Location, Location, Location!

By Cynthia Nemeth-Johannes
http://www.abcsmallbiz.com/bizbasics/gettingstarted/location.html

As any real estate agent worth their commission will tell you, the key variables in buying real estate are location, location and location.

They could be selling you far more expensive real estate than your business needs, or can use.

For every business, there are good locations but not all locations are good for all businesses. The perfect location for a restaurant on a pad outside of a busy mall with plenty of drive-by traffic is probably not the best place for your plumbing supply business.

If you are working with a commercial leasing broker, consider contracting with one as your buyer's broker. Commercial real estate law is definitely "buyer beware" because you are expected to be more sophisticated as a business owner than residential clients are. The broker has their highest duty to the person who pays them. Enough said.

What is Right for Your Business?

Finding a location that is right for your business requires thinking about your customers. Are most of them going to be visiting you? If you have business where customers visit you, such as a hair salon, you want your business to be easy to find. You will also want visibility to draw in some traffic and you will want plenty of parking. It is also useful to be located close to where people are.

Do people passing the location come by car or do they walk? Will it be close to stops for public transportation? Look at where your possible customers spend regular time, such as the office parks where they work. Any place that has a large number of employees or customers can also generate traffic for your business. Locating close to businesses that serve your customer base but don't directly compete with your business can be very helpful.

Having a great traffic count flowing past your location is not a guarantee that they can get to your door. Many local governments do not want a lot of traffic coming entering and exiting from any location, so they will design streets and curb cuts to keep traffic moving. They also can restrict your signage size and visibility. Customers that are specifically coming to your business will persist until they find you. People looking for a type of retailer, a gas station, restaurant or other businesses may keep going until they find an easy-to-access competitor.

Some places have a high traffic count during part of the day that drops off at other times. Your restaurant may do a great lunch business in the middle of a busy office park but it will be deserted at night when your customers leave the area.

Another accessibility point is your need to meet the requirements of the Americans with Disabilities Act. Consider whether your possible place of business is handicapped-accessible or whether you will have some expensive modifications to make before you sign that lease.

If you have relatively few customers visiting your location, traffic considerations for your employees are next. If it's easy to get to your location and there is plenty of close parking, you will have more qualified people available. If your business provides services at your customers' locations, that easy transportation access becomes even more important.

Do you have a lot of freight coming in and going out? You will need a location with good highway and surface street accessibility. You will also need a location where loading docks and trucks pulling in and out will be accepted by other businesses. If your business grows and needs more space, will you have options to expand?

Population

Will your business serve locals? Information about your local customers can be very helpful. Are there enough people or businesses in your "target market" for your business to succeed? A good starting place to find out about your neighbors is the Census Bureau at http://www.census.gov/.

Other good sources of information include:

Chamber of Commerce. (Find the National Organization at: http://www.chamber.org/ with links to local chambers).
City
County
State

Not only can they help you with existing information such as demographics and traffic counts, they can give you a heads up on the timelines and locations for future development.

Zoning

It is likely that your local zoning department has placed some restrictions on property use in the areas. A nightclub is unlikely to be approved for a zoning variance if it's across the street from a church or school, so don't lease or buy real estate without making certain you can use it for your purpose. Check your neighboring zoning to make sure that any business locating near you will be appropriate for your clients. An adults-only business may not go well next to your children's specialty toy store.

Can You Afford The Space?

When you write your business plan, you should get a good estimate on what your location costs will be. Real estate brokers can provide you with an average cost of commercial space per year for the area you're considering.

So, you've found the perfect location. There is just one problem: your budget calls for $15 per square foot and the best deal you can negotiate is $27. Is there something about the location that will pay for that additional cost and the overhead? Businesses go out of business when they run out of cash. Do not sign the lease unless you know that you will have the cash flow to pay those bills and to pay yourself.

Money, Money, Money

You will probably want to rent rather than buy space for your business. Most leased property costs are tax-deductible when you pay them.

You may negotiate with your landlord to make improvements to the location, especially if it will make the space more attractive to other tenants. You will pay for it with your rental fees, but shelling out a higher per-monthly fee over the length of a lease can keep cash in the bank that you need to get past your breakeven point. If you can't get basic plumbing, electrical and other structural needs taken care of by the landlord, you should look for another location.

Rent is not the only cost for your location. Will you have to pay utilities or does the landlord cover it? Can you contract with any communications company or has the landlord sold the right to the wires to just one telecom company, sticking you with a single supply source? Will you pay for your own facility cleaning or will the landlord or management company? Will you, your employees and customers have to pay for parking?

Pay Attention

You can hire traffic consultants to find the "right" location for your business and they are usually well worth the expense. It's your business, so you are the one to make the final decision. Trust yourself. Drive the area; get out on foot if you are counting on foot traffic. Make sure that the customers you need are there. If your business is retail, shop the area. If your store is targeted to 18 - 25 year olds and most of the customers you see in the grocery anchor are 45+, you have a potential problem.

Competition

Is competition bad? Not necessarily! Using restaurants as an example, diners may often set off for an area where they know they'll have a variety of choices and make their restaurant choice when they get there. You will often find fast food located close to direct competitors. Too direct competition can hurt if there are not enough customers in an area.

The Building Itself

Many older buildings, even those built in the past twenty years, do not have the infrastructure to support all businesses. At a minimum, your building needs enough electrical, telecom and air conditioning to provide power and protection for your delicate information systems. It must be structurally sound as well. Consider hiring an engineer to evaluate your potential location to make sure it's suitable before signing the lease.

Communications

What kind of communications will your business need? Although you can get a phone line just about anywhere, getting enough phone lines and enough high speed access to meet your needs can be essential. Find out if you have, or can get, fiber optics, DSL, T1 or other high-speed options for the space.

Security

Is the site safe for your customers and your staff? Is there a security guard? Is access by the general public limited? If you or your employees will be working evenings and weekends, will there be easy access to the building? Is the parking lot safe and well-lighted?

Ready to Commit?

Once you have found a great location, it's time to seal the deal. Be aware that everything in a commercial lease agreement is negotiable and that the first contract your potential landlord will offer you will be advantageous to them. If you have a commercial broker working for you, use them to help you get the terms and conditions that you want and need. You may also want your attorney to review the contract before making a final commitment.

 

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Title: Location, Location, Location!
Author: Cynthia Nemeth-Johannes
URL: http://www.abcsmallbiz.com/bizbasics/gettingstarted/location.html
Certain materials herein are included under the fair use exemption of the U.S. Copyright law and have been prepared according to the educational multimedia fair use guidelines and are restricted from further use. This work may be protected by further copyright, reproduction and distribution in violation of United States Copyright Law is prohibited.