So many questions to consider when choosing locations!
It really depends on what business you are in and who is going to buy from you. Here are a few things to consider.
Do your customers come to you?
Do you have to go to your customers?
Do you have employees?
Do you manufacture products for distribution?
Are you in the retail business where you need high traffic? Drill down a bit more and ask , are you a specialty shop like electronics, or are you a Department store? Or a Pharmacy?
The difference could be if you were an electronics store that probably means customers will find you, and it is an occasional purchase. For example if you were the Department store you need easy access and lots of visibility, high traffic, and parking. A Pharmacy can go several different ways. In the past I have seen Pharmacy’s located in the same vicinity as Grocery stores, but lately I have seen them near Doctors offices, and Assisted Living facilities. There are even some in our local area on side streets. It will depend on length of time in business, customer loyalty, the nature of the access and purchase. For a new business and even for relocating an existing business I would rent. If you fail, better to owe the balance of a lease than have bank repossession on you. Try to have the ability to sublease; this would decrease your exposure even more if you find yourself failing. Are you a Food Service Business? Drill down more and ask are you fast food? Fine dining? Private parties only?
Fast Food generally has to have a high visibility and high traffic location. Fine Dining I have seen in off the beaten path areas and the Private Party only locations can and usually are way off the beaten path.
Are you a Service business? Drill down and ask are you a hair salon? Automotive service? Carpet cleaning service?
Service businesses can require a high traffic, high visibility location, or a Transmission Shop can be way off path. A Salon can go into a secondary location due to the high customer loyalty. A Carpet Cleaning service can be located in rural or industrial parks simply because they come to you the customer.
All these variables can change depending on the density of the local population. If you are in a large city these could all change? If you are in a rural or suburban location the guidelines above generally apply. The most important thing is to get a location that achieves the traffic and visibility you need within your budget.
There are locations that I have heard referred to as HooDoo locations. These are business properties that can’t seem to make a go of it no matter who the tenant is. I can think of one here right now in Southern, IL. It can befuddle you when the visibility is excellent, parking excellent, and yet the traffic pattern and speed of the traffic going by can be a crippling factor. I have seen where changes are made to intersections that destroy a location.
So what can you do? Do everything you can! I worked for a shopping center developer who flew airplanes over the town during morning rush hour and evening rush hour taking pictures of the intersections that were busiest. You can park in a location and watch during the same times for a lot less. I would also find the top competitors in your business in three neighboring towns and study their locations to see if they are secondary or high traffic. If you can make a go of it in a secondary location it will save you tons of money!
To repeat myself, I would rent first for a new business and even for relocating an existing business I would rent. If you fail, better to owe the balance of a lease than have bank repossession on you. Try to have the ability to sublease; this would decrease your exposure even more if you find yourself failing.
I don’t want to sound dire, but let’s be realistic… most businesses fail in the first few years. The U.S. Bureau of Labor and Statistics found in a four year study between 1998 and 2002 that after the first two years 36% of all business start ups failed but after four years only 44% were still in existence.
So what if you are already in business and your location is not doing well? You need to go through a diagnostic questioning of your own knowledge of your business. You need to analyze the recipe that you started with (for more on that see the Blog post on Recipe). You also need to know your Z score (for more on that see the Post on Z Score). Is your marketing hitting your correct demographic? (See the Post on Demographics)