How to choose a business location: 11 crucial factors to consider

It is often said that there are three things that matter in property: location, location, location. Whether you are a startup looking to set up your brand new business, a well-established organisation aiming to make inroads into new markets or an online business expanding into brick-and-mortar stores, the process of researching, vetting and selecting a business location is fraught with myriad pitfalls and challenges. Selecting an apt location for your business is a complex endeavour that involves detailed planning, substantial investment and a duration spanning several months or years. Hence, many organisations choose to outsource this arduous task to experienced consultants. Consultants assist in identifying the best location for your business, based on your requirements and preferences. They also help you set up your business and provide talent acquisition services so that you hit the ground running. Here are 11 fundamental and crucial factors to consider when choosing the best location for your business.

Nature of the business

While selecting a location for your business, some of the most important determinants include the nature and type of your business and its operational needs. You will need to introspect on the overall activities of your business, its various offerings, goals, objectives and more. This initial step helps create an exhaustive list, comprising the qualification criteria for the right location.

Since what is essential to one business may be insignificant to another, it is vital to take the distinctive traits, priorities and unique operational style of your business into consideration while picking a location. Further, the brand image and visual style of your business will influence whether you choose to locate your business in an affluent area or an affordable one.

Proximity to the market

Deciding how close you wish to be to your clients or customers is another important factor, which can have a huge impact on the growth potential of your business. Retail businesses generally choose to be located in the vicinity of their customers as they sell their products or services directly to the end-users. Service businesses, on the other hand, have two options — ones like transport companies need to be located near their customers, whereas those that don’t require direct interaction with customers, such as web design services, can choose to be location agnostic and situate their offices anywhere.

Manufacturing businesses usually prioritise cheaper rents over being in close quarters with their customers. Given their transport network that enables efficient delivery of products, they can opt for far-flung locations. Another recent trend observed is that of organisations choosing remote locations or becoming completely digitally native. This allows them to tap into global markets and workforces without the need to have a physical location to conduct their business activities.

Rent price and cost of utilities

While picking the best location for your business, fixed and variable expenditures have to be taken into account as per your budget and estimated profit margin. Rent price is a fixed and recurring expenditure that will constitute a major chunk of your total expenses, whereas the cost of utilities, consisting of water, electricity, gas, telephone and Internet connectivity, is variable.

Before signing the rental papers, it is recommended to conduct a thorough research of the location and converse with other business owners in the locality chosen to ensure that it is not afflicted with any deal-breaking problems. One must also bear in mind the hidden costs involved in choosing a business location such as the cost of renovations, property taxes, insurance fees, utility equipment maintenance and upgrades and parking fees that can all add up to a sizeable amount.

Demographics

Demographics refer to the data on the socio-economic characteristics of the population of a particular geographical location. It encompasses details such as age, gender, location, educational level, employment, level of income and homeownership. While choosing a business location, studying the demographics of the location will help identify a target market that will help build a robust customer base for your products and services.

By analysing the preferences and purchasing behaviour of your target customer group and selecting a location that is densely populated with it, you can ensure higher sales for your business. For example, if your business sells tech gadgets, picking a business area that is populated with a younger demographic rather than an older one will be favourable to your overall sales.

Talent availability

The employment conditions in each area will differ, depending on various demographic and economic factors. Since the availability of superior talent is one of the key drivers in decisions pertaining to business location, finding out about the existing talent supply in an area is important. Besides, getting a rough estimate on the number of people willing to move to the place where your business will be located can also help you gauge the recruitment efforts that will be involved in growing a qualified workforce.

Careernet is India’s foremost talent solutions provider that offers cutting-edge research and consultancy services. Our team of experts assists you in setting up your business in India. We help determine the right city and area for your business, based on talent pool availability, geographical suitability, competitor analysis and current market trends. What’s more, we also help you acquire top-notch talent and provide actionable insights for decisions on the right compensation, organisational structure, sustainable technology and infrastructure for your organisation.

Competition

With regard to competition, a business location can prove to be a double-edged sword. By locating your business in an area close to your competitors, you can either rake in your competitor’s surplus customers or end up losing your customers to your competitors. Hence, the decision to locate your business near your competitors must be taken carefully.

Choosing a business location that your competition has not saturated is advised. You might find sparse competition in some locations, which may indicate low demand for your product or service. Ensuring that there is high demand for your product or service is essential before selecting a location that is the right fit for your business. An area that has a healthy level of competition is recommended as it will allow you to take advantage of the prevailing consumer demand.

Infrastructure and accessibility

Several older buildings may not have adequate infrastructure to serve the needs of the high-tech businesses of today. It is always a good idea to make sure that the building you choose has the necessary power, water supply, telecommunications, air-conditioning and road connections to meet your current and future infrastructure requirements. An independent engineer can be hired to make an objective evaluation of the building infrastructure to suit your specific needs.

The availability of sufficient parking spaces for employees and accessibility provisions for persons with disabilities must be factored in while selecting a location. You must also take into consideration the amount of time it would take employees to commute to your business location, as traffic woes tend to be exhausting for employees. A location that is optimally located for both customers and employees, has minimal traffic and is well connected to public transportation systems is recommended.

Government incentives

The central, state and local governments in India offer businesses several incentives on the basis of their economic activity, industry and size. Businesses registered with the Ministry of Corporate Affairs become eligible for fiscal incentives such as cash grants, tax rebates, tax breaks and tax credits for locating their business in a specific area.

Businesses in the manufacturing and IT services sector can consider locations within the confines of manufacturing hubs and IT Special Economic Zones (SEZs), respectively. These areas provide numerous incentives to businesses such as duty-free operation, tax holidays, no import licence requirement, exemption from minimum alternative tax (MAT) and exemption from routine inspection by customs authorities. Besides, under the ‘Start-up India’ plan, eligible start-ups are granted several tax benefits based on their location.

Distribution network

A distribution network refers to an intricately connected group of wholesalers, retailers, distributors, storage facilities and transportation systems that facilitates the receipt of goods for final delivery to customers. A distribution network that is well-organised, fast and reliable is a crucial lifeline that strives to meet the needs of customers and end-users instantly.

When identifying an ideal location for your business, it is important to ensure that it is in close proximity to your suppliers. Locating your business in an area with a robust distribution network minimises your logistics and transportation costs, thereby reducing your total cost of operations.

Zoning or permit issues

The business location selected by you will determine the taxes, zoning laws, permit compliances and regulations that your business will be subjected to. Hence, while making the strategic decision to locate your business within a particular municipal area, it is crucial to be cognisant of the zoning ordinances, licenses and permits for your chosen location.

Local governments, generally zone neighbourhoods for either commercial or residential use. When planning to buy or rent a building or construct one, you will have to ensure that your building conforms to the local zoning rules. You will also need to be mindful of restrictions and bans that prevent certain kinds of businesses from operating in particular areas. Comprehensive research and planning help avoid any legal hassles with local authorities.

Security

While operating a business, feeling safe and protected is an often underestimated but crucial factor to be considered. Some businesses may require more elaborate security arrangements than others. A jewellery store, for example, will need a building with a high-tech alarm system, whereas a restaurant can manage with a sturdy lock.

When you are comparing locations, it is advised to choose a building where the property owner allows you to install security cameras and security gates for the safety and security of your employees, customers and business equipment. The overall crime statistics of a locality should also be evaluated and the necessary precautions must be taken in case your business has inventory that is prone to burglary and theft. Further, if your business hours stretch late into the night, you must make arrangements to ensure that the safety of your employees isn’t compromised.

Conclusion

A business location that seems quaint and unassuming at first glance, may hold immense potential for growth. Conversely, a snazzy and upmarket business location may disappoint due to certain inconspicuous underlying problems. Selecting the right business location is a high-stakes decision having a bearing on your organisation’s resources, time and manpower. When you carefully consider all the factors impacting the present and the future success of your business before finalising a location, you can breathe easy with the confidence that your chosen location will not only be able to cope with the vagaries of the market but also stand the test of time.

Whether you are a global employer scouting for the best location in India, an indigenous start-up that is finding your bearings or an established large-scale enterprise aiming to rapidly scale up your operations, Careernet has a tailor-made solution for you. As your trusted partner, we not only expedite the process of selecting the best-suited location for your business but also provide end-to-end solutions to all your business and talent acquisition challenges. Explore Careernet to find out how we can help you innovate in order to stay miles ahead of your competition.