Deciding on the location for your brick and mortar business largely impacts your objectives. It involves thorough planning and research and must be done carefully prior to your registration and operation.
Here are few things that you need to consider when scouting for a location of your business.
- Foot traffic and distance to your target market
How far any potential client would be willing to travel in order to reach you?
Retail as well service establishments need to be situated in the sites within the areas of respective target markets (duh). It is best to find out first where your customers would be coming from. Putting up a brick and mortar retail store in a commercialized area like malls can give high volume of customer traffic however it’s usually more costly that is why, it is very important that you conduct research about the type of market or foot traffic you are after.
For manufacturing businesses, distance is less critical unless you are planning to retail in the same area which is rare.
- Transportation and Accessibility
Locating in a spot with an adequate and reasonably priced transportation services is essential to your business. It is an advantage for your customers if they can conveniently reach your location. Availability of parking space as well as vehicular traffic should also be taken into account. If you are locating your business near a high-way, having a nearby foot bridge is also a factor. I already experienced receiving a complaint from a customer about the hardship she went through just to pass-by a busy highway in order to reach our location.
- Proximity to Supplies
Sometimes, it is beneficial to have your business situated close to your sources. The cost of acquiring your goods is highly related to where you source it especially if you are dealing with raw materials or products that are subject to spoilage. Logistics and time spent in purchasing raw materials or products from the supplier is a common expense that is usually neglected by new business owners during product costing or analysis. Though some distributors in my experience offer free delivery, it usually packaged with large volume of orders.
- Proximity to Competition or Businesses Related to You
Assess the level of competition of your business in the potential location. Retail stores located next to each other are likely to thrive. However, this might not be effective for long term if you will be carrying exactly the same products or services. Locating your business near a business with the same target market as you is usually a better option.
- Zoning and Building Infrastructure
It is recommended to determine if the proposed area allows the type of business that you are trying to put up. Take into consideration the zoning laws since there are types of businesses that are not allowed for some locations. There are laws set out restrictions on building heights, sizes, types of facilities, waste regulations, and environmental issues. Make sure that the location you chose are allowed to have commercial activities in the first place because there are buildings that are strictly for residential purposes only.
For service oriented firms, make sure that the building has a provision for things like air conditioning, telecommunications and exhaust. A provision for power generator is also important if your business rely on electronic equipment like computers.
- Local Laws and Regulation
Cities and provinces have different laws and regulations regarding business operation. Putting up a karaoke bar next to a place of worship may not be a good idea. Or putting gaming or gambling establishments near schools is usually prohibited. You can start asking your LGUs before you make a deal with your lessor.
Some areas also provide tax benefits like in areas or buildings that are registered in PEZA (Philippine Economic Zone Authority). It is usually more costly to rent in these places but you will have an option to apply for income tax holiday.
In addition, at the time of this writing, we have different minimum wage rates for different regions in the Philippines, this might not be a huge factor during your start up stage but it can be once you started hiring many employees.
- Compatibility with the Community or Nearby Businesses
The nature of your business must fit the community. Select an area that shows interest in your business. Selling high-end products to a community of low wage earners might not be a good idea, or putting up a pork barbecue stall in a non-pork eating community might not be good.
Other than the nearby residents, you also need to consider the compatibility of your business to nearby business establishments, observe the community. You might end-up putting a restaurant beside a funeral service or place yoga or meditation classes near a karaoke bar. Do not rush. We once rented and renovated an office space which we later on found out that our neighbor establishment is too noisy. We ended up moving to a different space after only few months wasting money on renovation and many other costs.
The area must have adequate police and fire protection. Providing your business with such protection can result to increased cost of operation. From time to time, Bureau of Fire Protection (BFP) conducts an audit to business establishments so make sure that the area have good fire exit, have fire extinguishers (though BFP might require you to purchase your own) and provision for emergency lights. In addition, some municipalities like Quezon City require every business establishments to have CCTV cameras, though it is easy to install this later but it is a huge plus if you are already renting a space with provision for CCTVs.
It is also a good idea to research about the crime rate in the area and analyze how it might affect your business. Feel free to ask around.
- Proximity to potential employees
Most businesses depend on people and this is more true to service businesses. I’ve been in different businesses for quite some time and had a fair share of employees who left/resigned. Getting home sick or too long travel time are some of the reasons they left the company so it is a good idea to consider this especially if your business require specialize skills. If your business require specialize skills, locating it near a school where they train or teach these skills can be a good idea.
- Public Services
This refers to the availability of services like garbage collection and sewerage. If these are not available in your chosen site, this can be an extra cost in your operation.
The idea of settling in a wrong location may jeopardize your start up and can even cause demotivation to the business owner. Moving to another site can give you inconvenience, additional expenses and can even result in lost opportunity to make profits. Evaluating the possible locations for your business must be done carefully to avoid the risk of pouring your hard earned money down the drain. This might be the most challenging part at first but will save you from having a hard time in the future.
I said “10 tips” in the title but I would like to give you another tip. There are no guarantees in business, sometimes even a small miscalculation or a small detail that you did not notice might result to the failure of your business so it is a good idea to negotiate properly with your lessor. Try to convince your lessor to only try the place for only few months. In my experience there are lessors who will let you try the place for only 3 months, some 6 months then sign for a longer term once you’ve proven that you got the right location. For me, 6 months of operation is enough to determine if the location is right.
Good luck hunting!