Locating your business for that competitive edge

Ask an expert for tips on how to succeed in business and chances are one of the things he would quickly advice you is to consider three things:  location, location, and location.

This has become almost a mantra — a way of emphasizing the critical importance of geographical  location to the success of a business.  The basic premise is the more human traffic there is in the perimeter of your business, the more it is likely to be patronized.

The location mantra can be an overstatement.

Cecil Jacinto located her coffee shop in an obscure place along Santa Rosa Highway in Tagaytay City, going against well-meaning advice to put up her shop in a more accessible place.  Cecil’s Cafe has since become one of the most popular eating places in Tagaytay.  Cecil philosophizes there are out-of-the way establishments that have managed to gain a clientele simply by word of mouth.  The implication is that if you offer good food and good service to boot, and word gets around,  people will go out of their way to find you.

On the other hand, Letty Camus put up a goto stand near two big schools and fronting the cathedral in Pasig many years ago when it was not yet a city.  It was also a stone’s throw from used to be the Municipal Hall. Indeed, the crowds came and bought her goto as well as the ginatan that sometimes went with it, even if it was often Standing Room Only in the cramped place.  However Letty’s Goto folded up within six months it was established.  The reason?  Letty lacked commitment to the business.  She would sometimes leave the cooking to inept assistants.  The food could be tops one day and lousy the next.  The assistants didn’t observe good hygiene.  Soon, other goto stalls sprouted, driving Letty’s Goto out of business.

What do these two cases tell us?  Not that location should be ignored.  But rather that it is just one of the many important considerations in running a business. Simplistically put, it may be said that between two businesses offering the same quality of products and services, the one more strategically located would have the edge.  Makes sense, doesn’t it.

So how do you locate your business for that competitive edge?

Here are some guidelines that may help you in choosing the best location for your business, as  adapted from the US Small Business Administration.

Determine your business activity

Your business activity is an important determining factor of where your business should be located. Answering the following questions can quickly narrow your location choices.

  • Do your customers come to you?
  • Do you have to go to your customers?
  • Do you have employees?
  • Do you manufacture products for distribution?

If your type of business depends heavily on pedestrian or drive-by traffic, such as a florist, gift shop, or clothing boutique, you’ll want to seek popular retail locations, such as a downtown area or a mall, where there are few restrictions on signs that can help attract passing customers.

If customers typically seek your type of business, such as a child care service, beauty salon, or fitness center, you’ll want to find space that is easily accessible from population centers, major roads and public transportation.

If your customers do not typically come to you, other location factors may be more important than physical proximity to your customers. For example, if you conduct much of your business online, establishing a home-based business might be more desirable and economical than leasing commercial office space. If you manufacture products for distribution, an ideal location might be an industrial park near major transportation ports.

Ease of access

If your business is a customer destination, consider how people get around in the area where your business will be located.

  • If you are scouting a location in a suburban area, most people may get around by car. You’ll need to make sure you are close to major streets, and have plenty of parking.
  • If you are scouting a location in an urban area, consider areas around public transportation hubs or areas of the city where there is a lot of foot traffic.

Proximity to competitors

While it may seem counter-intuitive, operating a business close to your competitors is often very beneficial. This is especially true if you have a retail business that relies heavily on foot traffic. Shopping malls are a good example of why proximity to your competitors is an important factor. Most major pedestrian malls are full of clothing shops, and cost of retail space is often very high. The reason for this is that the number of potential customers increases exponentially on a per-store basis around a concentration of similar businesses. For example, while one store might attract 50 customers, two stores might attract 200 customers, and three stores might attract 1,000 customers.

This premise for locating a business near competitors has given rise to the clustering of pet shops in Tiende Sitas, of computer stores in Gilmore, and mobile phone retailers in Greenhills.

Zoning policies

Before setting up shop, make sure you will not break any city ordinance or zoning policies in your preferred location. Remember that most residential areas are not zoned for commercial purposes.

Even if you decide to run your business at home, remember that there are local governments which have tight restrictions on the types of businesses permitted to operate out of a home. Check with your local zoning authority for rules that best apply to you.  If you plan to hire employees and have customers come to you, a home-based business is probably not the best business location for you.