The Importance of Location in Business

Sale and lease signs in the window of a shop CityAM

In an age where we buy and sell heavily through the internet, it's easy to overlook the importance of location in business. However, where you set up shop can have a significant impact on your success; a poor choice can jeopardise your potential income, increase your expenditure and compromise your future growth. 

Indeed, your positioning influences many factors, from the price point you select for your products or services, to the tone of brand voice you adopt. Your physical location presents your business in a particular light, and, when chosen well, can help you appeal to your precise target market. 

To illustrate the importance of selecting the right spot, here are some of the key benefits of a good location.

It Makes Your Business More Accessible 

Of course, this depends on your line of business, but generally, you want to make it as convenient as possible for your customers to visit you. If your address is located close to your target audience, you will find prospects are more inclined to buy from you, not just for convenience, but also because they feel confident you can deliver your product or service to them with ease. 

Many customers will go elsewhere if it's too difficult to reach your store, meaning you will lose out on a significant portion of potential clients. If you're a small business within a city centre, high footfall can be extremely beneficial, as a substantial portion of your sales will come from people walking past your store. As such, being accessible by foot, bus and car can generate revenue based merely on the convenience factor.

It Enables a Smoother Supply Chain 

If your business relies on frequent supply deliveries, then a good location can make the process a lot easier. For instance, if you are located in the middle of a pedestrianised city centre, but you regularly receive large quantities of supplies, then maybe it would be a better idea to be based on an industrial estate with specialised transport links.

This would allow materials to be brought in from afar and enable finished products to be moved to market quickly and cheaply. Property rental and purchase prices are typically lower in low density, less commercialised areas, too, so such planning can to save you money in the long term.  

It Widens Your Skill Base 

A good location can be a critical factor in recruiting the right talent into your business. If your venture relies on a skilled workforce, then you will need to seek out a location where there is a healthy source of talent that is proficient in your industry. This is often transparent in industries such as tech, where areas with high numbers of software engineers and designers often result in a larger proportion of successful startups.

At the same time, your location determines how accessible you are to your potential employees, too. For example, if you are located in an out-of-town commercial space, then effectively, you are restricting your talent pool to only those who can drive. However, if you are located within a town or city, your staff can easily commute to your location via public transport.

It Creates Perception 

Your physical location can also have an impact on your business' market positioning, reflecting your brand and its products or services.

For instance, if you run a financial or legal company, then selecting a location in a major city or prominent financial district will show that you are a serious part of the high growth culture of that area. Likewise, if you run a creative business or agency, then your location will influence how innovative your business is perceived to be. In some cases, your choice can even represent a direct reflection of your brand; if you make and sell vintage clothes, for instance, then working out of a repurposed factory or something similarly stylish makes sense.

Just as we often make assumptions about people based on where they live, businesses can also be viewed in a certain light. Always remember that your location is a statement of who you are as a brand. 

It Can Save – or Cost – You Money

Naturally, the most important thing about your business location is how much it costs. It's all well and good taking up a hip residence in a cool part of town, but if the rental costs are higher than your profits, then it's ultimately pointless. Conversely, a well-chosen location can save you money, especially if you are practical about your needs during the early stages of your venture.

It's not just about rental or mortgage costs, either. Where you decide to set up your business can have a massive impact on your corporate tax obligations, as well as access to any grants, loans or incentives that you may be eligible for. Depending on your chosen industry, it might be wise to look at establishing your organisation in a different country, especially if your business is not local in nature.

It Can Impact Your Pricing Structure

Rightly or wrongly, your location can often dictate the price at which you sell your products, especially if your business is in the retail sector. For instance, if you are based in an affluent area of your town or city, then, even though the rent may be higher, you will be able to charge significantly more for your products.

Conversely, if you are based in a more run-down area of town, then, although the rent will be cheaper, nobody will buy your products if you have thrown a premium price tag on them. Your location influences how much or how little you can realistically charge, which can have a significant effect on your profit margins depending on your expenditure.

It Keeps You in Line with Your Competition 

Often, a viable measure of your success is your proximity to other competing businesses. If you are a clothes store, for example, then it's likely that all your competitors will have locations in your area's main shopping mall. If you don't, then not only are you missing out on business, but it suggests that your brand is not on the same level as everybody else. Often, visibility is a sign of credibility in itself.

This theory applies to other industries, too – especially those in which customers might be shopping around for a deal. For instance, car dealerships often want to be close to one another so that customers can compare and choose the best option.

Of course, this doesn't mean that you should always follow the status quo. During your market research phase, you may have identified an untapped market that nobody else has identified; this is an ideal opportunity to quickly establish a presence in a new area and attract customers from elsewhere. 

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Ultimately, the importance of location in your business journey should never be overlooked. While cost is undoubtedly a primary factor, there are numerous other aspects involved that can influence your company's success.

What other factors are worth considering when choosing the location of a business? Let us know your thoughts and experiences in the comment section below.