This document discusses factors to consider when choosing a business location. Key factors include costs like rent and utilities, flexibility in leasing options, transportation and communication infrastructure to connect with customers and suppliers, access to skilled labor, proximity to target markets, and potential government assistance programs. Most startups initially operate out of homes but may need additional space as they grow. Choosing the right location involves balancing these various factors, as there is rarely a perfect option.

1. Location Plan

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
suppliers might still need to be visited
Work is often interrupted –e.g. by callers
to the home or by family
Work can be combined with domestic
tasks and responsibilities (e.g. child care)
Work never goes away – it is difficult to
separate work from home life
Reduced risk and a lower break-even
point
Potentially lonely – lack of simulation
from colleagues
Environmental benefits – lower carbon
footprint
Working from home can give a poor
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