Start by evaluating potential locations from your customers' perspective. Develop a vision of who your customers will be and determine which locations will best suit their needs and which locations will promote the best image of your company in the minds of your customers.
Retail businesses that require a large amount of walk-in traffic will need a highly visible location. An ice cream store or art gallery may depend on drive-by or impulse traffic to bring in customers, whereas a business selling water purification equipment will more likely attract customers who are already researching those products.
Although a location near to customers would still be important, the water purification company would not be as dependent on street visibility or high-traffic areas, and therefore a high-profile location would not be worth the additional expense.
High visibility or high traffic locations will cost more, but if that's the kind of exposure your business needs, paying for the right location will bring dividends later. Talk to other merchants in the area to determine their level of success. Ask how they're doing and if they would stay in that location, given a choice.
Monitor the area at different times of the day and take note of traffic patterns-who walks by, when, and how many go into stores. Realtors and leasing agents will often paint a rosy picture, but as King Solomon observed, "Only simpletons believe everything they are told! The prudent carefully consider their steps" (Prov. 14:15 NLT).
Ask for backup information to verify all claims. If possible, find out who the previous tenants were and call them to ask about their experience in that location.
Another key issue is to determine whether you want to be located near your competitors. Opening an ice cream store next to a yogurt store, for example, would split the customer base and not benefit either business.
However, an art gallery may profit from locating near other art dealers, because customers may be attracted to a cluster of similar businesses, thereby increasing foot traffic-and sales.
Next, determine a location and facility that fits your company's image. A store that specializes in expensive, high-fashion ladies wear will want an upscale location and appearance, whereas a budget paper products store may actually benefit from a "budget" location, reinforcing the idea in customers' minds that they are not paying for any frills.
Don't forget to check out traffic flow patterns and available parking. Too much congestion or not enough parking will reduce customer visits. Also, verify any road construction plans in the area that would affect traffic. More than one business has set up shop only to have the road torn up for the next two years.
Prepare a checklist of other important considerations, including zoning restrictions, permissible signage, the electrical capacity on the property, structural soundness, and necessary permits.
When you have determined the optimum location, look for the most favorable lease or rental agreement. Most landlords will require a long-term commitment, secured by a lease. A personal guarantee is usually required when signing a lease.
Be careful! A five-year lease at $3,000 per month adds up to $36,000 per year, and $180,000 over the term of the contract. A personal guarantee obligates you to pay, even if the business fails; therefore, you should approach a lease as if you were obtaining a loan.
Remember King Solomon's warning: "The borrower is servant to the lender" (Prov. 22:7 NLT). You can limit your personal liability by negotiating a shorter term for the lease, or by asking that your personal guarantee be limited to three month's rent.
Most landlords will make some capital improvements to suit a new tenant. Work out the details in advance-what the landlord will do, by when, and according to what standards. Be sure to budget for any improvements that are your responsibility.
The time to work out improvements by the landlord is before a lease is signed-not after. The more expense taken on by the landlord, the more stringent the rental agreement will be, because the landlord will need to recover costs.
Careful planning in locating and occupying your new location will largely determine the success of your business.
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Steve Marr has learned from 40 years of business experience that God's way works.
As an author, speaker and business consultant, Marr helps companies and organizations apply the ancient wisdom of the Bible to avoid the common mistakes and headaches of growing a business.
