Brick and mortar businesses rely on foot traffic and street visibility to sell products, serve customers, and stay profitable. The number of patrons shopping at any given store, restaurant, or service-based establishment depends on its location and neighborhood, in addition to other factors such as consumer awareness and business reputation.
While it takes more than having a prime location to lure shoppers into a boutique, drugstore, or supermarket, it certainly helps to be in an area that works to your advantage.
Before choosing a location to set up shop, consider how the following factors will impact your business:
1. Floor Plan
Does your business deal in services or products? If you provide a service, how much space do you need to carry on business? If you sell goods, how much inventory do you have, and how much square footage do you need as selling space?
When configuring a floor plan, think about your assets, including your inventory, equipment, and employees. Research similar business locations to get an estimate of the space you’ll need. Ideally, you’ll want to achieve maximum profit for the space you’re leasing by earning more per square foot than you’re paying to rent it.
Convenience stores typically need 1500-2000 square feet of room, whereas a restaurant is upwards of 2500 square feet. Most likely, you won’t be able to expand or decrease space once you’ve moved in, so do your homework before committing to a floor plan.
2. Commercial Building
Once you know approximately how much physical space you’ll need for your small business, it’s important to think about the type of commercial building that fits your needs.
Do you want to open a book shop, clothing store, or café? How about a tire repair shop or an industrial machine retail store? The type of business you want to open will determine what structure will suit you best.
Here are the types of commercial properties that are available:
Mall or strip mall: Malls typically deal in big box stores or retail stores, and strip malls usually have a mix of retail, restaurant, or small service spaces, such as laundromats, beauty salons, law firms, doctor’s offices, and more.
Storefront: An attached or detached commercial space that can house any number of businesses, from an art supply store or a daycare, to a bank or a family restaurant.
Office building: A high-rise or low-rise office building has office space reserved for service-based businesses, but can also lease office space to anyone, including entrepreneurs.
Warehouse: Serving a variety of uses, warehouses can be a hybrid of industrial and office space, with room for storage and equipment, as well as service areas for manufacturing or repairs. They can also serve as a hub for distribution.
Hotel or Apartment Building: Sometimes, commercial space is available on the ground floor of a hotel or a high-rise apartment building.
3. Physical Location
Where is the property located on a map? Is it downtown, in the suburbs, on a busy transit route, or hidden away on a side-street?
Zoning laws control how land is used in a municipality. Certain areas are zoned specifically for commercial activities, which means that similar for-profit businesses can operate in that district. These areas are kept separate from residential neighborhoods.
Review your local zoning laws and make sure you can use a space for your intended business activities. These laws impact where you can conduct business, the type of business you can conduct, as well as parking, signage, and even building requirements, so it’s important to become familiar with them before signing a commercial lease.
Once you’ve researched zoning restrictions, think about your customers, where they are, and where they’d expect to see a business like yours. For instance, a gas station should be accessible from the main traffic route, and visible to drivers. A restaurant or specialty shop can serve as more of a “destination” location, where customers travel to your business directly because they need something specific or they want a unique experience.
4. Lease Terms
Of course, none of what you want is achievable if it doesn’t fit within your budget or your long-term plans. Always have your budget and terms in mind when looking for a business location.
When viewing commercial property, ask the property manager the following questions:
- How much is rent?
- Are utilities and operating costs included?
- Who pays for property taxes or maintenance/repairs?
- How much is the security deposit?
- Are there any additional fees, such as parking or late payment fees?
Next, come the actual terms of the commercial lease, which can vary depending on the structure, location, and space itself. A commercial property manager may have restrictions, so you’ll want to inquire about any rules or policies, including:
- Permitted Use. Whether the property can be used for your business activities.
- Signage. What types of signage you can/can’t display.
- Duration of the lease. Ask if you’ll be on a fixed or a month-to-month lease term.
- Insurance. Who is responsible for property and contents insurance.
- Improvements. If you can do renovations or remodel the space, including adding/removing fixtures.
- Sublease/Assignment. If you can sublease or assign the space to a new tenant.
Always make sure you read through the lease agreement and ask about any terms you don’t understand prior to signing.
Lastly, a commonly overlooked factor when choosing a business location is the neighborhood, including nearby businesses, demographics, crime rate, and reputation. No one will visit your location if it is dangerous, has a high crime rate, or is surrounded by dilapidated buildings.
The community you choose can help or harm your business, so you’ll want to be particular about your neighbors and location. Having a group of similar specialty shops nearby can work in your favor, especially around the holiday shopping season, as it will be a destination for many. Conversely, moving into a building by competitors can also hurt your profit if you don’t have a unique selling proposition.
Your Place of Business
Choosing a business location is a big commitment and may take time to find the perfect spot. Where you decide to set up your store, coffee shop, or office will directly impact the longevity of your business and whether you’ll be successful.
Consult with a real estate agent about your options and what might be the best location to serve your needs. Your goal is to find a location that is accessible to customers and feeds your business growth, and a place where you’ll feel confident turning the open sign on every day.
What matters most to you in a small business location?