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Money Management (Distributed by the New Jersey Society of Certified Public Accountants)

Choosing The Right Location For Your Business

Whether you are looking for a site for a new business or relocating an existing one, choosing the right location is likely to play an important role in the success of your business. When it's time to select a location for your business, the New Jersey Society of Certified Public Accountants (NJSCPA) recommends that you address the following questions.

Does My Business Require Public Visibility?
The nature of your business generally determines the level of visibility it requires. Many retail businesses live or die by consumer traffic. A luncheonette, dry cleaners, newsstands and any business that relies on impulse buying, needs visibility. A visible location is less important for businesses that provide services at other locations, such as lawn maintenance or on-site computer repair. Manufacturers have different location concerns - they typically need proximity to suppliers, modes of shipping, and employee pools.

Do the Area's Customer Demographics Match Those for Your Business?
Carefully matching the business location to its customers is a key success factor. You must be aware of the demographic profile of your potential customers in order to select a location where the residents are consistent with the age, income level, and buying tastes of your target market. The purchasing needs and interests of professionals and business executives differ from those of blue-collar workers, families' buying habits differ from singles, and suburbanites differ from city dwellers. Take all of these factors into consideration when evaluating a location.

How Far Will Your Customers Travel To Buy Your Product or Service?
This is known as your trading area. Typically, the more specialized the product or service you are providing, the further buyers are willing to travel. If your business sells specialty items - for example, Italian imported ceramic tiles - you can expect to attract customers from a wider area. Just be aware that you will need to spend more to advertise and promote your business. If, however, you're selling convenience goods - milk, bread and similar frequently purchased items - it's unlikely that a buyer will drive past others just to come to your store.

Is the Location Convenient?
In a society based on speed and service, busy customers tend to shop at places that are easily accessible and have adequate parking. Don't underestimate the importance of this factor.

How Much Competition Exists In Your Chosen Location?
Many businesses fail because they underestimate the strength of their competition and the role of customer loyalty. How close to your competition you can afford to locate depends on the nature of your business. Some businesses, such as car dealerships and fast food restaurants, tend to concentrate in the same areas, but, generally speaking, it's best that you don't locate your new business near a successful one similar to yours. If your competitor has developed a high level of customer loyalty, there's a good chance that better products or lower price will not lure those customers away.

Have I Checked With the Local Authorities?
Whether you are leasing commercial space or building a new facility, you must be aware of and comply with local zoning ordinances and building codes. The town's zoning commission and local authorities can help you secure the information you need and avoid problems down the road.

Is the Location Affordable?
A prime location may give you a better chance for success, but it can also cost you more to lease, which impacts your profitability. A less desirable site may cost less, but it won't matter much if you can't get customers to go there.

Like many business challenges, when it comes to choosing a location for your business, it is possible that you may have to compromise some factors for the sake of others. CPAs recommend that you list and prioritize what you see as your business's critical success factors in terms of location and use those in evaluating potential sites.

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Money Management is a weekly column on personal finance distributed by the NJSCPA.

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