How To Choose The Right Location For Your Small Business


The following are 1 Factors To Consider When You Want To Choose The Best Location For Business

  • 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 side, a good business location can make your small business grow 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 enough 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.

In all cases, remember that transporting raw materials or finished goods over a long distance constitute additional costs to your business.

Most importantly, you should not forget that you need to optimize your business expenses in other for your business to grow.

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.

Similarly, other areas may be prone to flooding and other natural disasters.

Therefore, you must choose a business location where your business can thrive successfully, secure and safe.

Nearness to your target customers 

When choosing a business location you should look out for the places where your likely customers hang out.

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

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 not sure that there will be demand for your products, you should not locate your business there. Go elsewhere.

Choosing a 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 can help you to channel your marketing efforts to meet the needs of your customers.

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

Therefore, to succeed in your business, you need to set up your business where there is good population.

Most importantly, you should endeavor 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
  • prepared to fight competition.

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

This is because no one business will possibly have everything that people need. 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 be businesses big companies might not be interested in doing. You can also move in to provide the goods or services they do not like to offer.

Choosing a business location: Competition

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

In every business, there must be competition. In fact, in business business is war and the common enemy is competition.

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

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.

For example, if you locate your business where it is difficult for customers to see or access your business, you cannot drive sales.

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 might need some highly skilled people to work for you.

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

For example, you might need people that will perform some specialized tasks which for one reason or another, you cannot handle.

More importantly, you should ensure that you can easily get the right caliber of labor for 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 need water to improve sanitation in and around your business.

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 makes policies that directly or indirectly affect small businesses.

For example, government can just embark on massive road expansion or the construction of new ones that might affect 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.

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

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

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 might leave you.

Another point you need to consider is environmental population. Poor environment can make you loose your customers.

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, using modern communication tools.

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 to make things happen.

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

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

Related: See The 9 Strategies To Prevent Small Business Failure



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 →