“Location, location, location” are the three things real estate agents insist on while determining the desirability of any property. The same “location” plays a vital role in the success of a business as well. Consider, for instance, the scenario where the owner of the new boutique kept wondering why people were not visiting his shop despite having the trendiest stock at his shop which was located in a quiet by-lane of a residential society. Little did he realise that his shop location was hampering his business. Similarly, a grocery shop located on the second floor of a building had adopted all the latest display techniques in his spacious shop but that too failed to draw in the customers, since a grocery store needs to be quickly approachable for a walk-in crowd as well, which is not possible on the second-floor store.
All this ascertains the fact that location is of prime importance for every business and can help the business grow or at the same time can dampen its progress. Interestingly, the type of business is also important while considering a location for the business, for instance, a business catering to the requirements of the elderly will find few seekers close to a college but many visitors near a hospital or a gated old-age community.
Therefore location and positioning are vital parameters that affect the growth and success of a business. They must be given due importance while starting or establishing a business.
The process of choosing a location must be given thought and consideration. Thus, a few questions to consider while deciding on the location for your business are helpful, such as-
- Does the success of your company rely heavily on customer traffic?
- Is convenience important to you and your employees?
- Do you rely on suppliers of goods?
- Is brand visibility important for your growth?
- What about the legal implications of your location?
Importance of Location in Business
A few reasons will help further establish the fact that location is primary for the growth of a business –
- Eases Accessibility– a suitable location that is easily accessible helps customers and suppliers alike to reach the business with ease. Thus if the business requires supplies of raw materials or other goods and the finished goods need to be supplied too, the easy accessibility helps make the tasks smooth flowing and thus saves on time and resources of the customers, suppliers and the business too.
- Increases Convenience– an optimum location which is in close proximity to the market or where the business purchases its supplies from increases the convenience quotient for the business. Day to day tasks or jobs pertaining to getting essential supplies tends to become convenient since the location is optimum.
- Achieves Savings- a business that is easily accessible and conveniently located helps save the time of the business owners, the suppliers supplying to the business as well as of the customers visiting the business. Additionally, transportation costs and other miscellaneous costs are also considerably saved if the location of the business is adequate. A convenient location also saves resources of the business along with saving of effort. Also, if the business has appointed additional staff to handle situations where supplies need to be bought from the market, or for deliveries or for running errands, if the location of the business is ideal and close to the basic necessities needed by the business, additional staff is not needed and thus the business saves on unnecessary manpower and costs towards the additional staff.
- Provides Access To Demographics- depending on the type of business, the proximity of the business to its targeted demographics can help the business grow as an ideal location provides access to the customer base that the business wishes to approach and cater to.
These are just some of the various factors that help the business grow if the location of the business is suitable and chosen after considering the advantages that a particular location will have to the business.
Additionally, along with knowing the importance of location and its advantages, there are certain factors that need to be considered while choosing a location for your business.
Business Location Factors To Consider
There are certain factors which must be considered to help decide on the optimum location for setting up a business.
Cost And Funding
While choosing a location to set up your business, one of the first decision to be made is whether to purchase the property or to lease it. This factor also depends on the availability of a suitable property in the areas desired and further it depends on the availability of funds and if capital or loan is easily obtained to start the business. Also, it depends on whether the business owner wishes to use the funds available on purchasing a property or elsewhere for equipment and setting up the business. A comparative analysis between leasing or purchasing will help arrive at the decision sooner.
- Leasing or renting a property for business is always more advantageous since it involves less risk in terms of financial involvement. It costs less to rent than to purchase and in case the business needs to be shifted, it is easier to let go of a leased space than an owned property. Additionally, the process to rent a property is quite simple and fast and the documents required for leave and license agreement are easy to arrange, thus making renting a property a quick procedure. Also, renting is a temporary process, not making the business owner liable for the property on a long term basis if he wishes to move to a bigger space or to expand his operations.
- Purchasing a property for setting up a business is an expensive option, as it requires a huge capital investment which can eat up into the funds required for other aspects of the business. However purchasing a property is a permanent asset the fruits of which can be enjoyed till a later time and it is also a one-time investment, unlike a rent which is a recurring expenditure. However, at the same time purchasing a property can be a permanent liability that the owner needs to take the responsibility of even when the business is expanding or moving.
Proximity To The Market
While decising on the location, it is vital to consider the location of the business to its proximity to the market. A business located close to or within the market means that customers can visit the business easily and there are also higher chances of walk-in crowds, which can be suitable for the business. Additionally, if the business requires supplies and raw materials which can be obtained from the market, then a location close to the market increases the ease of obtaining supplies and is convenient for the business, saving time, money, resources and man-power.
Availability Of Infrastructure
Basic infrastructure is vital for every business, such as water, electricity, and be easily connected by roads, which needs to be checked while deciding the location of a business.
Economic Policies And Special Zones
Certain areas or regions have economic policies such as the Government’s policy, fiscal and monetary policy, exchange rates, taxes, levies and duties that might affect the business positively or negatively. The policies affecting a business must be checked before starting a business in a particular region.
Also, certain regions are designated as special zones such as free trade zones or export processing zones or social-economic zones (SEZ) where special benefits and concessions are offered to businesses operating in those regions or zones. If a business stands to gain from operating in such areas then business owners must consider it as a suitable location.
Other factors to consider are the demographics and psychographics of the location while considering to set-up a business. These factors are specific to the nature of the business and must be considered keeping in mind the specific business.
In case of further elaboration on the importance of location for the success of the business or on the factors to be considered while deciding the location for a business, contact deAsra for their expert guidance.