Choosing the best site for your small business is a critical decision that can make or break your venture. At Unbroker, we’ve seen firsthand how location impacts a company’s success.
This guide will walk you through the key factors to consider when selecting your business location, from market proximity to growth potential. We’ll help you make an informed choice that sets your small business up for long-term success.
Where Should You Set Up Shop?
Know Your Customers
Selecting the right location for your small business can make or break your venture. You need to position your business where your customers are. A study reveals that 61 percent of small business owners surveyed report over half of their annual revenue comes from repeat customers. For a coffee shop, this means choosing a bustling area with high foot traffic. B2B services should consider office districts where potential clients work.
Check the Competition
Setting up near your competitors might seem counterintuitive, but it can sometimes boost your business. This strategy works best for businesses that benefit from comparison shopping (like car dealerships or furniture stores).
Accessibility is Key
Your location must be easy to find and reach. A survey shows that 93% of consumers typically travel no more than 20 minutes to make everyday purchases. Ensure your business is visible from main roads and has ample parking. In urban areas, proximity to public transportation is essential.
Mind the Law
Zoning laws can significantly impact your business plans. These regulations determine what types of businesses can operate in specific areas. Check with your local zoning office before signing any lease. The U.S. Small Business Administration warns that violating zoning laws can result in fines of up to $1,000 per day in some cities.
Consider Future Growth
When choosing a location, think about your business’s future. Will the space accommodate expansion? Is the local economy growing? Are there skilled workers available in the area? These factors can influence your long-term success.
The perfect business location aligns with your goals and target market. Thorough research and expert advice can help you make the right choice. Now that we’ve covered the key factors in site selection, let’s explore how to evaluate the costs associated with different locations.
What Are the True Costs of Your Business Location?
Rent or Buy: The Big Decision
The first major cost you’ll face is whether to rent or buy your business space. Renting offers flexibility, while buying provides stability. Commercial real estate prices have shown significant changes over the past years. This means property values can fluctuate considerably over time.
When you evaluate rental costs, look beyond the monthly rate. Many commercial leases include additional charges like property taxes, insurance, and maintenance fees. These can add 15-50% to your base rent. Always read the fine print and negotiate these terms before you sign.
The Hidden Costs of Renovation
After you secure a location, you’ll likely need to renovate to fit your business needs. Renovation costs for a single-story office building can average between $313 and $378 per square foot for low-end and high-end projects respectively.
Don’t overlook permits and inspections. Depending on your location and the extent of renovations, these can cost anywhere from a few hundred to several thousand dollars. Always budget extra for unexpected issues that arise during renovations.
Ongoing Expenses: Utilities and Maintenance
Utility costs vary widely based on your location and business type. The U.S. Energy Information Administration provides monthly data on electricity consumption and costs for commercial customers.
Maintenance is another ongoing cost that’s easy to underestimate. Try to budget 1-2% of your property’s value annually for maintenance. For a $500,000 property, that’s $5,000 to $10,000 per year.
The Bottom Line: Impact on Operating Expenses
Your location choice directly affects your operating expenses. A prime location might bring in more customers, but higher rent could eat into your profits. Conversely, a cheaper location might save you money but could result in fewer sales.
Businesses succeed in various locations. The key is to thoroughly analyze all costs and potential returns. Don’t just focus on the upfront expenses – consider how your location choice will impact your bottom line over the next 5-10 years.
These costs aren’t set in stone. Negotiate with landlords, get multiple quotes for renovations, and shop around for utilities. Every dollar you save on location costs is a dollar you can reinvest in growing your business.
Now that we’ve explored the financial aspects of choosing a business location, let’s turn our attention to the potential for growth and expansion in different areas.
Will Your Location Support Future Growth?
Room to Grow
When you select a business location, you must consider your future expansion needs. Recent data from the U.S. Small Business Administration reveals that there are 33.3 million businesses in the United States that qualify as small businesses. Don’t limit yourself to your current requirements-project where your business will stand in 5-10 years. Will you need additional office space, more storage, or a larger showroom? Your chosen location should accommodate these potential needs.
Economic Indicators
You should examine local economic trends carefully. The U.S. Bureau of Economic Analysis provides detailed regional economic data. Search for areas with consistent GDP growth, rising personal income levels, and a diverse industry base. These factors point to a healthy, growing economy that can support your business expansion.
Austin ranked #5 overall in CBRE’s 2024 Scoring Tech Talent report, moving up one spot as its tech talent workforce grew 29.1% between 2018 and 2023 (making it an attractive location for tech startups looking to scale). However, you should exercise caution with areas heavily dependent on a single industry-the impact of auto industry declines on Detroit in the early 2000s illustrates this risk.
Talent Pool
Your business success hinges on your team’s quality. You should research the local workforce thoroughly. The U.S. Bureau of Labor Statistics offers detailed information on employment rates and industry concentrations by area. Focus on locations with a high concentration of workers in your industry.
For instance, if you operate in the finance sector, Charlotte, North Carolina might prove ideal. As the second-largest banking center in the U.S., it boasts over 82,000 workers in the financial services industry. This deep talent pool can support your growth as you expand your team.
Networking and Partnership Opportunities
The business ecosystem in your chosen location plays a crucial role in your growth potential. You should look for industry clusters, incubators, or co-working spaces nearby. These can provide valuable networking opportunities and potential partnerships.
Silicon Valley stands as an extreme example. Its dense concentration of tech companies, venture capital firms, and support services creates an unparalleled ecosystem for tech startups. While you don’t need to be in Silicon Valley to succeed, you should seek areas with a strong business community in your industry.
Balancing Present and Future
The best location strikes a balance between your current needs and future potential. It’s not just about where your business fits now, but where it can grow. You should consider all these factors (room for expansion, economic trends, talent availability, and networking opportunities) to choose a location that supports your long-term success. Tools like Porter’s Five Forces can help you understand the business’s position in the market and its potential for future growth or decline.
Final Thoughts
Choosing the best site for your small business requires careful consideration of multiple factors. You must understand your target market, assess accessibility, navigate zoning laws, and evaluate competition. The financial aspects, including rent or purchase costs, renovation expenses, and ongoing operational costs, play a significant role in your decision.
A location that supports future growth is essential for long-term success. You should analyze economic trends, workforce availability, and networking opportunities in potential areas. Professional advice from real estate agents, business consultants, and local economic development offices can provide valuable insights to help you make an informed choice.
At Unbroker, we offer transparent, low-cost options for selling businesses. Our platform eliminates high brokerage fees and provides expert support throughout the process. We aim to help you navigate the complexities of the business world, whether you’re selling your current business or starting a new venture in the perfect location.
