Today I’m gonna be talking about is the eight things you need to consider when choosing a location for your business. ‘
A lot of this applies to if you want to relocate, because I have screwed that up a few times and I’ve gotten it right a few times, but it’s really expensive and it’s a pain in the tail when you screw it up.
Okay, so you have an idea and you don’t want to do it in the area you’re currently located in or you’re considering your area, but you can put it in other places. What things should you consider? Let’s start going through those now.
How Is the Competition in the Area?
The first thing is you want to look at the competition. Obviously, I don’t want to put a business in a physical location where there’s massive competition. I remember in our area, I am not exaggerating, where there was a Mexican restaurant every two blocks, and a nail salon every two blocks.
Unless you have an extraordinary value proposition or competitive advantage that you’re giving that nobody else is, you have to win on price. It just didn’t make sense that everybody just kept opening up another one and another one, when they could have picked maybe another area, just a little bit outside of our city. They might have been a lot more profitable.
When I consider a location for a business, I want to consider the competition. I don’t want it to be shark-infested waters. I’d like to have a little bit of blue ocean out there.
What Are My Costs to Operate?
This is what am I gonna be paying for rent? Maybe you have manufacturing costs. What are all the costs that are associated with operating that business? Each area has different costs. What you would pay in New York City is far different than what you pay in Central Virginia where I’m located.
You have to look at that. Some of my businesses, I don’t have to be in a fancy location. There are other businesses where the location, the real estate, is far more valuable. You have to look at all your costs to operate before you choose a business location.
Your cost to operate, when you’re looking at your business model, this is where you may want to ask, am I gonna target commercial business and maybe they’re never gonna visit my place, or are we gonna have customers come through our business? You gotta kind of look at all those different things. That business model alone could massively affect your costs.
Is This Where My Target Customers Are?
I want my target customers to be there in abundance.
This is why I do beta testing. I do it with postcards for my service companies, then I can see that my target customer is in abundance out there, and not only that they’re willing to buy from us. You can pick a location that’s a total bomb because it doesn’t have your target customer. We’re definitely a high-end home improvement company. We have eight different divisions which are basically different companies, and the average income is not gonna really do it for our business model for the service we provide. We have on-staff designers, engineers, and project coordinators. We’re the next level, and an average or lower income area would not support that company. In my digital marketing companies, we need to work with small businesses. We need to have an abundance of small businesses.
Can you get the Pricing You Need for Your Product?
if you put your business in a lower-income area, you’ve limited how much you can charge. You really need to consider that.
Is it Hard to Staff With the Talent You Need?
Where are you located? This is why Amazon was willing to go to New York. Because they obviously need tremendously high-level staffing. I’m assuming in that tech business that it requires pretty talented people and there’s a lot of colleges there. They could get a ton of kids coming out of college but if you look at the areas that they were targeting they were very unique. They understood their staffing needs.
I have thought of businesses before that I wanted to do and then I tried to staff it, it was like trying to find a one-eyed leprechaun and I couldn’t do it. The idea seemed great in my head, but then when I started going through these location criteria, I couldn’t justify it. We’re looking at locations with the idea that, do you want to move your company somewhere or do you have a start-up idea and you feel like you could put it anywhere or you’re considering putting it somewhere and you want to change the scenery. These are the things you want to consider.
What Are the Advertising Costs?
This is huge, I am aware of this. I’m in a city where I could go 60 miles and run into Richmond and my advertising costs could go up 10 fold, or I could go up to Northern Virginia and it could go up 25 fold.
I can buy an ESPN commercial in my city, which is one of the top cities in America to live in. It’s been voted the number one city to live in America before, but I live in a great city. I could buy an ESPN Radio ad for $3.
I can buy an ad on any of the top primetime shows for about $50 to $75. If I was in DC, are you kidding me? Add two zeros to that.
Advertising cost is critical. You have to look at how are you gonna acquire customers and where are your target customers are gonna be, and be careful because you can put yourself in an area where you just added exponential cost to your advertising, like New York LA, DC, Chicago.
Where I’m located, I get the best of all worlds because the incomes are every bit as strong in my area as anywhere in Northern Virginia, but I don’t have the advertising costs and I don’t have the competition. All those things were considered when we choose locations.
Proximity to Airports
Next is you gotta look at your business. Do you guys do consulting? Do you travel to see clients? If you’re in a city where you have to go here to there, that’s exponential cost. You may want to consider being within 45 minutes of a major airport. This is depending on what you all do. But you need to consider all these factors.
What is the Cost of Living?
You need to consider that many cities are gonna be far more expensive than other. When Amazon was considering New York, I think that they knew they had to pay their these type of jobs $150k. $150k Is a strong wage in every city but maybe New York.
It costs a lot to live in certain cities so you need to consider that. Are you going to pick a location where you have to increase your cost by 20% to pay your staff because of the cost of living there? Private schools, daycare, you gotta look at everything. What are the housing costs?
In California housing costs are drastically different than maybe housing in Arizona. You gotta consider that.
How Much Will You Need to Pay the Staff To Have a Livable Wage?
Next is wages, because the cost of living is outrageous, your wages are gonna go up. In my city, I can pay somebody $25 an hour in one of our companies, and that’s really good money. If I was in Northern Virginia, you could add $10 to that. You’re talking $400 a week per person.
In one of our companies, $60k is a decent wage. If we were in Northern Virginia, I need to make that $100k.
When you’re looking to choose a location for your company, your business, where you’re looking to relocate it, you need to look at the competition, the cost to operate, target customers/are they there in abundance, are you picking an area that’s low income, they cannot give you the pricing that you need, staffing. Is it gonna be hard to staff or is there gonna be an overflow of talent there? Advertising costs dramatically increase in certain areas. Airport location, if you need to travel, cost of living. The cost of living will dictate the wages that you need to pay. These are the nine things to consider when choosing a location.