11 Most Important Factors You Should Consider When Choosing A Business Location


The following are the 11 Most Important Factors You Should Consider When Choosing A Business Location

  • Nearness to raw materials
  • Research the Area
  • Nearness to your target market
  • Population
  • Security
  • Visibility
  • Availability Of Labor
  • Basic amenities
  • Government Policies
  • Environment Issues

Often times, choosing a business location can be very difficult for many people.

For many reasons a wrong business location can make a potentially viable business to fail.

On the flip sides, a good business location can make your small business big within a short period of time.

Consequently, it can make all the difference between success and failure in business.

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

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Nature of business

The nature of your business should determine the best location for your business.

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

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

Furthermore, if you are looking at export business, you can locate your business near a sea port or airport.

Consequently, you should remember that transporting raw materials over a long distance constitute additional costs to your business.

Most importantly, you should remember that a good business location can help you to optimize your business expenses.

Research the area

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

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

Other areas may be prone to flooding and other natural disasters.

Therefore, you must choose a business location where your investment will be safe and secure.

Nearness to your target customers 

When choosing a business location you should locate your business near your target customers.

Your target customers are the people you expect would buy from you.

Simply put, the things you want to sell should be things people in that locality will want to put their money.

Therefore, if you are sure that there will be demand for your products, you should not locate your business there.

Business location: Population

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

For example, you need to find out the demography of the area: old people, men, women, boys and girls.

Understanding the population of the area and their buying habits will help you to channel your marketing efforts appropriately.

If you locate your business in a low density population area, only few people will buy from you.

Therefore, you need to consider the population and the purchasing power of the people in 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
  • prepared to fight competition.

Business location: Competition

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

Therefore, you should research the level of competition in the area.

You need to find answers to the following questions:

  • How tough is the competition?
  • Are they big competitors?
  • what can i do differently to stand out from the competition?
  • 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.

If you locate your business where it is difficult for customers to see or access your business, you will not sell much.

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

Availability Of Labor

As your business begins to grow, you will need some skilled people to work for you.

It unlikely that you will be able to do everything all by yourself.

So you will need people who will carry out tasks, which for one reason or another, you cannot handle.

Therefore, before you choose a business location, you should ensure that you can easily get the right caliber of labor for your business.

This is necessary because you need capable hands to help you handle some specific aspects of your business.

The right quality of labor will ensure that you do not have to stop work or experience delays in meeting customers needs.

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 need water to improve sanitation in and around your business.

Moreover, you need good access roads to make it convenient for your customers, suppliers and employees to do business with you.

Government Policies

Sometimes, government makes policies that indirectly affect small businesses.

Therefore, you need to find out if there is any likelihood that the government will in future acquire the building you want to use for your business.

Furthermore, you should find out if there are any plan by government to expand an existing road on which your business is located.

Or even build another road that could displace your business.

Should any of these happen, you will lose your customers.

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

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 might leave you.

Customers like to shop in a clean environment.

They like beautiful sights. They want to be proud to introduce your business to their family and friends.

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.

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 you do not need to commute to your customers. A call might just be all that you need.

Finally good business location should result in more customers, more sales turnover and hence profits.

Therefore, you should take time to look for a suitable location for your business.

Related:9 Best And Most Effective Ways To Prevent Business Failure


Samuel Ijenhi

B. Sc. Accounting

University of Benin

Benin City.


About Samuel Ijenhi

A graduate in Accounting, University of Benin, Benin City, Edo State, Nigeria.
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