PC Computing: Best Free Software/ZDCD.iso/top100/smalb.exe/F429.SBE

Text File | 1997-05-09 | 24.0 KB | 490 lines

           ┌─────────────────────────────────────────┐
           │ SELECTING A LOCATION FOR YOUR BUSINESS  │
           └─────────────────────────────────────────┘

There's an old saying in the real estate business that the
three most important things to consider in buying a piece
of real estate are location, location, and location.

There is a lot of truth in that assertion, and it applies
equally to selecting a site to locate your business, as
even the best run retail business will often fail if it
is in a poor location.  The process of selecting a good
location for your particular type of business is largely a
matter of common sense, but there are a great many factors
to consider before you decide on a place to set up your
business, whether you are buying or leasing the property.

Enough time, energy and study has been devoted to this
subject over the years to practically make the process of
site selection into a science.  While we can't turn you
into a "location specialist" or expert overnight, the
outline and suggestions below will give you a number of
things to consider and look into--before you sign on the
bottom line, to buy or rent a location for your business.

GENERAL CATEGORY OF BUSINESS -- RETAIL OR OTHER.  Most of
the discussion below is centered on retail businesses, as
site selection tends to be much more critical to the success
or survival of the typical small retail business than for
a wholesaler, service firm, or a manufacturing or publishing
business.  However, we have also included a brief section
at the end of this discussion on location considerations
for non-retail types of businesses, since location can
be important in some cases for certain other types of
businesses.

RETAIL BUSINESS SITE SELECTION.  If you will operate a
retail business, much of your success will depend on those
people who happen to pass by your site, notice your signs,
and decide your business is convenient and looks inviting
enough for them to stop in.  Without that component of the
market, you may still attract a lot of people who will
seek you out based on your advertising and promotional
activities, but you will have a very hard time surviving
if your location is poorly chosen.  Thus, choice of the
optimal site for your business is crucial to the success
of your retail business.

As noted above, the site selection process can become very
complex, since there are such a large number of variables
to consider.  To help you approach this problem in a more
structured and organized fashion, the following paragraphs
will give you a framework for conducting your location
analysis, as well as a number of important hints and
suggestions on things to look for, or to avoid, when you
go through the process of selecting a location.

Thus, we have broadly outlined in the following paragraphs
a suggested approach, as several steps you should take, in
more or less the order we have listed them, when doing
your location analysis.

STEPS IN PERFORMING A SITE SELECTION ANALYSIS:

STEP 1.  Perform Market Research.  As you may have already
done if you have used the business plan or market feasibility
study features of this program, you need to begin your site
selection by doing a market study, to make sure the general
area in which you are locating will support the type of
retail business you plan to open or acquire.  While this
phase of your study will not point you to a specific site,
it should give you some assurance that you have selected
a geographic area that at least offers the potential for a
successful retail site of the type you are planning, so
that you can then begin to focus on specific streets,
shopping centers, or individual sites within the market
area you have studied.

Or, if this phase of your research shows that the area you
are considering will NOT support your business, even if
you pick the best location within the area, then you will
need to refocus your search on another area that offers
better demographics.  For example, if you are planning to
open a very exclusive, upscale jewelry store, and you are
looking for a site in a lightly populated, very low-income
area, you could probably end your site selection study
very quickly, as soon as your market research disclosed
that this was the wrong type of area in which to open such
a store, which would cater to such a high-income clientele.

While we will not repeat here the mechanics of doing a
market analysis (refer to the market feasibility study
and business plan features of this program), some of the
key components of such a market survey will include the
following:

  . Identify the retail trading zone from which you will
    be able to draw most of your customers, and map it
    out on a map of the city or county.  Note that the
    distance from which you will draw customers will
    usually not be measured so much in miles as it is in
    minutes by car.  Thus, if there is only one major
    east-west arterial street or highway that runs through
    your targeted area, which has relatively good traffic
    flows at a fairly high speed, your retail trading
    zone will probably be an elongated elliptical area,
    running east to west, if there are no similar north
    to south arteries.  In short, if you will draw
    customers who are within a 15 minute drive, this
    may mean people 10 or 12 miles east or west of your
    location, who live near the major east-west road,
    will be in your trading area, whereas people who live
    only 5 or 6 miles to the north or south, who must
    take slow or congested side streets to reach you, may
    be outside your retail trading zone.

  . Study demographics, population trends, and growth
    prospects, for your retail trading zone, to make sure
    there is a good market for your retail product or
    service operation.  You can use Census Tract data
    on income levels, age and ethnic distribution, and
    other demographic factors that may be relevant to
    your particular type of retail business.  One fairly
    simple way to get an idea of income levels in your
    trading area is to go to a few local supermarkets
    and make some careful observations.

    If they are very busy, clean, well-maintained, and
    carry a lot of high-quality fresh cuts of beef, a good
    seafood counter, and lots of expensive specialty items
    such as out-of-season fresh fruits and vegetables from
    around the world, you can be fairly certain that you
    are in a relatively affluent neighborhood, one which
    is likely to support a retail business, like a coffee
    house, that will cater to a fairly high-income customer
    base.  If the supermarkets are poorly maintained, and
    have a very limited selection of meats, fresh fruits
    and vegetables (which items perish quickly if they do
    not turn over rapidly), it is a safe bet that there
    are not a lot of high-income people in the trading
    area, which may be a yellow warning light, depending
    upon the type of business you plan to operate.

  . Identify your competition, and look for areas where you
    may be able to operate with minimal competition.  But
    don't necessarily be scared off by a lot of competition.
    In some cases, where a number of good restaurants set
    up shoulder to shoulder, an area may become known as
    a good spot to go to eat out, with numerous dining
    choices, so you may actually benefit from the presence
    of the other restaurants if you open another restaurant
    nearby, provided that you offer food, service, and a
    setting that is fully competitive with the neighboring
    eateries.

STEP 2.  Research traffic patterns in your city or other
selling area, until you feel you have a good understanding
of how, when, and in what directions the major traffic
flows occur in your targeted area.  Identify the major
arterials, radial roads, and other major thoroughfares
that carry most traffic to and from various nodes, such
as between residential districts and office or industrial
employment centers.  Find out which way the traffic flows
on major streets where you might locate, at different
hours of the day.

Be aware that there are three main types of traffic:

  - (1) Local or "living" traffic, which is mostly very
    short trips of people to the grocery store, to pick up
    a paper or other items at a convenience store, or to
    get their hair cut, or the like;

  - (2) commute traffic to and from work; and

  - (3) long-distance traffic from other cities or from
    out of the state.

In general, you will usually have to pay more for a site
that is located on a main artery that carries a lot of
commute and local traffic and even more if an interstate
or other major highway passes through the area, with
long-distance traffic either being forced to use the
artery or else, if it is a restricted-access freeway, it
has off-ramps that dump off substantial traffic onto the
local streets.

Thus, the most desirable sites, in general, would be those
that carry a lot of all three kinds of traffic, local,
commute, and long-distance.  While you will have to pay
higher rent for such sites, it will usually be more than
worth it, for most retail businesses.

Some pointers to keep in mind in doing your traffic study:

  . For example, if you will open a Mexican restaurant
    or a steak house on a major commute route, you will
    probably want to be located on the side of the road
    where it will be most accessible to the evening
    commuters.  Conversely, you will want to be located
    on the other side of the road if you are opening a
    donut shop, which is likely to appeal more to the
    morning commuter.

  . Obtain traffic count information and projections from
    city or county offices that compile such information,
    such as the local planning department or city traffic
    engineer's office.

  . Note that merely locating on a high-volume street will
    not necessarily be good for your business.  If you are
    on a stretch where traffic goes by at 50 miles an hour
    much of the day, or crawls by during long congested
    periods each day, it may be difficult to attract much
    business.  You may not attract fast-moving traffic
    unless you have a very wide entry and can post large,
    visible signs far enough ahead to give drivers time to
    slow down and safely turn into your driveway.  By the
    same token, if traffic is terribly congested, it will
    tend to discourage anyone OTHER than commuters who are
    inching by to come to your location, and many commuters
    who are going by and who might want to stop at your
    shop or store may be unwilling to exit and have to
    later re-enter the heavily congested street or highway.

STEP 3. Look for possible sites on major arteries in your
chosen selling area.  Once you have done your market analysis
and study of local traffic patterns, and feel you know the
area and understand the traffic flows, begin to focus on
specific streets or shopping centers.

As you do so, consider the following:

  . Avoid locations on dead-end streets, roads that
    parallel railroad tracks, or freeway frontage roads,
    in general.  Even a street that soon ends at a T-type
    intersection should be considered a dead-end, for this
    purpose.  Avoid other low-traffic minor roads or streets,
    even though rents might be temptingly low.

  . Avoid one-way streets, or intersections with one-way
    streets, or odd, angular 3-way intersections, in most
    cases.  Remember that if a driver has to go to any
    trouble to get to your store, he or she is likely to
    pass you by and look for a more easily accessible
    alternative.

  . Narrow down your site selections to just a few.  Your
    best choice will usually be in a large regional mall,
    if that is possible, where there is a great deal of
    "foot traffic."  Often, however, such a location in
    a regional shopping mall may be available only to
    bigger businesses having widespread name recognition.
    Thus, many small businesses frequently have to settle
    at first for some sort of compromise.  Often that
    means locating at first in an active neighborhood
    shopping center.

  . The best type of free-standing site is one located on
    a "far corner" of an intersection, on the right hand
    side, on a major street.   Ideally, it should be at
    an intersection of two major thoroughfares, but a
    location on the far corner of a busy street where it
    intersects with a less busy street can also be quite
    a good location.  (The "far corner" site is the corner
    on the right, across the cross street, which you will
    be able to see as you wait at the red light, if any.)

    Example of "near corner" and "far corner" sites for
    eastbound traffic on a major thoroughfare:

  │                              N                            │
  │                                                           │
  │                       (Side Street)                       │
  │                           │   │                           │
  │                           │   │                           │
  │                           │   │                           │
  │                           │   │                           │
  │  ─────────────────────────┘   └───────────────────────    │
  │                                  < - - - - -              │
  │ W            - - - - - >             (Major Street)    E  │
  │  ─────────────────────────┐   ┌───────────────────────    │
  │                    (Near  │   │ ████  |   (Far corner     │
  │                    corner │   │ ████  | <---  site)       │
  │                     lot)  │   │_ _ _ _|                   │
  │                           │   │                           │
  │                                                           │
  │                             S                             │

  . A second-best choice would be an "adjacent" site just
    behind a far corner site, if your site has good
    visibility, room for 2 entrances (each 2 cars wide,
    so that cars can be entering and leaving each such
    entrance comfortably, at the same time), and it will
    be an even better site if your property wraps around
    the corner site so that your business also has good
    access to the side street, as well as the main drag.

  . Avoid a "near corner" in most cases, unless you have
    exceptionally large frontage on the main drag.
    Otherwise, most cars speeding up to get through the
    intersection will not have time to slow down and turn
    into your driveway after they see your signage.  Also,
    cars trying to get back out of your lot onto the
    street will find doing so to be difficult if traffic
    backs up at the light, past your driveway, which will
    normally be the case with a near corner lot.

STEP 4.  Look for serious traps.  Buying or leasing a
business location is a major financial commitment, and you
don't want to find out AFTERWARDS that there is some
serious drawback to the property that you hadn't originally
noticed.  Many sites that seem to be ideal in many ways
may nevertheless have certain flaws that can be fatal to
your business.  Be particularly wary of the following
possible problems, once you have narrowed your search down
to a few (apparently) choice locations:

  . Even in an otherwise ideal location, be aware of
    median dividers, which will make it impossible for
    cars coming from one direction or the other to easily
    turn into your driveway.  This is often a problem at
    an intersection of two major roads.  A much better
    road layout is one where the major street is either
    two or four lanes, with an additional center turning
    lane that runs for a considerable distance down the
    block from the intersection, marked only with yellow
    lines.  With this layout, cars wanting to turn across
    traffic to get to your store can easily pull into the
    center lane between the yellow lines, and simply wait
    until the oncoming traffic thins out, or is stopped
    by a red light at the intersection.  Also, drivers
    pulling out of your lot who wish to go left can
    easily do so, by first pulling into the center lane
    and waiting there until they can merge into the
    traffic in the far lane or lanes.

    Where there is no such center lane, most drivers will
    be fearful, in heavy traffic, of trying to time their
    egress from your lot in such a way as to make a left
    turn, when they have to duck between cars moving in
    both directions to make such a turn.  Or, if there is
    a center divider, they will not even have the choice
    of making a left turn, and thus may not patronize your
    business if they know they will have to turn right when
    they exit and then make a number of convoluted turns,
    if they want to go back in the other direction.

  . Beware of inadequate parking!  Even the best site can
    be crippled by a lack of parking, or even by a shortage
    of convenient parking -- if the customers can't park,
    they will not come to your store, in most cases.  For
    example, the author of this program was a partner,
    along with a group of real estate experts, in a very
    upscale, award-winning restaurant in California in the
    1970s, in one of the most exclusive office/shopping
    centers in Orange County.  We were told that our patrons
    would be able to park on a street behind the restaurant,
    but didn't get that promise in writing.  So, when the
    restaurant opened to large crowds and rave reviews,
    the developer who controlled the large office/shopping
    center decided all the on-street parking was a nuisance
    and decided to ban it, since free parking was also
    available (upstairs) in the office building in which
    our restaurant was located.  The result was that our
    sales immediately dropped by 50% when the on-street
    parking was banned (Southern Californians don't like
    to park in enclosed garages, we found out, too late --
    they want to park near the door, in a lot or on the
    street).  We finally went out of business two years
    later, after incurring huge financial losses, and
    several other restaurant operators have since tried
    the same site and also gone out of business, due to
    the inconvenient parking situation, in an otherwise
    ideal site.

    Thus, for most kinds of businesses, unless you will
    have your own parking lot for customers, you need to
    carefully focus on whether there is enough free or
    inexpensive metered street parking available, or
    adequate common parking if you are in a shopping
    center, at the times of day when you expect your
    business to peak.  Lack of convenient and free (or
    cheap) parking has been the death of many a small
    business.

  . If the rent seems too low, and the location seems too
    good to be true at the level of rent that is being
    asked, be very careful -- there is probably a very
    good reason.  While the site might look ideal, you
    had better do some more research, as there may be
    something like a zoning change, changes in the street
    or road layouts in the area, or some other upcoming
    change looming on the horizon that can or will have a
    major negative impact on the prospects for business at
    the site in question.  If the rent is too low, in your
    opinion, that probably means that most other business
    people in the area are already aware of some negative
    factor, and you are not, so you need to do some more
    research, starting by asking a lot of questions of
    neighboring business owners until you find out the
    missing piece of the puzzle.  When you do, you will
    probably understand why the rent for the property in
    question is so cheap.

NON-RETAIL LOCATION FACTORS.  As a success factor, your
business location is most essential for a retailing firm.
However, location can also be important for some kinds of
manufacturing and service businesses.  Look for places
that present you to the most customers at the lowest cost,
as a rule.

In general, businesses that cater to the same class of
customer increase sales of neighboring businesses.  If you
are in a service business, then you may want to consider
location in an office or professional building.  For
example, if you are a lawyer, you may do well if you
locate in an office building that largely filled with
accounting firms, and vice versa if you are an accountant.

While rent is an important cost factor for a professional
service firm, there are two schools of thought on whether
you should seek costly "prestige" offices, or economize by
seeking something that is clean and presentable, but much
less expensive, and perhaps not in a major office center.
One line of thought is that, for a new professional firm
in particular, it is very important to convey an impression
of being successful, by maintaining prestigious offices in
a centrally-located, top-of-the-line office building.  The
other view is that many clients may be "turned off" by such
fancy surroundings, assuming that your fees will have to
be much higher in order to pay for such lavish offices,
and such clients may thus prefer to go to a professional
who runs a leaner, "no-frills" operation.

There is a lot of truth in both arguments, and the answer
as to which approach is best for your professional firm is
likely to depend upon the type of clientele you think you
are most likely to be able to attract -- the more upscale,
rich client who expects his professional service providers
to have lavish offices, or the more practical, middle-class
business types who aren't interested in such "showy"
surroundings, but are frugal themselves and who prefer
an adviser who also runs a low-cost, economical operation.
Obviously, if you run a tax preparation where you charge
low fees to do "small" tax returns, you will want to find
inexpensive office space in a strip shopping center or
comparable location, not lavish offices in a downtown
office tower.

Some types of businesses, like small manufacturing or
publishing company operations, will be somewhat less
concerned about their specific location within a geographic
area, as long as it is in an area where employees will
feel safe coming to work, and is also reasonably accessible
to freeways or other major roads or transportation lines.
For such a firm, you may be more interested in the general
geographic area where you locate, as your primary concerns
will tend to be whether you are able to recruit the types
of employees you need in the area where you locate.  For
example, if you are in a rural area, far from major
cultural centers such as New York or San Francisco, you
may find it difficult to attract qualified people to staff
a publishing firm, unless you are in a very desirable area
to live, such as a resort area in a place like Colorado
or Florida.

Or, while the immediate area may have low taxes, a thriving
economy, good roads, and a good workforce to draw from, if
you are a manufacturer, it may simply be too far from the
major cities to which you will have to ship your product.
In that case, if your product is bulky and expensive to
ship over long distances, you may be placed at a serious
cost disadvantage as compared to your competitors, if you
are located too far out in the "boondocks."

In some locations, "incubator" space is available for many
kinds of non-retail businesses.  Incubator space offers
low rent and shared services, which may include telephone
answering, receptionists, conference rooms and copy
machines, which your small firm might not be able to
afford if you "go it alone."  Contact the SCORE (Service
Corps of Retired Executives) chapter at your local U.S.
Small Business Administration (SBA) office, or the nearest
Small Business Development Center (usually located on the
campuses of colleges or universities) for information on
or referrals to business incubators in your area.