Choosing a business location

Question: "What factors should I consider when choosing a retail location for my business?"

Answer: Location, location, location is usually the most important factor in choosing your retail site. However, what may be a good location for a convenience store or fast food restaurant may not be a good location for a clothing store, jewelry store or car lot.

If you own a convenience shop, such as fast food or a gas station, the quantity of traffic is the most important factor because the product has a relatively low unit price, is bought by habit and is sold in numerous stores. Therefore, the intersection of two major highways would be a prime location because the product that you are selling would grab traffic from all directions.

Retail and specialty goods, on the other hand, usually have a higher unit price, are purchased infrequently, and more intensive selling efforts are usually required on the part of the storeowner. Examples of this category include men's suits, automobiles, jewelry and furniture stores. For these stores, the quality of the traffic is more important. This type of retailer can have a much wider trading area. Without a heavily trafficked location—but with the help of adequate promotion—this type of store can generate its own traffic. The site you choose can experience lower traffic density but must be easily accessible from a residential area, have good parking and a pleasant general appearance in the surrounding neighborhood.

In many cases, buyers of retail goods like to compare the items in several stores by traveling only a minimum distance. As a result stores offering complementary items tend to locate close to one another. That is why most car dealerships cluster near other dealerships or complimentary clothing stores are located in the same malls.

Other considerations in choosing a retail site include:

1. What are the traffic patterns in the area you are considering? Where is the growth of the town directed?
   
   
2. What are the zoning regulations? Make sure the property is zoned commercial before you choose the space by calling your zoning administrator at the city hall. If it is not, you need to request a variance that may or may not be granted.
   
   
3. Are stores in the area compatible with your product or service? Would their clients shop in your store?
   
   
4. How responsive is the landlord? Is the general appearance of the area neat and in good shape? Make sure the contract mentions who is responsible for utilities, snow removal, repair and maintenance on the building. Get everything in writing to avoid problems in the future.
   
   
5. What is the history of that location? If three other restaurants have failed in that location, maybe you should think twice before you locate another restaurant there.

Selection of a retail location requires time and careful consideration. It should not be done in haste just to coincide, say, with a loan approval. A few months' delay is only a minor setback compared to the massive—often fatal—problems that occur from operating a retail business in a poor location. Remember if you locate in haste, then you may repent at leisure.

Although the Missouri Small Business and Technology Development Centers are not in the appraisal business, we can figure if a potential buyer can break even or make a profit based on your selling price. For further assistance, contact a business specialist at a Small Business and Technology Development Center.

- Jeanne Dau, Small Business & Technology Development Centers, Chillicothe 3/13/01; reviewed 12/10/08