PART 2 – Location. Location. Location.
A six-part series on the necessities of starting a business.
Ever notice where there’s a McDonald’s, there’s at least one of its competitors – Burger King, Wendy’s, Chick-fil-A or Sonic? That’s not a coincidence, but rather a major component in establishing a business location. From research to assessment to locking the lease, the location of a business is the top priority.
Research
With most things in life, a little research goes a long way and is essential when selecting a business site. Understanding the demographics, traffic patterns, type of location and proximity, and overall history of the area is important. If unfamiliar with the area, consider contacting local realtors and/or development companies. These companies usually already have demographics and great location information on hand. Do some investigative work. If your location is near other businesses, take a minute to talk to the owners to find out specifics, such as how long they’ve been there and what their successes and frustrations are with the location. Familiarize yourself with the area through observation. Observe both foot and vehicle traffic patterns (during the week and weekend), ease of access and what’s located around the area, especially the competition. Research is the foundation and allows for an educated process when moving into the assessment phase.
Assessment
Assessing the location and information that has been gathered is the most tedious, yet critical, step in determining a location. Assessing proximity covers a gamut of items in making a location decision. Is the location in a residential or commercial area? How close is it to schools, shopping centers, sports centers and restaurants? Where is the competition?
Placing your business near a residential area can mean easy access for consumers when they’re craving a frozen treat. However, commercial areas mean more foot and car traffic, and in this fast-paced world, a place for consumers to complete multiple errands with one stop is critical. Proximity to schools, athletic fields and parks are also items to assess, as gelato after a baseball game can bring a new twist to the American tradition of “team” ice cream.
Don’t go it alone – get a second opinion or make use of a buddy system. An investment like this is too big to “trust your gut,” even if it’s always been right.
Competition is the final component for determining proximity, but surprisingly the key is keeping your competition close. Competition is healthy. By opening a location close-by, business owners are not only able to access the competitions’ audience, but can also offer something new and different to hopefully entice them. And any marketing your competition does could potentially lead new customers your way without you spending a dime. Blake Tartt, in an article in entrepreneur.com titled “How to Find the Best Location,” reveals that “competition breeds more business, more traffic, and that’s a positive.”
Assessing all these proximity items also determines the traffic patterns, ease of access, visibility and parking. How easy it is to enter the location? Can the business be seen from the street or is there a large sign? Is there adequate parking to handle the volume of traffic in and out of the area?
Another part of assessment is the site itself. The site assessment includes reviewing cost, size, appearance and overall ambiance, and functionality. The most important question when viewing a location: Is this the location that was envisioned when the business plan was formed? Sites are big investments; the passion and ambiance have to be present, or something will always be left to be desired.
Reviewing the size requires a few steps. The business owner will need to have some idea of the product that will be produced to determine space needed for machines, display cases, storage and customer service areas, such as tables and a drive-through. Knowledge of prospective business growth, employee numbers and future product expansion will also affect size decisions as well. Size is proportional to cost; as the larger the space, the higher the cost. But value is also determined by the condition of the location and the demand for the space. Choosing a fixer-upper may result in repairs that end up equaling the cost of a new establishment. Don’t be fooled by a price break; that could just mean that the establishment has failed in keeping businesses, which could have a multitude of reasonings behind it. Checking the prices of surrounding locations will determine if the price is in line. Brand-new spaces don’t always translate into the best option either – sure it’s aesthetically pleasing, but there’s no history and problems have yet to be discovered. Additionally, know what can be compromised and what is a must for business – can budgets be adjusted for the right location size or will a fixer-upper work when opening dates are critical?
Locking the Lease/Sale
The pros and cons have been weighed, and the location is within your grasp. But before signing, there are a few items to consider. Don’t go it alone – get a second opinion or make use of a buddy system. An investment like this is too big to “trust your gut,” even if it’s always been right. Enlist the help of a lawyer, consultant or realty specialist who understands lease and purchasing agreements. They can review agreements and help explain items that aren’t easily understood. Don’t take any agreement as final – if there are terms that are concerning, always discuss them. If leasing, make sure the lease outlines who is responsible for what (e.g. certain repairs, annual maintenance, etc.). And, if something does occur, understand the response time it will take for a landlord to address/handle maintenance problems – in some cases, problems that could shut down the business for days.
And speaking of landlords, assess them too! The landlord virtually becomes one of many business partners and has to understand the lessee’s needs as much as his/her own. A sour relationship from the beginning doesn’t usually bode well for the future.
And just one more thing before putting the ink to the paper: purchase insurance. The day the lease starts or the purchase is final is the day the insurance should start. While most companies require proof of insurance upon final sale, don’t procrastinate if they don’t. A dream can easily burst at any time, but knowing that you have the ability to rebuild that dream is priceless.
Finding a location is truly a top priority with many layers. There is a lot to learn, absorb and assess, enough that books have been written about the process. While it’s no easy task, it is one that is both rewarding and a necessary first step in launching a business. Now, take that pen, sign the papers and check another item off the “To Do” list. And then maybe wave to the competition across the street; it’s going to be a good ride. Keep your eyes open for the next issue, where we’ll cover products and platforms.
Continue Reading Part 3 of “Turning your Passion into a Reality”
Sources:
Spaeder, Karen E., “How to Find the Best Location,”entrepeneur.com.
Small Business Association, sba.gov. “Tips for Choosing a Business Location,” business.gov.