Location, Location

Today with the emphasis towards online information gathering, communications, and sales, small businesses leaders often neglect to fully understand the importance of physical location to the success of any business.   

While experts estimate one out of three new ventures focus on being online only, they along with many businesses with brick and mortar needs, view the physical location as an afterthought.  For reasons to be discussed below, location (formation and brick-and-mortar) should be ranked third after financial strength and product or service appeal in importance. 

First and often overlooked, it is important to consider location when a company is being formed.  Experts estimate most small businesses are formed within three miles of the founder’s home.  This factoid is not a surprising given a majority of ventures often begin within the founder’s home. 

INCORPORATION

At the basest level, where a company is incorporated or obtains its legal authority should be based on which states, like Nevada, have tax rates that are low or non-existent for smaller enterprises.  These states are also flexible as to physical location for the headquarters so that using a local mailbox center will often suffice.   

Finding the right state for incorporation can save small companies thousands of dollars in its first years.  There are also professional incorporation providers available to ease the process.  Whether the company is a C, sub-chapter S, partnership (LLP), or LLC should be the recommendation of your accountant.  Moreover, it is important for new business people to put themselves behind some legal entity to protect their assets. 

Second, once the legal incorporation is in progress, the next step is deciding if a brick-and-mortar location is necessary.  Leasing an office, shared space, using your kitchen table, converting your garage, are all available alternatives.  The key to these choices is not over committing to more than the company needs in its initial efforts.  Above all, seek to conserve as many liquid funds as possible to stretch out your runway to profitability. 

For products in need of a retail operation, choosing a location is critical to success.  Some of the factors to consider are: 

Type of business location (retail, mobile, commercial, industrial, etc.)

Consider your brand

Foot and car traffic offers ability to generate sales. 
What is the mix of nearby stores and are they complementary 
Rent amount; find out if it can it be kept smaller in the beginning 
Structure lease requirements to give the company grow or contract
Find locations that reduce the cost of build out 
Explore all equipment costs, lease alternatives 
Examine the local labor pool characteristics
Easy to connect with vendors and suppliers

Insure space availability for delivery services 
Determine adequate parking availability for customers 
Evaluate crime statistics involving nearby retail outlets 

Checkout common charges, escalations, extraordinary expenses associated with the location

A recent study by Small Business Digest determined many companies entering their fifth year begin to consider purchasing their first physical property.  For professional services firms, this point occurs about three years later.  For retail stores and distributive companies, these considerations usually revolve around needing extra space.  

Real estate experts are split on the advisability given the high interest rates but the availability of existing buildings often well-suited to the company’s needs at attractive prices make for compelling arguments to purchase.  A rule-of-thumb one real estate expert suggests is to double current square footage needed in choosing new location to allow for expansion in later years. 

In today’s market, with the advent of work-at-home hybrid efforts, office planners suggest waiting until 2026 before purchasing office space.  Also, they point out there is a glut of office space available today that will be augmented by new buildings coming online.  Many will combine in work and living developments which may offer attractive work-life opportunities. 

LOCATION, LOCATION

This has been a necessarily brief overview to a very important small business consideration, location.  There is much more to discussion necessary but small business leaders should keep thinking about location in all of their planning. 

Tags: brick-and-mortar-stores, business, entrepreneur, online-shopping, real-estate