Size and Location Matters

Size and Location Matters

There are a lot of constraints and issues that you need to determine during the startup phases of your business.  Money and Time being the obvious ones, and these two issues affect most of the others as well.

Many businesses such as software development, construction trades, and professional services can start small and then grow larger without much disruption to their business.  But especially when building a brick-and-mortar location such as restaurant, retail location, spa/salon, convenience store, etc., particularly when there is a lease involved, making it the right size is crucial.

Here is a piece of advice that I have often given; you don’t build a church for Easter Sunday and you don’t build a restaurant for 3PM on a Tuesday.  If you build it too big you may never have enough business to offset the overhead you have created, and if you build it too small, and this is the bigger sin… you will never have enough capacity to offset your overhead.

Of course, the amount of money you must develop your business does come into play, but if you don’t have enough to build it and large enough to offset overhead then you will never reach the ability to prosper or grow.

Think about it; you are a Hair Stylist, you have one chair, you do all the hair cutting.  You may or may not make good money, but you have limited future growth because of your finite capacity. So instead, you decide to make a multi chair facility where you can employ several Stylists while you focus on marketing and filling those chairs.  The first variable you need to overcome is the increased cost of the facility which will dramatically increase the monthly rent and other expenses.

The second consideration is the reduced amount per service you will enjoy, which is probably only 30-40% of the full price.  This means that you would need to do roughly 3 times as many customers per day to make the same money that you would make as a single Hair Stylist.

But let’s not forget that we have increased our overhead, rent, utilities, accounting, insurance and so on.  So perhaps the number is closer to 4 times as many services performed per day or 4 employees with 4 chairs to have a similar bottom line.  If we want to have room to grow then we need to be even larger.

Here is another consideration… Is the market large enough and are your marketing skills good enough to fill that minimum capacity?  Do you have enough monetary resources to build a salon that size?  If you don’t have that kind of capital or don’t know where those customers will come from then your vision is NOT VIABLE and we need to go back to the drawing board and re-envision our business model.

This may be a good time to talk about location as well.  Location is where franchise businesses seem to beat the sole proprietor businesses often.  Those ideal locations are always much more expensive than just any spot in the strip mall, and when it is our own startup and our own money, we tend to preserve our cash and go for the bargain.  Plus, we may not have the expertise that franchises provide to determine that ideal location.  Therefore, we get what we paid for and need to have better products and services, better marketing, work harder and maybe have better pricing.  All of which will cost us more money over time, and takes more work to beat the larger franchise businesses.

Selecting the right location for a new business is a critical decision that can significantly impact its success. Here are key factors to consider when determining the location for a new business:

1. Target Market:
   • Understand your target market and choose a location that aligns with the demographics and preferences of your customers.
2. Proximity to Customers and Suppliers:
   • Consider the proximity to your customer base and suppliers to minimize transportation costs and enhance logistical efficiency.
3. Competition:
   • Analyze the competitive landscape in the chosen location. Evaluate the presence of competitors and assess whether the market can support your business.
4. Accessibility and Visibility:
   • Choose a location with easy accessibility for customers, employees, and suppliers. Visibility and foot traffic can be crucial for retail and service-oriented businesses.
5. Costs:
   • Evaluate the overall cost of doing business in the chosen location, including rent, utilities, taxes, and labor costs while comparing costs across other potential locations to find the most cost-effective option.
6. Regulations and Zoning:
   • Understand local regulations, zoning laws, and business licensing requirements in the chosen location while ensuring that your business operations comply with all legal and regulatory standards.
7. Infrastructure and Utilities:
   • Check the availability and reliability of essential infrastructure, such as utilities, internet connectivity, and transportation networks.
8. Labor Pool and Talent:
   • Assess the availability of a skilled and qualified workforce in the area.
   • Consider the local labor market and whether it can meet your business’s specific needs.
9. Quality of Life for Employees:
   • Consider factors such as the cost of living, housing, schools, and recreational opportunities in the potential location to attract and retain employees.
10. Market Trends and Growth Potential:
    • Research the economic trends and growth potential of the chosen location.
    • Consider areas with a growing population, emerging markets, or supportive business ecosystems.
11. Infrastructure Development Plans:
    • Investigate any infrastructure development plans in the region that may impact the business environment in the future.
12. Cultural and Social Factors:
    • Consider the cultural and social aspects of the location to ensure alignment with your brand and values.
    • Understand the local community and how your business can integrate with it.
13. Risk Assessment:
    • Evaluate potential risks such as natural disasters, political instability, or crime rates in the chosen location.
    • Develop contingency plans to mitigate these risks.
14. Future Expansion Opportunities:
    • Assess whether the location allows for future expansion or if it meets your business’s long-term growth plans.
15. Technology Infrastructure:
    • Ensure the availability of reliable and high-speed internet connectivity, especially if your business relies on digital operations.

Taking the time to carefully consider these factors will help you make an informed decision about the best location for your new business, setting the stage for long-term success.

I hope this helps our startup readers, and I’ll be the guy crammed in, sitting next to you on Easter Sunday…