Where a business will locate can spell the difference between success and failure — especially to a trading or service enterprise.
Generally speaking, the best location is where you can transact business with reasonable convenience. It should be one which allows you to manufacture your products and sell them at the lowest possible cost. It should also be where your target customers can easily find you.
Where are you going to set up your shop, store, or factory? In a city? In a town? In a village? In a shopping mall? In a commercial or industrial zone or cluster (think export zones, techno hubs, restaurant rows).
One of the first considerations regarding location is whether the prospective site is residential, commercial or industrial. If the area is residential, enter with caution. Not only would you need a barangay clearance for the business; you also need the tacit approval of the residents, often represented by the homeowners association. Some businesses have located in residential villages only to be driven away later by protesting homeowners.
Find out, too, if the area is a progressive community or one that is on the decline. Marikina City, for example, was once a dying town. But look how upbeat it has now become both as a residential and industrial community.
Try also to find out as much as you can about infrastructure development plans for a particular area. Is it going to be the site of a road-building or road-widening project? If it is, it can work either of two ways for your business. At best, your site becomes more of a premium location. At worst, it may be expropriated by government, and you would be left with nothing but a paltry compensation.
Here are other important considerations in deciding where to locate:
- Raw materials – How close are you from the sources of raw materials? Are these materials bulky and difficult to transport? How frequently do you need to order them?
- Customers – How close are you to your target customers? This is crucial if you are in the service, wholesale trade or retail trade business. Do you have delivery facilities and personnel? Will the customers pick up the goods?
- Transportation facilities – If your raw materials are heavy or bulky, examine the availability and reliability of transportation facilities. Think also of your employees who need to commute from their house to the workplace on a daily basis.
- Labor – Can you employ people living in the vicinity? Do they have the skills you need? If your business is labor-intensive, be sure to locate in population centers where labor is abundant.
- Power and other utilities – Are light and water available? What about telephone and internet facilities? Are these in adequate and reliable supply? How are the power rates in the site? Are they affordable to a start-up entrepreneur like you?
- Water disposal facilities – Will there be a lot of waste by-products during processing? If you are into pulp and paper manufacturing, electro-plating, woodworking or plastics business, this will be an important concern.
- Community – Are there rules, regulations and restrictions that will affect businesses? Does the local government encourage entrepreneurial activities? Are the residents tolerant or accepting of businesses locating in their community?
- The decision to own or rent – Will you buy the site or rent it? Can your afford the price? Are the terms reasonable? Is it properly titled? If you are leasing, how long is the lease contract? Whether you are buying or leasing, how much will it cost you to make the place more suitable for your business? For example, do you need to excavate or put in land fill? Do you need to pave roads?
- Zones and clusters – Will you locate your premises in a commercial/industrial zone or cluster with similar businesses? There are advantages to doing this. Many customers find it advantageous to buy or canvass for their high-ticket needs (example: furniture, appliances, cell phones, computers and other IT gadgets) in places where there are trading clusters (like cyberzones and home depots). You can take advantage of economies of scale and shared resources, better source new knowledge and pursue innovation opportunities through stronger links with service providers and educational establishments. Clustering also allows companies to serve existing markets better and to respond to future market changes through closer links to customers.
Adapted/updated from: Introduction to Entrepreneurship, 1st revised edition, published by the SERDEF and UP ISSI
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