Background Information
All businesses are affected by their immediate environment. Many factors influence them, for example, the location of the business premises, availability of labor, labor costs, and availability of raw materials and so on. Among them, location is particularly important for businesses, which allows the businesses to situate themselves somewhere where they can be noticed by their target audience.
How to Start a Business
Starting up: picking an ideal location
To michael mahle, picking the right location for his newly opened artisanal cheese shop, Bondgard, ranks up there with creating an air-tight business plan and landing seed funding. In fact, it’s so important that he spent over a year debating about where to set up shop.
Since Mahle lives in the New York City area, numerous avenues were open to him. However, after canvassing business-brokerage web sites and analyzing the demographics of various towns, he finally settled on his hometown of Allendale, an affluent community in Northern New Jersey. "I needed an area where the population would accept a cheese shop," says Mahle, "and this place was perfect." Allendale’s residents, he says, "tend to be more worldly and willing to pay a premium for quality."
Even though Mahle chose to park his business in a familiar setting, he’s certain that the time he spent gathering information will pay dividends as he develops marketing campaigns and considers branching out to other locations in the future.
To be sure, it’s optimal for a business owner to have a firsthand knowledge about a location, as it lowers the chance of setting up shop in an unexpectedly bad spot. However, even if you live down the street, there are a number of factors to consider before signing a multiyear lease. Here are a few.
Knowing your customers
Michael Mahle chose to locate his cheese shop, Bondgard, in Allendale, N.J., for its well-traveled, cheese-loving residents.
Your first task is to figure out who your customers will be, suggests Dorothy Finell, author of "The Specialty Shop," a book about creating a profitable retail business. Think about who your products or services appeal to...women parents of small children golf enthusiasts Consider ages, too, says Finell, who adds that knowing specifically who you’re targeting can help you both pinpoint the best locations and weed out the bad ones. "You can’t even plunk the best of businesses in an area that’s not conducive to the clientele that you’re looking for," she says. "That’s business suicide."
If you have an area in mind, make sure the area’s demographics chime with your intended customer. You can usually research an area’s average cost of living and median home income at local chambers of commerce, city hall or just by asking existing business owners. Check out demographic web sites such as ePodunk and ZIPskinny. Additionally, Yahoo’s and AOL’s real estate sites offer demographic information as well.
Timing is everything
Once you figure out whom to reach, Martin Lehman, a counselor in New York for SCORE, an affiliate of the Small Business Administration, recommends thinking about how and, more importantly, when your potential customer might consume your products or services. For instance, a prospective deli owner might prize a spot near an office park, while a restaurateur specializing in brunch would likely prefer a more residential setting.
Speaking from experience, Lehman cautions that areas that appear busy with pedestrian traffic might be deceptive. As a former owner of several women’s apparel stores, Lehman once set .up shop near a number of hot lunchtime restaurants, showcasing clothing in his store’s big windows. However, he soon found that the crowds that came to the area only wanted sandwiches--and when they left, foot traffic was scarce. "I could have put a rack outside with a dollar bill hanging on it, and it would still be there," he says.
But proximity is paramount
Proximity to complementary or similar businesses is also a huge determinate of success for many types of businesses, says Finell. For example, she says, "you don’t want a tattoo parlor next to an antique shop." Instead, look for like-minded businesses. For instance, she says, "the type of person who would be shopping for antiques might also be interested in a linen shop." Or, she says, some businesses thrive when they’re surrounded by competitors, which tend to share the same target audience. A fast-food franchise, for example, might consider locating near other fast-food businesses.
Additionally, for small businesses that rely heavily on foot traffic "being near a bus line, a subway line or parking is usually an absolute must," says Finell. Customers of these businesses (say, a retail shop or gift store)often make impulse-driven purchases--so location is more important than marketing, she says.
Customers who have convenience in mind also want to be able to enter and exit an establishment with ease, especially if they’re driving, says Jon Schallert, a marketing and business location consultant in Longmont, Colo. For example, he says, being located on an extremely busy street won’t help unless the turns in and out are easy and parking is available.
The search begins
After you have a better idea of what you’re looking for, start your search. Mahle from Bondgard used business-broker web sites Vested Business Brokers and BusinessesforSale.com to search for potential store locations, although he ultimately landed his current location after spotting a for-rent sign in the window. Researching a location this way can help you get to know an area and learn about comparable prices that similar businesses pay, which can help you negotiate rent with landlords.
Business brokers can be helpful to use, as they generally provide demographic information and possibly the history-of a certain location, according to Schallert. For instance, if you’re planning on opening a bookstore, and the previous tenant also ran a bookstore, you’ll want to know that, he says. After all, if the location didn’t work for another business, it might not work for you.
Exercises
Which of the following is not true according to the passage
A．Selecting an ideal location is important for a business.
B．Knowing your customers is crucial for a business.
C．Timing plays a key role in business.
D．Proximity is not very important in business.