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

Choosing a business location can be very difficult for many people.

There are many factors to be considered when choosing a business location.

However, the following tips should guide you when choosing your business location.

Nearness to raw materials

If you are going into a manufacturing business, for example, you will need to locate your business near the raw materials that your business uses.

Similarly, if you are looking at export and import business, you can locate your business near a seaport.

The reasons why you need to do this is that if you have to transport raw materials over a long distance, it will increase your cost of production and selling costs.

The selling prices of your finished goods will be high.

Consequently, customers may take their business to your competitors.

Furthermore, shortage of materials can result in your inability to meet customers’ needs.

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 notorious for flooding and other natural disasters.

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

Nearness to your target market

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

Your target market is the people you want to sell to.

You need a good number of regular customers for your business to succeed.

Therefore, you need to find out whether the people in that area will be interested in buying your products.

If you locate where nobody is interested in your product, your business will fail.


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.

If you understand the population of the area, it will help you in directing your marketing campaign to the right target.

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.

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.


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 there 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 visit 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 you handle certain important 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.

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 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.

Or even build another road that could affect 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.

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. The want to be proud to introduce your business to their 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, quicker stock turnover, more sales 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


By Samuel Ijenhi