Location, Location, Location
One of the most critical steps in opening up any small business is determining exactly where your business will be physically located. Nowadays, more and more entrepreneurs are opting to develop an electronic office and market their products, skills and/or services over the web. In these cases, where your business is ‘located’ usually refers to a virtual domain on the World Wide Web. But, like elsewhere in the world, many of the more traditional small businesses that exist in the Philippines are more ‘brick-and-mortar’ operations. The typical small business in the Philippines remains heavily reliant on an actual physical location. For most of these businesses it is ideal if the location chosen is easily accessible to the identified target market of the business.
The most suitable location for a small business really does depend on the type of business one is referring to. If you stop to think about it for a minute, many ideal locations for certain businesses are quite obvious. Pharmacies are usually located near to hospitals or in high-foot-traffic locations like shopping malls and near to super-markets and mini-markets. Gas stations tend to locate on the roadways with the most traffic, especially on or near highways. Ticket outlets and travel agencies tend to gravitate towards areas in close proximity to airports and seaports. But where should you consider being located when the small business you intend to put up does not have such an obvious location requirement?
It most cases it definitely pays to spend considerable time planning, searching for, and settling on a desirable location based on a set of criteria you develop before you sign a lease. The location you ultimately select should meet most or all of the criteria you deem important. The criteria you develop will be tailored to your specific business needs, but a list of some of the most common criteria of interest to small businesses would likely include the ten that follow.
How much is the rent? You should know beforehand how much can you afford for a monthly rate, and do not forget to include allowances for various deposits and advance payments required. Will you need to make improvements? You need to calculate exactly how much work needs to be done on each space you consider before you open your doors. Is the space the right size/form? It helps to ask yourself just how each space meets your needs from a square-meter standpoint, but also from the standpoint of whether you need a customer CR, kitchen ventilation, etc. Is the space visible? Not all businesses require high visibility, but if yours does, you need to determine whether the location can be easily seen from the road/in the mall? What utilities will you need? Can you get a phone line, separate power and H2O meters, Internet connection, or cable? Is there a need for security? How safe is the neighborhood? Are security guards present or needed? Do your target customers drive and require parking? If yes, you need to choose a location where they have access to parking. Does your product or service rely on foot-traffic or is peace and quiet more appropriate? Noise can ruin the atmosphere of certain businesses. Others businesses require a constant flow of walk-in customers to be successful. How about your intended hours or operation? Can you be open when you want to be open? You need to be careful, because malls and some buildings only allow business between set hours throughout the day. And lastly, How does each location fare in different types of weather? Does the area flood in rainy season?
Even if you have a detailed list of criteria, sometimes it will be impossible to find the ‘perfect’ location for your small business. The reality is that in many cases, the rents demanded for the most prime locations make it unaffordable for the budding entrepreneur to occupy the most desirable locations. The big players, like fast-food giants or major banks, occupy these prime locations. That is why it is even more critical that you rely on your pre-determined list of criteria to help in deciding on the location that is most suitable given what is available after eliminating those locations out of your rental budget. Furthermore, your list of criteria also helps you eliminate locations that are clearly inferior in other ways and this helps narrow the choice down to the locations best suited to your business and customer’s needs.
So take your time when selecting where you will set up your business and always remember: location, location, location!
Hi everyone,
I know this week’s column was supposed to be on business plans, but a friend of mine who is about to open a business made me think of this topic on location. Both are important topics, but because he was focussed on this issue right now, I thought I’d mix up the columns just for this week. Next week we’ll resume with busines plans. Cheers!
Hi Martin,
It seems to me many of your points on the location topic would be importat to include or at least think about and consider in a well developed business plan. Better to have this information early or beforehand rather than as an afterthought or too late in the process.
Salamat!
marshall
Hi Marshall,
You’re right on the money. Many of the points raised in the coming weeks will also be of significant value in any planning activities. Location, form of business (i.e. single proprietor/partner/corporation), market research — ideally these and other topics should find their way into a business plan. When I was planning my business in the Philippines, I even drew a schematic of exactly where to place different lighting fixtures! That may be over-the-top, but it illustrates a good point — planning is important. Thank you for reinforcing the point that location is certainly a major consideration that belongs in a business plan and should not be an afterthought. Cheers!
Hi Martin,Regarding foot traffic,the late multi millionaire hotelier Sir Charles Forte decided how to measure foot traffic when opening his 1st business,a coffee bar.He found a suitable location on a busy street,he stood outside it all day counting how many people passed.He then calculated that if only 5% of the passers by bought a coffee that would be enough to cover his overheads,he then assumed that customers would buy additional items like pastries,cakes etc,this would be his profit.He then signed the lease.When he opened he found that 10% of passers buy were buying coffee and he was making a healthy profit.As the old saying goes “Fail to plan,plan to fail” regards Chas.
Hi Chas,
What a great illustration on how to undertake market research! Observe, tally, estimate conservatively — these are the kinds of actions that successful entrepreneurs undertake in planning the launch of their business. Here in the Philippines the same lessons hold true. Thanks for your excellent comment and sage advice! Cheers!
Excellent example and wise words Chas!
Onward and Upward
- marshall
Hi Martin, thanks for this very enlightening article. In my case I think the location of my business (office for translation and consultancy services) as well as on line business is the best AT HOME. No extra rental and sideline fees… Correct me please, if I am wrong…
THERE ARE THE 6 P’S THAT SHOULD BE LOOK INTO BEFORE GOING INTO A BUSINESS
PRODUCT,PRICE,PLACE,PROMOTION ,PEOPLE and PLANNING
Hi Klaus,
No doubt you’ve made a great point. Some businesses are best suited to be run out of the home. Not only do you keep the overheads low like you mention, but you also have the freedom to spend less time commuting and more time on things you enjoy. I think an article on home-based businesses is something I will need to cover in a future column, because they really are an option many are finding attractive these days. Cheers!
Hi Athena,
That’s a nice list and covers most of the key start-up issues. I’d agree that if most budding entrepreneurs would focus on these six, then they’d really improve their chances of launching a successful venture.
Now we just need to think of a word that starts with “P” to cover how much capital one should have to start and have in reserve when opening a small business. Anybody have any suggestions?
Thanks Athena for your comments!
Hi martin, i am looking forward to this write up… cheers!
The only “P” word that comes to my mind is Peso or Piso…so it might work for those dealing in this currency…
ciao,
~marshall
Hi Klaus,
I’m working on an outline for a column on home-based businesses this weekend. Hopefully it will be ready to share within a few weeks time. Thank you for encouraging me to do some research on this topic, and I hope you’ll have some great comments to share on your own experience running a home-based business!
Hi Marshall,
Peso works for me! Since this area of LiP is devoted to small business in the Philippines, I think Peso does make sense. It sums up the need for entrepreneurs to focus on money requirements for both start-up and continuing operations during the first few months or years of operation. Thanks for the suggestion. Cheers!
Hi Martin, sure…
