Small Business Management

1. part
4
PowerPoint Presentation by Charlie Cook
Copyright © 2003 South-Western College Publishing.
All rights reserved.
Selecting a
Location and
Planning the
Facilities
11
The New Venture
Business Plan
12e

2. Copyright © by South-Western College Publishing. All rights reserved. 11–2
Looking Ahead
After studying this chapter, you should be able to:
1. Identify the factors affecting the choice of a business
location.
2. Describe the attraction and challenges of a home-
based business.
3. Explain how efficiency can be achieved in the layout of
a physical facility.
4. Understand the equipment needs of small firms.

3. Copyright © by South-Western College Publishing. All rights reserved. 11–3
Key Factors in Selecting a Good Location
• Customer accessibility
–As a matter of access by target customers
–As a matter of customer convenience
–As a necessity to avoid shipping costs
• Environmental Business Conditions
–Climate-related factors
–Business environment factors
Competitors, legal requirements, and tax structure

4. Copyright © by South-Western College Publishing. All rights reserved. 11–4
Key Factors in Selecting a Good Location
• Resource Availability
–Nearness to raw materials
–Availability of a suitable labor supply
–Access to adequate and reliable transportation
• Personal Preference of the Entrepreneur
–Familiarity with home community
–Familiarity of community with entrepreneur
• Site Availability and Costs
–Difficulty of locating a good site
Business incubator provides shared space, services, and
management assistance for new businesses

5. Copyright © by South-Western College Publishing. All rights reserved. 11–5
Key Factors in Selecting a Good Location
• Site Availability and Costs (cont’d)
–Large costs for and commitment required to
purchase site outright.
–Leasing avoids a large cash outlay and allows the
owners to postpone committing to the site before
the business becomes a success.

6. Copyright © by South-Western College Publishing. All rights reserved. 11–6
Fig. 11-1
Environmental
Business
Conditions
Customer
Accessibility
Resource
Availability
Entrepreneur's
Personal
Preference
Site
Availability
and Costs
Optimum
Location
Five Key Factors in Determining
a Good Business Location

7. Copyright © by South-Western College Publishing. All rights reserved. 11–7
Home-Based Businesses
• Advantages
–Low start-up and overhead costs
–Convenience for family and lifestyle
–Technology
Advances in office equipment allow home-based
business to compete with commercial sites

8. Copyright © by South-Western College Publishing. All rights reserved. 11–8
Home-Based Businesses (cont’d)
• Challenges
–Family and business conflicts
The need to observe regular business hours and
establish spatial boundaries (specific work areas) to
avoid distractions.
–Business image of a home-based business
Professional image is difficult to maintain in a home
environment.
–Legal considerations
Local laws and zoning ordinances prohibit many types of
home-based businesses.

9. Copyright © by South-Western College Publishing. All rights reserved. 11–9
Primary Income
Second Income
To Be Own Boss
Family Responsibilities
Health, No Work, New Ideas,
or Other Reasons
18%
36%
21%
12%
12%
Fig. 11.2
Entrepreneurs’ Reasons for Operating a
Home-Based Business

10. Copyright © by South-Western College Publishing. All rights reserved. 11–10
Designing the Physical Facilities
• Functional Requirements
–Physical facilities should be of adequate size and
accommodation; not too large or elaborate.
–Ideal building is one that matches the functional
requirements of the business
–Considerations
Age and condition of building
Fire hazards
heating and air conditioning
lighting and restroom facilities
entrances and exits

11. Copyright © by South-Western College Publishing. All rights reserved. 11–11
Building Layout
• Factory Layout
–Process layout
A factory design that groups similar machines together
–Product layout
A factory design that arranges machines according to
their roles in the production process
• Retail Store Layout
–Grid pattern
A block-like layout that provides for good merchandise
exposure and simplifies security and cleaning

12. Copyright © by South-Western College Publishing. All rights reserved. 11–12
Building Layout
• Retail Store Layout
–Grid pattern
A block-like layout that provides for good merchandise
exposure and simplifies security and cleaning
–Free-flow pattern
A flexible layout that is visually appealing and gives the
customers freedom of movement
–Self-service layout
A design that gives customers direct access to
merchandise

13. Copyright © by South-Western College Publishing. All rights reserved. 11–13
Grid Pattern for Retail Store
Display Racks
Racks
Racks
Restrooms
Storage
Office
Display
Display
Racks
Check-out
Door
Door

14. Copyright © by South-Western College Publishing. All rights reserved. 11–14
Free-Flow Pattern
Door
Door
Racks
Display Racks
Check-out
Office
Storage
Storage
Display

15. Copyright © by South-Western College Publishing. All rights reserved. 11–15
Arranging Merchandise
• Impulse Goods
–Place where they can easily be seen and near or
at the register/checkout area
• Customer-Necessary goods
–Place at the back of the store or in out-of-the-way
places where customers must seek them out.
• Entry Areas
–Put goods at right front of store to catch
customers’ eye as they enter the store.

16. Copyright © by South-Western College Publishing. All rights reserved. 11–16
Equipping the Physical Facilities
• Manufacturing Equipment
–General purpose equipment
Machines that serve many
functions in the production
system
–Special-purpose equipment
Machines designed to serve
specialized functions in
the production process

17. Copyright © by South-Western College Publishing. All rights reserved. 11–17
Manufacturing Equipment
Special-Purpose
Equipment
• Low labor cost
• High hourly output
General-Purpose
Equipment
• Low purchase cost
• Flexible production
• Good resale value

18. Copyright © by South-Western College Publishing. All rights reserved. 11–18
Retail Store Equipment
• Necessary Office Equipment
–Computers
Networks
–Fax machines
–Copiers and printers
–Telephone systems
Voice mail
Interactive voice response (IVR)