12 Factors To Consider When Choosing A Business Location


There are many factors to consider when choosing a business location.

This is because a good business location can make your business to grow rapidly.

Conversely, a wrong business location can make a profitable business to fail.

This article is, therefore, focusing attention on some of the most important factors you need to consider when choosing a location for your business.

Nature of business

Your choice of business location should depend on the nature of your business.

For example. if you are into manufacturing, you can locate your business in a place large enough for your current use and for future expansion.

Additionally, you can locate close to the source of the major raw materials that your business uses.

This is because if you locate your plant far from the major raw, you will incur high transportation costs to get them delivered to where they are needed.

And this will add up to increased cost of production.

Consequently, your production costs of the finished products will be too high for your customers.

Export trade

If you are looking at export business, you can locate your business near a sea port or an airport where it will be easier, quicker, convenient and more cost effective to:

  • Receive your consigments
  • Or ship goods to custoers within or outside the country.

Similarly, locating near a seaport or airport can make it easier for you to  take delivery of your raw materials.

Furthermore, this closeness will help you to ensure that your machines can run properly without idle time.

In either way, you will be able to meet customer deadlines.

Most importantly, your aim should be to reduce costs and increase your profits.

Research the area

Before you choose a location for your business, you will need to research the area.

For example, some areas are known for crimes, violence and insecurity.

Another factor that you may want to consider is lighting.

Furthermore, some areas are prone to flooding and natural disasters.

All the above and many more other factors are important for your consideration.

Any or a combination of the above factors can have negative effects on your business.

Therefore, you must choose a location where your business can be:

  • Safe
  • Secure
  • Operate seamlessly.

Nearness to your target customers 

Regular customers and very key to the success of your business.

You need to identify your target market.

Your target customers are the people that you think will buy your products or make use of your services.

Your target market can be men, women, boys or girls.

You can find out if you can segment your target audience.

Decide whether your customers will be men, women, boys or girls.

This will enable you to properly channel your marketing effort to those who needs your products or services.

Next, you need to look out for the places where they usually stay so that you can reach them.

Furthermore, you need to make sure that your products are things the people in that locality would want to spend their money on.

More importantly, you need to make sure that there will be demand for your products.

In fact, you should research several locations and make comparisons before making a choice.

Choosing a Business location: Population

Another important factor to consider is the population of the area.

You need to make sure that the population in the area is large enough to sustain your business.

With a large population, if Mr A does not buy, B can buy and so on.

Try as much as possible to find out the buying habits of the inhabitants in the locality.

For example, if you are selling expensive jewelry, you should not locate your business in an area where the vast majority of the are poor.

If you locate your business in a low density population area, only few people will buy your products or make use of your services.

And you need regular flow of revenue to remain in business.

Most importantly, you need to find out the purchasing power of the people that make up the population of the area.

Cluster Business Area

Business cluster area simply means an area where there are many different businesses.

Choosing a business location where there are many businesses has advantages and disadvantages.

For example, if you locate in a cluster business area, you will need to:

  • Advertise more
  • Update your offerings
  • Provide high quality products
  • Have enough working capital
  • Provide excellent service
  • Be up to date with industry trends
  • Prepare to fight competition.

You should not run away from business cluster area just because there are many businesses.

This is because no one business can possibly have everything that every needs .

And there could be times when the big companies might have stock outs; so you can move in to sell your products.

Most importantly, there might also be businesses products or services that the big companies are not interested in doing.

This can give you an opportunity to provide such products or services that the big companies do note want to provide.

Choosing a business location: Competition

When choosing a business location, you should remember that competition is real.

In real life, business is like war and the common enemy is competition.

Therefore, you should research the level of competition in the area to find out if it is the type you can cope with.

Furthermore, you can find out if there are things you can do differently to stand from the crowd.

You also need to find answers to the following questions:

  • How tough is the competition?
  • Are there big competitors  with vast resources and connections?
  • What strategies am I going to use to fight competition?

Where people can find you. 

You should choose a business location where it will be easy for people to find your business.

For example, if you locate your business where it is difficult for customers to see or access your business, you can end up with low sales.

This time, the problem is not with your product or your marketing strategies. It is with your business location.

However, if you locate your business on a busy road, preferably on a “T” junction, it should be easy for passersby to branch into your store and make purchases.

Availability Of Labor

As your business begins to grow, you might need some highly skilled people to carry out some specialized tasks which for reason or another, you cannot handle.

In the beginning, you might be able to carry out many tasks all by yourself.

But as your business begins to grow coupled with advancement in technology, you might need specialists to hand some critical aspects of your business.

More importantly, you should make sure that you can easily lay hands on the right caliber of labor that can meet the needs of your business.

Most importantly, you cannot afford the luxury of work stoppages or encounter delays in meeting customer deadlines just because essential staff are not available to provide the required services.

Choosing a business location: Essential amenities 

Another important factor you need to consider is availability of essential amenities.

For example, you need electricity to power your systems.

In the same vein, you also need water to cater for the sanitation needs of your business and your immediate environment.

Do not forget that customers like beautiful and clean sights.

Furthermore, you need good access roads to make it convenient for your customers, suppliers and employees to get to your location.

Government Policies

Sometimes, government can make a policy that can directly or indirectly impact on your business.

For example, government can just embark on a massive road expansion or  construction of new ones.

These can displace your business with the result you might loose some of your customers.

Furthermore, you should find out if there are any plans by government to expand an existing road or put a large plant that can affect your business.

And it will take you a long time to acquire new customers in your new location.

Therefore, you should look before you leap.

Choosing a business location: Environment Issues

You need to locate your business in a clean environment.

For example, if you locate your business in a dirty or erosion prone area, your customers will not be interested to take all the trouble of going through  rough terrains because they want to buy  stuff from you.

After all, you may not be the only seller of the product. Customers are slippery and difficult to keep.

Customers like to shop in a clean environment. They want to be proud to introduce your business to their family and friends.

Therefore, environment where you do your business should be a priority for you.

Communication facilities

Communication facilities are essential for the smooth running of your business.

You need to be able to communicate easily with your customers and suppliers, using modern communication devices.

For instance, you need to be able to make cold calls to your customers to find out how they are doing.

If communication facilities are good all you need is just to put up cold calls to your customers as the need arises.

Effective and seamless communication will improve ease of doing business with you.

Customers do not like to shop with tears running down their cheeks.

Related: 10 Effective Ways To Prevent Your Business From Failing



By Samuel Ijenhi

B. Sc. Accounting, (University of Benin)

Benin City, Nigeria.


About Samuel Ijenhi

A graduate in Accounting, University of Benin, Benin City, Edo State, Nigeria.
View all posts by Samuel Ijenhi →