The document discusses key factors for selecting a business location, emphasizing cost, flexibility, access to labor, proximity to customers, and supplier availability. It highlights the importance of communication and transport links for operational success, alongside government assistance for startups. The text also outlines considerations for home-based businesses, noting advantages such as low costs and challenges like isolation and distractions.

1. Locating a New
Business

2. Introducing location
• Small businesses are started in various locations -
where depends on several factors
• Technology (particularly communications) has made
the choice much easier, particularly for service
businesses
• Most start-ups begin life at home, but then need to
find extra/different space as the business grows
• The location cost and proximity to customers are key
factors in choosing the best location
• An entrepreneur will often have to compromise –
there is rarely a “perfect business location”

3. Main factors affecting choice of location
• Cost (vital)
• Flexibility
• Communications
• Labour
• Customers
• Suppliers
• Government assistance

4. Main location costs
• Rent (to the landlord)
• Maintenance charges
• Insurance (can be substantial)
• Rates (local government tax)
• Energy costs (electricity, gas)
• Housekeeping (e.g. cleaning, security)

5. Why location flexibility matters
• A start-up or small business needs to:
– Minimise its costs
– Set up operations that can be scaled-back or
scaled-up when needed
– Avoid being locked into a location which might
not prove suitable in the future
• Examples of flexibility
– Short-term leases
– Hot-desking

6. Communication
• This includes transport facilities (road, rail,
air) as well as information technology
infrastructure
• Transport links are particularly important if
the business delivers products, sells direct
using a sales force or is dependent on
imports and exports
• Information technology now makes the
choice wider – most start-ups can quickly
establish reliable broadband Internet
connections

7. Labour
• When a start-up needs to
hire employees, then access
to a reliable pool of staff with
relevant skills is important
• Businesses that are labour-
intensive often look to locate
in areas of traditionally low
wages
• Manufacturing businesses
tend to locate where they
can access trained employees

8. Market – Customers & Population
• A start-up may need to be located near
particular centres of population
• For example, if the product is a service
targeted at affluent older-aged people,
then it is important to be located where
there is a sufficient population of such
people
• Franchise businesses often analyse the
population characteristics of a potential
new territory before setting up in a new
location
• For a retailer, the choice of location for
the retail outlet is critically important –
needs to have a strong customer
“footfall”

9. Suppliers
• The business may be
dependent on supplies of a
particular raw material, so
costs will be lower if the
business is located near
the source of supply
• This factor tends to be
more important for
manufacturing businesses
rather than service
businesses

10. Government help
• Aims to encourage start-ups &
business growth in poorer
locations
• Assisted areas – benefit from
grants & low-cost loans
• Regional Development Agencies
– focus government investment
in target regions and industries
• Government support can be the
difference between one location
and another – particularly if it
affects the location costs

11. Home-based start-ups
• 60% of new businesses
are started from home
• 2.1 million home-based
businesses in the UK
• Popular sectors
– Business & professional
services
– Online trading
– Food products

12. Running a business from home
Advantages Disadvantages
Very low cost - the big advantage Requires greater self-discipline
Less travelling, although customers and Work is often interrupted – e.g. by
suppliers might still need to be visited callers to the home or by family
Work can be combined with domestic Work never goes away – it is difficult to
tasks and responsibilities (e.g. child separate work from home life
care)
Reduced risk and a lower break-even Potentially lonely – lack of simulation
point from colleagues
Environmental benefits – lower carbon Working from home can give a poor
footprint impression to potential customers
You can wear what you like! Some hidden costs – e.g. extra
household insurance, potentially higher
capital gains tax when the house is sold

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