There are many reasons a high percentage of new businesses fail. One of them is location. Simply opening a business in the municipality you live in may not get it done.
If you live in a metropolitan area, you may have six or seven cities and townships all around you that could be a better fit. Your suburb may not be such a long drive to the nearest big city. You may find it possible to re-locate for the purposes of opening a business. No matter the case, be sure to scope out your location carefully. Here are some factors to look into.
Cost of Doing Business
One of the reasons considering nearby cities or counties is important is that each location has its own (or can have) taxes, fees, regulations, etc. In fact, if you live close to a state line, a move into the neighboring state can make a big difference in taxes.
If you’re not going it alone with your business but plan to hire employees at the minimum wage, that’s something to research as well.
Are there Enough Customers?
We all know that a business in a small town can have trouble due to a low number of potential customers. Conversely, businesses in large cities can run into trouble if their potential customer base is already being served by other businesses. These are all things to consider, and you want to find that sweet spot. Your customer base needs to come from a relatively large pool of people, with a good core of those interested in your product or service. But it also can come from a demand, a lack of availability of those services.
The more commonly-sought-after your product is, the less population you may need. If you want to open a kitchen supply store, you’re going to need a pretty solid population base. If you live in a big city, you have the best chances of casting a wide enough net to catch the people who will pay nine dollars for a nice spatula.
Does the Population Have the Right Income?
Your kitchen supply store isn’t going to play very well in any economically depressed area that is served by discount stores. You’re going to need a pretty good base of families, with single professionals providing you with some clientele as well. Again, to sell niche items like stainless steel egg slicers, espresso machines, and mortars and pestles, you’re going to need people with a taste for finer things and quite a bit of discretionary income.
Other Demographic Factors
If you spend a few hours researching, you can find what kinds of factors influence customers of banks, pizzerias, computer stores, accountants, attorneys, consignment clothing stores, etc. You can get descriptions of the age, education level, income, family makeup, marital status, etc., of folks who tend to buy various products. For example, for your kitchen supply store, you’d want to know if a good percentage of retired people are in the market for nice skillets. Is this something that single professionals go for right out of college, or do they fry with something from the garage sale until they’ve settled down with a family?
Once you have figured out what sorts of demographic factors you need to support your business, you now have to determine which cities have populations that meet these needs. What you don’t want to do is to go through and manually hunt and peck from city to city to city. You’re going to want to take advantage of some of the tools that do this, such as areavibes.com. Having a stock of information all in one place will save you some time.
So far, a lot of what we’ve focused on has been the people themselves. However, the people have to actually go out and buy your products. They can’t just sit around at home. Some areas are large batches of residences, but not towns, per se. Some areas have offices and other businesses that bring people in during the day but aren’t fully realized livable areas. Once everyone leaves at 5, the place can turn into a ghost town.
Though all of this sounds very specific, it is possible to look these things up. Factors such as low crime and attractions such as stadiums, parks, walking paths, all bring people into areas and make those areas family friendly and appealing to foot traffic.
Take Birmingham, MI for example. It’s clear local business in this metropolitan area is thriving. This could be a great indication as we know that businesses often thrive when around other businesses.
All in all, setting up a business in the best way is a matter of research. Know your audience, know your costs and know the potential areas.