for a location. If you find a site you love, you might be tempted to stretch your budget to make it work. However, keep in mind that rent will be one of your most expensive ongoing costs—it’s something you want to minimize if possible.

Region-specific business expenses.

Your business location will determine the salary and minimum wage laws you are bound to. For instance, due to higher cost of living, employee pay in Los Angeles, California, averages higher than in Burley, Idaho. 

The city and state you choose for your business also determines the government licenses you must acquire and fees you’re expected to pay. Consider costs like property tax, sales tax, city-specific taxes and fees, and state taxes.

Additionally, property value and rental rates can affect the cost of insurance for your location. This goes beyond knowing a small space in the heart of a big city costs a pretty penny per square foot compared to rural areas. For example, if your preferred location is in a city prone to earthquakes, insurance to cover that is going to cost you more. 

Demographics

Who are your customers and where do they “live”? I’m not talking about their actual places of residence, but the stores they frequent. For example, are you targeting 18- to 35-year-olds who do most of their shopping at malls? Or are you aiming to be the coffee shop of choice for busy professionals on their way to work?

If you want to be a quick stop shop, placing your business location in the middle of a mall is probably not the best idea. And if you want to attract your typical mall-goer, having it several miles from the nearest mall won’t get you much traffic either. You need to know the answer to this question before you proceed with any location hunting, because that will be the deciding factor on what types of locations will most likely be successful for your business.

Accessibility

You may have found what seems like the perfect space for your business, but what about its surroundings? The right space alone does not guarantee success. How easy is it to get to your potential business location? Can you get there only by u-turn? If they see your store and then pass it, how easy is it for them to turn around? You need to have a location that will be inviting and easy to access. Otherwise, even if a potential customer sees and is intrigued by your store, it won’t be worth the effort if they have to drive two miles before they can turn around.

You also need to assess the accessibility of foot traffic. How easy is it for someone to walk to the location? Are there sidewalks nearby? What about public transportation? This also ties in with knowing your demographic. If you know that a significant amount of your target market is more likely to take public transit, then your location needs to be near a bus stop or subway station. If you anticipate the majority of your patrons will drive to your location, then they need to have ample opportunity for parking.

Safety

Having that sense of security should be a big factor for you and will be a big factor for your potential customers. If they don’t feel safe leaving their car in the parking lot, they likely won’t enter your store. In addition, for your part, the higher the crime rate in the area, the more susceptible your business will be to break-ins and theft.

If it’s in a part of town where the windows and doors of all nearby stores are barred at night, that’s probably not a good sign. Running a business is tough enough as it is. Don’t add to your stress by placing yourself in a dangerous part of town that is known to have a higher-than-average crime rate.

Competition

Competition can be very good for business. It can also smother a business. Knowing the difference for your business type is crucial. You probably hear more often that it’s never good to be too close to your competition. You’ll want to make sure to consider how competitors might affect your business. Will you have the opportunity to share customers with them, or will you be going head-to-head for every shopper who walks down the street?

But what if being close actually helps business? Have you ever seen an intersection that has McDonald’s, Burger King, Wendy’s, and Taco Bell, all within a few hundred feet of each other?

One of the biggest reasons is, customers see convenience. If Store A doesn’t have what I’m looking for, maybe neighboring Store B will, or even Store C. A customer likely would not patronize every single one of them if they were all far apart from each other.

If you’re curious about the science behind this theory, here’s a breakdown of why it is common. Moral of the story: don’t write off a good business location just because it’s close to a competitor. If you are a retail business, you would likely do very well near your competition.

Other nearby businesses.

Your location must be convenient for your target demographic. Perhaps there is foot traffic from another business you could benefit from or a nearby business that would enrich your business. Consider if there is a specific service or crucial industry missing in the area that your business can provide. Additionally, ensure there’s no direct competition that might take from your business if you open a location there.

Nearby businesses also contribute to how easy or difficult it might be for your employees to get to work or live in the area. Will your employees have adequate access to resources, entertainment, housing, and schools to live in the area? Your proximity to other businesses can be mutually beneficial to enriching your employees’ lives and helping to keep them in the area.

Location’s popularity trend.

Just because a location is booming now doesn’t guarantee it will stay that way. Look at factors contributing to its success and gauge whether it’s a brief novelty or a lasting trend. Is a new mall or shopping center opening on the other end of town soon? How will that impact popularity at your desired location?

Take a look at the existing businesses in the area. Are they all brand-new, or are some long-timers? A load of new businesses will indicate an area is up-and-coming, while several long-time businesses will establish the long-term legitimacy of the space—a combination of the two is ideal when choosing a location.

Parking availability

Think about how customers will access your business. Is there free parking available in front of your store? If not, is it available somewhere nearby? Or will customers need to park blocks down the road to access your store?

Many of these factors will depend on whether you choose to locate your business downtown or a more car-friendly part of the city. There’s not a right answer, but keep parking in mind when evaluating your options.

Commuting distance

It’s easy to get lost on the map trying to find the perfect location for your retail business, but don’t forget about your home location. If you’re planning on running operations, you’ll be commuting to and from the store daily. Ensure that this doesn’t conflict with your work-life balance.

It might be worth opening a shop in a slightly less-ideal location, if it means maintaining (or creating) the lifestyle you want. Also, consider the commute for your employees. Will you be able to find nearby workers, or will your staff need to drive a distance to work?

Choose a location with confidence.

On the surface, the site may look great, but do your homework. Why is it available? What was here before? Why did they move locations? 

Additionally, research what the average utility and operational costs would be at this potential business location. Does the space include utilities with the rent or will it be separate? If you plan to run a business such as a restaurant or a coffee shop, does the space have the necessary hookups and/or plumbing you’ll need to operate? You may want to consider hiring an engineer to evaluate the condition of the location before signing a contract.

This is where you tie up all loose ends regarding your potential business location. If you think you’ve found “The One”, then leave no stone unturned. Make a checklist before you even start your hunt and don’t overlook any factor you considered important to the success of your business. Don’t get caught up in the idea of a great location until you’ve done your research. Know for a fact that it fits the bill on all accounts before proceeding.

Don’t let the task of choosing the right business location overwhelm you. Use these tips as a guideline, make your own checklist, and know your limits. As long as you go into the search with your eyes wide open, you’ll be able to find a great spot for your business.