How to Choose a Location for Your Business
A guide to finding and choosing a physical location for your business.
This article is for informational purposes only and does not constitute legal, personal, or tax advice. The information contained herein is subject to change and may vary from time to time. For specific advice applicable to your business, please contact a professional.
Choosing a location is one of the most important decisions you’ll ever make for your business, so it pays to take your time. It’s no overstatement to say getting your location strategy right can be the difference between success and failure.
But before you start shopping around for the perfect store front, be clear about the fundamentals – the must-haves, what you’d like to have, the deal-breakers and how much you’re willing to pay.
1. The importance of choosing a business location
Your location is one of the biggest decisions you will make for your business and there are lots of factors to consider:
- Budget - Work out what your business can afford for loan or rent payments – this will affect where and what type of property you can find. Don’t forget to factor in other costs including local taxes, utilities, permits, any renovations or upgrades and service charges.
- Long-term commitment - Do you have the financial means to buy? Are you prepared to sign a lease for several years? Be clear about what you’re willing to commit to because you could be contractually tied in for a long time.
- Store visibility - Do you want to be somewhere with high foot traffic where you may pay a premium or are you happy being further out in cheaper premises? If you run a bar it might be important you’re in the hub of things, but if you’re a service-based business or operate from a warehouse, an industrial zone or out of town might be better.
- Demand - Look for areas where there is high demand for your product or service but low competition. You don’t want to be in an area saturated with competitors. On the other hand, you could benefit from any complementary businesses in the area, for example, opening a fitness clothing shop next to a gym.
- Accessibility - Is it easy to reach, not just for your customers but suppliers too? Are there good transport links (road, rail, air) in the area? Is there ample parking nearby? What is the public transport like?
- Talent attraction - Will you recruit from the local area? Will staff want to work where you are? For example, a vibrant city centre will be more attractive than a remote business park. Can they get to the premises easily? Are there sufficient facilities for them – showers, bike parks, somewhere to eat?
2. Types of business premises
You can rent anything from a small shop to a huge industrial warehouse, but what you need depends on what you do. If you sell physical products, a bricks-and-mortar shop may be exactly what you need. If you offer a service or run a consultancy, an office might suffice.
Depending on the nature of your business, you might require a combination or a multifunctional space.
Warehouse or storage
Shared space/co-working spaces
3. To buy or to lease
When planning your location strategy, think about whether you want to rent a property or whether you’d rather buy.
If you’re a small business just starting out, renting is likely to be the better option. However, buying might be preferable, depending on the type of business and your financial circumstances.
There are pros and cons to each:
Straightforward and quick to arrange – you just need a rental bond and the ability to make the monthly rent payments
A legitimate business expense and can be offset against company tax
Lower maintenance – the landlord is responsible for most aspects of the building, rather than you
If you lack capital, it may be your only option
Possible restriction on what you can do to the property
Commercial leases can be long, so you may need to commit for several years
High competition for prime locations
Ability to fix mortgage payments for longer terms, plus overall capital gain if property prices increase
More flexibility to renovate and fit out the space
Option to sublet to other businesses if your needs change
Buying ties up large amounts of capital and you may need to pay a sizable deposit
Can take time to sell
Responsibility for all maintenance
You may need planning permission to make significant changes
4. How to choose the right location
In an ideal world, your optimal location will be the one which ticks all your boxes. In reality, you probably have to make some compromises when considering your location strategy, but that doesn’t mean you can’t still find something which is great for your business.
Aside from choosing whether to rent or buy and how you’ll use the space, other business location factors you need to consider are:
Where your customers hang out
Proximity to other businesses
Proximity to competitors
Footfall if you expect target customers to shop in store
Any property taxes you may be liable for
Is the business location in a growth area with future opportunities?
Closeness to your suppliers/distributors, as this could impact transportation costs
Researching locations and competitors
When you find a location you like, take a deep dive into what is actually there. Ask yourself these questions:
What is the demographic of the area? Does it fit your target audience and are they likely to visit your premises?
Does it have parking?
Are there good transport links, both for staff and clients?
Do you need any planning or zoning permits?
What other local businesses are in the area? Do they complement yours?
Where are your competitors located? Are they nearby? Could their closeness impact your chances of success?
If the business space has changed regularly, ask why. For example, if you plan to open a restaurant but the last five in the same spot have all failed within a year, there is a reason.
Is there room for expansion as your business grows?
Are there any planned developments, zoning or business rates in the area which could benefit you in future?
Is your location in line with your business plan and current objectives?
Is the location easily accessible by your employees?
It’s often overlooked when formulating a location strategy, but you should also research any nearby businesses that could benefit you, not just your competitors.
Keeping track of your competition can give you valuable market insights, but making friends with them doesn’t have to damage your own objectives. Think coffee shops in bookstores, bars near hotels and activewear shops near gyms. By locating near complementary companies, you can actually strengthen your business.
Reaching your target market
It’s stating the obvious, but there is literally no point having the perfect premises if your target audience doesn’t come to it, so researching where they are is so important.
Your customers should be able to find you quickly and easily. There should also be adequate parking and facilities for them.
If you’re not sure who your target audience is, then you may need to conduct further customer research to be clear about their needs and location.
5. Moving premises as you grow
Whenever you consider a business property, think about your future needs too. If expansion is on the cards, make sure the property you choose offers you either the flexibility to expand on site or to move on easily to somewhere bigger.
Increased space isn’t the only reason you could move sooner than you planned – as your business shifts, it may no longer be suitable for reaching your target customers. It may also be more efficient and cheaper to move elsewhere.
6. Business premises checklist
Use our business premises checklist to help hone your location strategy:
Business Location Checklist
|Visibility to passing traffic|
|Proximity to suppliers|
|Location in relation to target market|
|Overall customer convenience|
|Number of nearby competing businesses|
|How your site compares to theirs|
|Overall convenience and experience for customers|
|Parking and transport|
|Major transport links|
|Health of local businesses|
|Quality of local businesses|
|Future development opportunities|
|Initial terms and rent increases|
|Ease of renewal|
|What’s included in lease e.g. waste disposal|
|Security or maintenance services included|
|Condition of fixtures and fittings|
|Adequate waste disposal|
|Space for expansion|
|Any restrictions on expansion|
While location needs differ from business to business, covering the major bases gives you the best chance of finding somewhere that really ticks your boxes and maximises your chances of success.
7. Useful resources for finding the perfect business location
The Australian government has useful information on business location
Visit the Australian Licence and Business Information Service (ALBIS) for help on licences you may need and which may affect your location decisions
Find out more about consumer behaviour and how it affects your business
Launching your business
From choosing the right business licence and insurance to setting up payroll and hiring your first employee, we’ve got the resources and information you need to start your business successfully.
Managing your business
Once your business is actually open, learn how to manage its everyday activities. Finance, operations, marketing – they’re all down to you. We give you the help and advice you need to get to grips with these.