Proximity to Customers and Suppliers

Every business depends on its customers for its very existence. To a greater or lesser extent, most businesses also rely on employees and a variety of suppliers who provide needed goods and services. Locating your business where these three groups can get to you easily is vital.

Customers

When you're ready to select the community in which to locate your business, you need to make sure that the chosen community provides ready access to enough potential customers to support your business. What constitutes "ready access" varies tremendously based on the type of business. A hot dog stand is extremely dependent on the number of people actually passing by; a manufacturer that sells only through wholesalers is not.

Owners of retail and service businesses (other than those that operate by mail, telephone, or computer orders) usually need to locate their businesses primarily based on customer volume and convenience. This is why many of these businesses choose a location that puts them in the midst of heavy car or pedestrian traffic.

Tip

If your business depends in large part on drive-in or walk-in customers, even the side of the street you are on can make a difference. If you are on a street where most of the commuter traffic goes one way in the morning and the other way in the late afternoon, you'll probably do better with a location that's on the return-home side of the street. (Unless a large part of your business involves the sale of items to be consumed at, or on the way to, work — such as coffee and donuts).

Likewise, in certain hot climates, your business may benefit from being located on the shady side of the street.

Wholesalers and manufacturing businesses must also be concerned about being close to customers, but for them, being close to customers is more a question of transportation costs and speed. This is why their preferred facility often is one that is large, obtainable at low rent, and serviced by inexpensive means of transportation. These facilities tend to be in the older, more industrial areas of established cities, near airports, or in outlying areas.

For mail-order companies, particularly those that don't ship heavy products, close enough to customers can well mean anywhere in the country. This also holds true for many types of creative work, such as writing, editing, consulting, and computer software design.

Suppliers

Unless your business provides purely services to customers, you depend on suppliers (distributors, wholesalers, manufacturers, etc.) to provide you with the items you need to create and market your product. Thus, all things being equal, it's usually better from the point of view of delivery and price to be close to your important suppliers.

If the source of the materials that you need to make your products is distant and you aren't well served by transportation facilities, the shipping costs that you will incur, and have to pass along to your customers in some form, may make it too expensive for you to compete with businesses that can get their supplies more cheaply. Also, more distant suppliers can mean more delays in delivery of supplies.

Your facility's street location and access to highways and other modes of transportation can also affect how quickly you can receive shipments from suppliers.

Employees

For many small businesses, the ability to attract and retain qualified employees can be critical to success. Because of this, you should carefully consider the availability of qualified employment prospects within a half-hour drive of your location.

If employee costs figure to be a major portion of your total business costs (and especially if you are considering different states to locate your facility), you will do well to investigate state and local work rules, required employee benefits, and workers' compensation rules.

Adequate Parking

No matter who visits your business, adequate parking is a major concern. How many times have you given up in disgust when there was no parking to be found near the store you wanted to visit? As a business owner, you face diminishing profits with each minute a potential customer can't find somewhere to park.

Mixed-use neighborhoods. If you are considering a facility located in a mixed-use neighborhood (such as residential and retail), you should check out whether the facility's parking lot is used by local residents without permission. If it is, you may find yourself in the position of generating ill-will with neighbors, some of whom may be your customers, if you move to reassert control over your lot.

Tip

If you have concerns about a possible unauthorized parking problem, as a part of a purchase or lease agreement you should have the seller or landlord state in writing who, if anyone, has been allowed to park in the lot for other than business purposes, and whether there has been a problem with unauthorized parking in the lot.

Manufacturing and wholesale businesses. Manufacturing and wholesale businesses don't usually need to accommodate customer parking, but often have their own parking lots for use by employees. In some cases, businesses can strike deals with other businesses, or with local governmental bodies, to meet their parking needs at a reasonable cost.

Example

For instance, we know of a business that was able to solve a critical employee parking problem by entering an agreement with a local park district. Under the agreement, the business's employees could park their cars in a nearby parking lot owned by the park district, which had adjoining softball fields and tennis courts. In exchange for this, the business, at its expense, paved and maintained the lot, which would continue to be open for public use. The business was able to get additional parking without buying or leasing land, while the park district had its lot expanded and paved, at no expense to it. Since the business's parking needs were generally limited to weekday business hours, while the park district patrons normally used the parking facilities after work or on weekends, this joint use agreement benefited both parties, while disadvantaging neither.

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