How to Choose a Good Business Location

How to Choose a Good Business Location

Have you been thinking about starting your own business? Great! You may have already decided what kind of business it will be but where will you operate it from? Have you already found a location?

Well, don’t be too hasty my friend. Your preference alone doesn’t matter. There are many other conditions that have to be met.

The location of business may not be important for virtual businesses and businesses that drop-ship with the help of third-parties, however, it’s critical for physical businesses such as restaurants and retailers.

Most entrepreneurs tend to overlook this process since it is a tedious and time-consuming task, however, choosing the wrong location may have negatively impact the performance of your business in the long-run.

Besides, unlike other startup mistakes, a bad choice of location can be very difficult to resolve.

Here we will discuss about the things you need to keep in mind when choosing a business location and where you can look for one.

Things to consider when choosing a business location

  • Demographics

Who is your target audience? How many potential customers live close by? And how important is their proximity to your business location?

Try answering these questions. The proximity of customers can be very important for retailers and some service providers but not so much for other types of businesses.

Next, take a look at the overall community. Check whether or not a decent percentage of the population in close proximity match your ideal customer profile, especially if you are a local business. If so, do they have a stable income source that will allow them to purchase your products and services in a recurring fashion?

Also, check whether the majority of the people residing close by are relying on jobs in one specific industry. This could be bad in the event of an industry downturn.

  • Pedestrian traffic

Monitor the amount of pedestrian traffic outside and near the location of your business at different times of the day (focus on morning and evening times the most) and on different days of the week to see how consistent the traffic is.

It’s important to monitor the traffic on both weekdays and weekends because some locations actually have high pedestrian traffic on weekends but little to no traffic on weekdays. Also, beware of dead spots. Even the most crowded locations have them.

However, if your business doesn’t accept direct customers or require some level of confidentiality, you may be better off choosing an area with less pedestrian traffic. Besides, the more crowded the place is, the more expensive the rent.

  • Competition

Are there competitors nearby? If so, how will you fit in or stand out from them?

Having competition nearby is not always bad. For example, if you own a pizza shop and there are 2 more pizza shops nearby, you could lower your prices or offer bigger pizzas to catch their customers and make them your own.

This will only be possible if your competitors are in the same level as you. If they are more established, they probably already give the lowest prices in the market. Being a new business, you can’t hope to drop prices too much because then you would face bankruptcy.

But fret not. You could just catch the overflow from your competitors when they are filled with customers. Either way you will still get enough business.

But if you are conducting a type of business where competition isn’t good, look somewhere else.

  • Safety

Is the neighborhood safe? The level of safety required differs from business to business.

For example, a jewelry business should not be located in an area popular for robberies or where there not many pedestrians or vehicles at night.

Also, make sure the streets are well lit and that parking is nearby. You should also consider hiring one or two security guards just in case.

It would help if there is a police station nearby as well. Remember that you are responsible for the safety of both employees and customers.

  • Cost

Most importantly, can you afford the place? I’m not only talking about the rent. Check whether any renovations are required before you can move in and if so, how much it would cost.

Income and sales taxes vary greatly from state to state so check out the states which are more business friendly in terms of taxes. Even if you can’t move to a state far away which has really low business taxes, check out the surrounding states.

If you can still afford it regardless of the high income and sales taxes, that’s great. Good for you. But what about your employees and customers? Can they afford it?

For example, is parking free? or is it expensive? Will high rent and tax rates cause you to charge higher prices for products and services? Are majority of your employees in another state? If so, what are the travelling expenses?

  • Prestige

What does the address say about your business? Would a downtown address add more credibility and prestige? Are there wealthy clients around you?

The most prestigious addresses are the ones that end with Beverly Hills, Silicon Valley, or Manhattan. People tend to trust those businesses more than others.

  • History

Ask about the previous tenants from your landlord or nearby businesses. If you are starting the business in a location where 3 other businesses failed, you may want to do more research as to why that happened.

Doing business in such a location may cause bad reputation to build up since people may think your business will end up the same way as the previous ones.

One the other hand, if the previous tenants were all successful, it might be a good sign but don’t count on it too much.

  • Convenience

Is it easy to find or is it located on the 5th floor of a very narrow building? Is parking available and nearby?

Check what businesses are around you and see whether you can benefit from the customer traffic they generate and whether those businesses could help you in any way.

For example, it would be pretty convenient to have a restaurant nearby for your employees to each, or a day-care center for employees with children.

  • Infrastructure

Make sure the building has electricity, water, air conditioning, proper lighting and telecommunication services.

  • Zoning

Most cities, especially the cities in U.S. have strong zoning requirements so be sure to check whether your business can be operated in the area before you sign the rent contract or before you buy it.

Where to look for a vacant business location

Now you know the things to consider when choosing a business location but where should you go to find one? You could start your hunt on Craigslist and commercial property listing websites such as RemaxCommercial, SpaceList, and RealCommercial.

In addition, you could visit the local Chamber of Commerce or commercial real estate agencies to get a list of available commercial properties, or just keep in an eye out for rental signs while you are driving.


As you can see, choosing a location is no simple feat. There are so many factors you have to consider before renting or buying office space, manufacturing facility or warehouse.

However, in the end, no matter who says what, if the location doesn’t feel right to you then don’t go for it. After all, it’s you who is going to work there everyday, not them. Do your research well before signing any contract.

So did this guide aid you in choosing a location for your business? If so, what was the experience like and from where did you find out about the location? Let us know in the comments section below.



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