Location choice is a matter of life and death in business. What are the dynamics to contemplate when selecting a business location? How is a business location analysis conducted amidst endless possibilities? Is location a major ingredient for the perfect recipe of success? These are burning questions which many emerging entrepreneurs seek answers for. The answer is simple, and it is that location matters. Here is a list of factors to consider when choosing a business location.
Proximity to raw material and depleting inputs
When one intends to run a business that involves manufacturing or production then the issue of being close to the required raw materials is not a joke. The overall profit of any producing firm takes from extra money acquired after deductions of transport costs and many other expenses. Being located far away from raw materials increases the cost of transporting raw materials whether you are hiring or using your own transport. Big firms lose thousands to fuel and hiring every week. The loss becomes double barreled when you add in the cost of time. The delay in arrival of input directly implies a delay in output. This can create a gap between demand and supply which can make your firm lose reputation.
How close is your business to the market?
Every business no matter how well seasoned will suffocate in the absence of a market. All manner of production and service delivery is done with the customer in mind. The million dollar question to ask yourself is, am I targeting retailers or you are targeting the end user. Retailers are usually willing to travel a long distance to order because they buy in bulk which then neutralizes the transport and time cost. The end users however do not afford to lose time and money to buy one or two small items. A perfect example would be someone who wants to buy a loaf of bread for tea break. Common sense says you cannot travel 20 km just for bread. On the contrary retailers eg in Mvuma travel over 40km to chivhu to order bread in bulk.
Accessibility of good infrastructure, water and grid power supply
Amenities such as water supply, electricity and building outlook are a factor to consider when choosing a business location. Areas without these basic neccesities are usually dead to business and slow in terms of turnover. Good roads are also essential and sometimes determine the numbers available in an area at any given time.
Demographics have a huge influence on your choice of location. One should carry out detailed research on the distribution patterns of an area they wish to do business and locate fully aware of the different statistics within a business area. A good example would be a mining area like Shurugwi where the larger percentage of people is males. If your business is into clothing then it would make no sense to order more clothes for women. Another example is if you want to set up a stationery shop then the best place to set up would be close to a school or in the CBD.
Detailed research on the varying mindsets of your potential customers is also very necessary. Issues like religion and back ground have high influence on this aspect. For example some religions do not eat certain kinds of meat, like beef or pork etc. Muslims and Vapostori do not eat pork so it would make no sense to set up a pork butchery in an area full of muslims and vapostori.
Labour availability is very essential for any start up business. This means that your business should be close to a location and if its not then they must be easy access to public transport. You also must find out the times that transport is available so that your workers can come to work and go home on time. If reliable transport cannot be found then you are bound to incur an extra cost of buying or hiring a vehicle for your workers.
There are many possible risks associated with any business location. These can range from natural disasters, theft, weather patterns, and closure of major industries. For example if your target market is mine workers then you must assess how much life the mine has and if the risk is worth taking. if you are into food production then it is very important to assess the weather patterns of an area before you fully invest in that area.
The other factor that we are going to consider is the cost of doing business in line with the location of interest. You must give careful thought and considerations to the rentals in an area. Your business must give you money which is way above your rental costs at your area of operation. You must also consider the cost of living in that area and adjust your pricing and service delivery system with the cost of living and class of people in that area.
There are other countries and regions which have policies which are not investor friendly. After setting up and putting up structures to run your business in an area you might then find out that the taxing system is too high such that you will not be able to realize profit. Research should be done and pilot tests done on the feasibility of doing a business within an area.
Some areas have a crime rate which is just too high such that it is near impossible to effectively run a business there without putting your life and business at risk. In some areas you need to incur extra costs for night guards which taxes on your profit further. Some areas do not allow you to do business a business at night because of theft and robbery.
A note from StartupBiz Zimbabwe: Everyday we send business updates via Whatsapp. Click the link to join: https://chat.whatsapp.com/K09gx0kaJy7Hu4M2Xts14H or send the word join via Whatsapp to +263778798072 (Whatsapp us by clicking the link https://wa.me/263778798072).