NigCareers

There are some factors you need to consider before you choose your business location.

Whatever the type or scale of your business, you need a business location where you can operate in order to service your customers. Choosing the right location is very crucial to the success of any business. The same way a right business location can propel your business for growth; a wrong business location can also crumble your business.

A reputable man in this country usually says that your location determines your allocation. What a truth! You need a right location for your business to grow. There are some factors you need to consider before you choose your business location. Before going further, I like to mention that a good location for one business can be a wrong location for another business. Businesses are different from one another. Understanding the nature of your business and your customers is very crucial. Having this in mind, let us look at some of the factors which you may need to consider before choosing a particular location for your business.

Customers

In business world, customer is king. I believe what motivated you to start a business in the first place is that you want to meet the needs of a certain group of people. If your aim is to meet their needs, then it is important that you take your customers into consideration in choosing your business location. You need to identify who your customers are, where they live, where they work and where they will prefer your services to be delivered. You also need to determine whether your business serves individuals or other businesses. You cannot afford to be far from your customers. You need to locate your business in a place where your customers can reach you. Staying close to customers is not enough; you must locate your business in a location which will best serve your customers. Your business may require that it is situated where your customers reside or it may be that such business be located very close to where they work or where they do their shopping. If you get this right, attracting customers will not be difficult. If your business is too far from your customers, you might need to spend extra money on advertisement and publicity in order to create awareness and draw people. Offering special discounts is another way of drawing distant customers to you.

Read Also: How to Turn Your Hobby to Home Based Business

Cost

It is commonly said that without money, nothing can be done. Every business location has its price tag. For example, the cost of property in Abuja, Lagos, Port Harcourt and some other major cities in Nigeria is very high. Locating your business in any of these cities requires that you should be ready to pay higher rent. However, in all these cities, we still have high brow and low cost areas. You need to ask yourself if locating your business in any of these areas is justifiable in term of returns. Even if the returns is justifiable, do you have enough money to put down for rent and still have enough left for purchase of inventories and as working capital? It will not be economically alright having paid high cost for rent and at the end of the day, you don’t have enough fund to run the business at a scale that will make it profitable. This is where some young entrepreneurs are missing it. They spend much on securing a place only to discover that the level of the business cannot sustain the costs.

Another thing about the cost of location is the resultant effects it might have on the price of your products. If you pay too much on securing a location for your business, you will like to pass the costs to your customers. The question is that, will your customers be able or willing to buy your products at that price? If your products are too expensive, this will drive customers away from you and that may spell a doom to the business. If you cannot operate at a scale that will allow you to spread the cost of your location thinly on the prices of your products, it is advisable to start at a location that is less costly. Remember that costs of location is not limited to rent, there are other incidental costs such as costs of painting, fittings, decoration and other costs to make the place safe and secure for your business.

Employees

Who are the people that will be working with you? Where do they stay? How would they be coming to your business location? This might not be an issue at the beginning of your business as you might probably be the only one operating the business at a start up level. You need to think beyond the present. When you want to start employing other people, will you be able to get the right people within or around your business location? If you can’t, getting people coming from a remote business location might mean providing accommodation for them or you are prepared to pay them attractive salary  so that they will be able to offset high costs on transportation.

Taking your employees into consideration may take a priority if your business is labour intensive. If your business is labour intensive, this means that labour costs will represent a high proportion of your costs. This might necessitate that you locate your business in areas where the cost of living is very cheap as the salary expectation in such areas tend to be low.

Competitors

Why are we talking about competitors here? Staying too close to your competitors especially those that are well established may not be a good option. Your competitors may decide to lower their prices in order to pull your customers and you may not be able to sell at their prices and still make profit.

On the other hand, staying close to your competitors may be the right choice and a good way to grow exponentially as you can benefit from their advertising efforts and the customers traffic they attract. There was a time I saw an advertisement by a company about new arrival of computers in its office at Computer Village, Lagos. This advertisement actually attracted me. But funny enough, on getting to the Computer Village, I ended buying my computer from a different vendor. That is a practical example on how you can benefit from advertisement from competitor especially if customers have to pass through your business location before they get to your competitor.

Also, if you can identify the major weaknesses of your competitors and you are able to make it your strengths, locating your business close to them will create a ready market for you. But this is the area you must not miss. You must ensure that the competitors’ weaknesses are noticeable and these have been major complaints from customers which the competitors have not been able to address. You may not have problem having customers to give you a trial, it is the consistent demonstration of your strengths in these areas that will make them to come back to you next time.

Zoning Rules

Hurray, I have found a good place for my business! This is likely going to be your exclamation after you have gotten a suitable place. But before you make payment, it is essential to find out the zoning requirement of your city. There are some areas that are marked industrial, commercial and residential. It will be wrong to site a factory in a residential area no matter how attractive it may look. To avoid trouble, ensure you understand the zoning rules governing the location of your business.

Safety and Security

Safety and security of life and property is not negotiable. I discover there are some areas where banks could have been located if not for safety and security risk. Even though those locations are attractive, when you carry out the risk analysis, you will find out that such places may not be suitable for a particular type of business, especially cash driven type of business. A one day theft or robbery can sweep off all the profits which one has made in the past years. Therefore, you need to consider the security of your life, your employees, your suppliers and your customers. Your assets should be safe and well secured in whatever place you choose as your business location.

Traffic and Convenience

Good transportation link is very vital to your customers, suppliers and to your employees. Businesses like retails and restaurants require a location with high traffic.  Nevertheless, there are locations with high traffic which are not convenient for customers. For example, if there is no parking facility at your place or very close to you, you may not enjoy much patronage. If you compare sales from two similar retail shops; one by just the road side without a parking facility and the other on the same road but at a bus stop and possibly with parking facility, you will find out that the one at the bus stop with parking facility will likely sell more. It is true they enjoy the same traffic but the one at the bus stop is more convenient for customers to park and easily walk in to do their shopping.

Recently I was reviewing the bank statement of a company. The company sells petroleum products and has many outlets spread across Lagos. There is one outlet that rakes in between three million and five million naira per day while another one was struggling to realise just two hundred thousand naira per day. This experience alone opened my eyes to the importance of choosing the right location for a business.

Demography

You need to study the population of the location where you intend to locate your business. You find out their age, sex, marital status, family size, disposable income, educational level, occupation, interests, cultural and so on.  Why is this important? For example, if you want to target children as your market, the study of the population will let you know whether the place is dominated by aged people or retirees. Selling children items in such environment will not be a right business decision. Also, selling expensive items in a place inhabited by low income earners will not bring sales.

Read Also: 110 Small Business Ideas With Low Investment Capital

Other factors

Future Expansion

If you have enough resources, choosing a business location can be motivated by your future expansion programme based on you business plan. A business location that seems too large today may become choking tomorrow.

Infrastructure

Is the business location equipped with the infrastructure or utilities requires to run your business? If you need constant electricity to power your operation, you might need to consider such a place where there is a stable supply of power. Too much reliance on power generator may escalate your costs.

In conclusion, your business plan will be able to guide you on which location that will be suitable for your business. If you are into manufacturing, how you will distribute your product is very important. You have to be close to motorways and the road leading to your plant need to be motor-able. But if you provide service, location may not be that important especially if your services require that you visit your clients’ offices instead of them coming to you. Generally, the best business location can be very expensive and very difficult to come by. There is possibility that the big existing businesses would have taken the majority of the best business locations. Therefore, you need to consider those factors (both quantitative and qualitative) which are most important to you and consider a trade off for other factors.

Home Based Business

As a result of high cost of rent, a lot of businesses are being run from home. Starting business from home is a good business model for young entrepreneurs as it affords them to start their business with little investment. In actual sense, some businesses do not need an office space before they can operate especially those that start their business as freelancers. You’ve got to ask yourself what you actually need the office for. If your work requires that you are the one going to meet your clients in their offices, then working from home may be a good business model in interim until you are able to grow the business to a scale that actually justify the cost of rent.

Read Also: Home Based Business Guide – Work From Home

To make your business look professional especially when you need to advertise your services or print your business card, you can use someone’s office address as your business address. But before you do this, you must have agreed with the person and assure you that the office will be available to you for use in case your client may need to meet you. If you want to adopt this style, I strongly advise that you use the address of somebody who is not directly into what you offer. Otherwise, the person will be the one to reap the benefits of all your marketing efforts.

Business Planning