Whether you’re an established business searching for a new HQ or are a brand-new startup looking to find your feet, the most important thing to remember is location, location, location.
You could have the most unique idea or well-polished business plan, but if you don’t find a location that fits your business model, you’re limiting your potential for success.
‘Serial entrepreneur’ Scott Gallaway has reviewed how location has impacted the success of 'The Four' - the world’s largest tech companies, Amazon, Apple, Google and Facebook. Gallaway suggests that all these companies being founded in San Francisco and Silicon Valley are more than just coincidence - the proximity to some of the best engineering universities in the world has allowed each business to flourish.
But it’s not just household names that can benefit from where they’re based, all businesses need to take into consideration the pros and cons of their location. Below we take a look at what businesses need to think about when looking for new premises, and then review the benefits of setting up shop in both big cities and smaller towns.
What to consider when choosing your business’ location
Choosing the location of your business is important and needs careful consideration. It’s not always a simple choice whether to choose a major city or a smaller town, so we’ve listed a number of details to think about before committing:
1. Accessibility
It’s not just your staff that need to reach your business, your customers do too. If you’re hard to find and rely on a high footfall, you’re limiting your potential to grow. Suppliers are another thing to think about, as businesses that require frequent deliveries need to make sure they’re easily accessible.
2. Competition
Gauging the competition in the area is an interesting one, as it’s not necessarily a bad thing to be located near competitors. Restaurants and car dealerships regularly operate in close proximity of similar businesses, as they give customers the chance to compare before purchasing.If there is too much competition in an area, consider relocating to a more suitable location. On the other hand, if your business offers a new spin on a popular market and you’re confident you can out-perform established companies, choosing to set up shop near competitors is a good way to quickly pick up customers and create a presence.
3. Research all costs
You wouldn’t move into a home that you couldn’t afford, so why would you move your business into a building you can’t afford? It’s crucial to make sure you thoroughly research everything that you’ll need to pay to operate in your location of choice. That includes the big costs like rent and business rates, but also smaller, easy to forget fees like whether you and your staff need to pay for parking or if the premises needs a deposit.
4. Skill base in the area
Finding the right talent is a must, and your location plays a big part in this. Depending on your industry, choosing between a major city and smaller town can have an impact in attracting the right people, but choosing which city or town can be just as crucial. East London, for example, is an excellent place to launch a tech startup, whereas Sheffield in the manufacturing capital of the UK.
5. Potential for growth
Even if you find a location that ticks all other boxes, have you considered business growth? As any other business leader, you’ll want your company to do as well as possible, which means expansion could be a real possibility. Are you looking for a short-term location with plans to move in the future, or are you looking to keep your HQ grounded? If it’s the latter, making sure your premises can accommodate the growth of your business means you won’t need to deal with the costly and time-consuming act of moving your business.
So then, what are the comparative benefits of towns and cities as business locations?
The benefits of a city-centre location
From London to Los Angeles, major cities are business hubs and the most common areas to establish new startups. With a greater population, higher levels of tourism and dedicated business regions like Manchester’s Media City and the East London Tech City, big cities are attractive locations for many business leaders.
1. Desirability
One of the major benefits of owning a business in a major city is that it’s a desirable location. More people are likely to pursue careers in well-known cities over smaller towns, as more often than not, cities have more to offer its residents. Whether it’s high-end restaurants, up-and-coming bars, a thriving music scene or a cultural heritage, working and living in a big city offers your employees a fantastic work-life balance.
2. Deep talent pools
With a higher population comes a much wider net of potential talent to recruit. Although desirability obviously plays a part in attracting talented workers to move to big cities to find exciting employment opportunities, Universities also contribute. Large cities with established universities are producing fresh graduates every year who are eager and ready to dive into the market. This is especially true of university business schools, which often have strong local links and partnerships, including dedicated student placement and apprenticeship programmes.
3. Networking opportunities
With a higher concentration of businesses clustered in large cities, networking is a much easier endeavor. You are much more likely to grow your professional network in an area with a higher number of companies in your industry. Working in smaller towns simply doesn’t offer networking on the same scale, meaning a significant amount of travel would be needed to experience what city-centre business have on their doorstep.
4. Greater footfall
With an increase in digitisation and online businesses, footfall isn’t often taken into consideration as much as it once was. However, for certain industries, it can make or break a company. Retail and hospitality industries thrive on a high footfall and choosing a city-centre location promises a constant stream of potential customers that smaller towns can’t compete with.
The benefits of a smaller town location
The other option for a business location is to take advantage of opportunities in smaller towns. Steering away from major cities is a popular choice with startups and first-time business owners, as generally, business parks and industrial estates require significantly lower funding and can often provide a niche service to areas that would otherwise need to travel.
1. Reduced costs
The best reason for choosing a location outside of cities is that your outgoings will be lower across the board. Business rates, building rent and staff wages are all more cost-effective in smaller towns and can save you a small fortune - essential for small businesses that are just starting out and have limited funding. Business parks, for example, share the cost of communal services such as security, parking and cleaning staff with all the companies within the premises. The cost of living is also much lower than that of city-centre life, helping to attract talent that are looking to keep their living costs to a minimum.
2. Less competition
For most businesses in cities, they’ll find that a dozen other companies are offering the same product or service. In smaller towns, however, a brick and mortar store will be faced with much less competition. This means you’ll position yourself to gain a higher customer base, if not the lion’s share. Unique businesses with a niche product are the ones who will benefit the most from this aspect, as you’re likely to be the first company of your kind in the area.
3. Closer community
Although being based in large cities is easier for networking, it’s in smaller towns where you’ll make real connections. Towns are known for their strong sense of community spirit, which gives businesses the chance to capitalise in local areas. As a business owner, you’ll form more close-knit relationships with customers and clients, rather than competing in the dog-eat-dog competition of big city business.
4. Easier travel
Another problem facing businesses located in city centres is that they can often be difficult for staff to reach. With the morning rush hour and extortionate parking fares to contend with, getting to work in a busy city can cause more than a few headaches. Setting up your business in a smaller town makes travelling much smoother for you and your staff and is almost always free to park on-site. Plus, business parks are usually located within a convenient distance from rail and bus stations, making public transport easier too.
Understand what’s right for your business
Finding the right location can make or break your business venture. Each business has different targets to meet, so choosing the wrong location can seriously harm business growth.
Make sure you do your research and come up with an in-depth strategy to find the perfect location. It’s also important to remember that no two businesses are the same - what worked for one company might not be right for you. Whether you want to put down roots in a bustling city or the close-knit community of a smaller town, make your decision based on what gives your business the best chance at success.
By Joh Waddicker, Director, Positive Commercial Finance