The perfect spot — how to choose your small business location
With the right research and planning, you can find a location that’s the right fit for your business to thrive. Presented by Chase for Business.
- Location is a core part of a strong business strategy, influencing your company’s visibility, customer base, operational costs and brand image.
- Analyzing your operational needs, checking zoning laws and creating a detailed budget are essential steps in the process before looking at properties.
- Long-term success is possible by considering physical scalability, contract flexibility and neighborhood trajectory.
Wondering how to choose a business location? It’s time to do the due diligence required to make an informed decision about an integral part of your business strategy.
This guide is designed for small business owners, aspiring entrepreneurs and startups looking to choose a physical place of business. In it, we’ll break down the decision-making process into manageable steps.
Why the location of a business matters more than you think
Your place of business is more than just an address; it’s an integral part of your business strategy. Here's why:
- Visibility and accessibility: A convenient and accessible location with good foot traffic and parking can help attract potential customers.
- Customer base: Your location influences the type of customer you attract. Being in the same area as your target demographic can help boost sales and brand loyalty.
- Competition: Being located near similar businesses can help create a shopping destination — but it could also lead to competition for the same customers.
- Operational costs: Rent, utilities and local taxes may vary drastically depending on your location. It’s important to weigh your projected costs against your potential profit to decide the best fit.
- Logistics and supply chain: If your business relies on physical inventory, being close to your suppliers and distribution centers can lower the hassle of restocking and decrease supply chain and shipping costs.
- Employee commute: A location that’s easily accessible by car or public transit can help attract and retain staff.
- Brand image and perception: Your location’s aesthetics and reputation reflect your brand. Consider your target audience and their perception of the area. Is it trendy? Upscale?
- Future growth: It’s important to consider whether a location gives you the opportunity to grow, or if the local community will be good for business in the long term.
Step 1: Analyze your operations and budget
Before touring potential locations, it’s important to do an assessment of your business’s financial needs and constraints. This internal due diligence will help guide you to the long-term solution for where to house your business.
Operational needs checklist
Consider your day-to-day business operations and what your physical space must have to support them.
- Space: Consider your current needs and potential for growth. How much square footage is necessary to fit your inventory and displays? Do you need a break room, storage area or an office?
- Infrastructure: Determine what utilities are essential to run your business. Strong electrical capacity, reliable internet, plumbing and even security all depend on your needs.
- Layout: Your business may have unique requirements for a floor plan. Do you need open floor space? Fitting rooms?
- Safety and security: Choose a space that supports the safety of your inventory, employees and customers. This can include things like fire prevention, security cameras and even lighting.
Zoning and regulations
Depending on the city or country where your business is located, there are different rules about what kinds of businesses can operate there. Avoid fines and legal issues by ensuring that your business is permitted in a location and that you possess any specific permits, licenses or building codes that apply to your industry. You can visit the official website of your city or county to access this information.
Creating a location budget
A detailed budget is essential before committing to a business location. Beyond monthly rent, you’ll need to account for several recurring costs, such as:
- Rent or mortgage
- Utilities (electricity, gas, water, internet and trash removal)
- Taxes and insurance
- Common Area Maintenance fees for shared spaces like parking lots, restrooms or lobbies
- Ongoing repairs and maintenance
- Business subscriptions or service fees
- Employee-related costs (wages, insurance, taxes, benefits)
Step 2: Research demographics and your target market
Finding the right spot for your business isn’t just about the building — it’s also about the people. Taking the time to understand where your ideal consumer base is located can give you a significant long-term business advantage in attracting and retaining customers.
Defining your customer
Before you can find out where your target customers are, you need a clear picture of who they are. Consider creating a detailed customer persona, including factors like age, gender, income, lifestyle, interests and their specific needs and pain points that your business can help address.
If you’re a newer business, it may also be helpful to explore the available data from competitors for more reliable information.
Data-gathering tools and techniques
These tools and resources are available to help you research locations:
- U.S. Census Bureau gives you access to valuable demographic data.
- Local chambers of commerce or economic development organizations gather community-level market insights.
- Websites like Data USAOpens overlay and City-DataOpens overlay allow you to explore detailed profiles of cities and neighborhoods.
- On-the-ground research allows you to visit the location you’re interested in at different times to observe foot traffic and the types of people walking by to get a feel for the community.
Step 3: Evaluate accessibility, competition and brand fit
Once you’ve narrowed down a few potential locations for your business, it’s time to look more closely at their physical environments and competitive landscapes.
Traffic and accessibility analysis
You’ll want to understand how customers will travel to your location and consider factors that make their visit easier, including:
- Foot vs. vehicle traffic: Determine what kind of traffic your location supports. A smaller boutique may rely on tourists and locals walking past, while a larger retail store may rely on their customers traveling by car.
- Parking: If many of your customers drive, you’ll want to assess the availability and cost of parking nearby.
- Public transportation: In urban areas where many people don’t own cars, consider whether your business is easily accessible via buses, trains or subways.
Competitive landscape
Instead of avoiding the competition, it’s better to understand them. It could be a major business advantage and help you better evaluate your position in the market.
- Direct competitors: These are businesses that offer the same products or services as you. Where are they located? Is there a strong demand for your products in that area, or should you explore other locations for your business?
- Complementary businesses: These are businesses that attract a similar customer base without directly competing with you. You may be able to leverage their goods or services to complement your own and create a destination for consumers. For instance, a local boutique may thrive next to a coffee shop so that people can browse with a drink.
Brand and neighborhood alignment
Your location can help shape your brand image. The community you choose should align with your brand’s personality and overall “vibe.”
- Vibe check: Think about whether the location’s atmosphere reflects the ideal image for your brand.
- Future development: Research any upcoming projects in the area. Are there developments that could increase foot traffic or make the neighborhood a more desirable place to visit?
Step 4: Make the final decision and secure your location
After you’ve successfully done your research, it's time to choose the best fit and make it official. This requires a final, in-depth review of your top choices. Here are a few next steps:
To make the final decision
Write down all the key factors you’ve researched, such as day-to-day operational needs and budget, traffic and overall neighborhood vibe. It might be helpful to assign weighted scores to each factor based on its importance to your company. This helps make the decision-making process easier and more objective.
Decide on buying vs. leasing
Once you’ve identified your top choice, decide whether buying or leasing is right for you. Consider what’s possible financially, and weigh the pros and cons for each location.
- Leasing a property: Leasing offers less of an upfront cost, with more flexibility to expand or move in the future. Payments are also deductible operating expenses for tax purposes. It can, however, be more expensive in the long run than buying.
- Buying a property: Buying a location has higher upfront costs but is a long-term investment that builds equity and gives you more control over your space. Owned property can also be used as collateral.
Review your key contractual elements
As signing a lease or purchase agreement approaches, you’ll need to review these key details and understand their implications:
- Lease start and termination dates: How long is the agreement?
- Terms and obligations: How and when will the rent be paid?
- Rent escalation clause: How and when will the rent increase?
- Maintenance and repair responsibility: What am I held accountable for?
- Insurance and liability clauses: What are my liabilities if there’s an accident or damage occurs on or to the property?
Build your location team
Hiring a team of professionals to support you during the process of buying or leasing your property can help you ensure you’re on the right track to move forward. Consider contacting:
- A commercial real estate broker to help you find and negotiate the best deal
- A real estate attorney to review contracts and legal documents
- A contractor or architect to plan any necessary renovations and set a price
Get your finances in order
A well-defined budget and a clear plan will ensure a smooth transition into your new space. After you’ve selected your location and established your team, you can move forward with financial aspects like financing and preparing for upfront costs like security deposits or tenant improvements.
Step 5: Future-proof your business location choice
You’ve reviewed the key details in the previous step, but there’s one more thing to think about before you sign the dotted line: longevity. This step can save you from costly and disruptive moves down the line.
Physical space scalability
If you plan on growing your business one day, consider whether the physical space accommodates that potential.
- Growth potential: Is there an option to expand your current space or lease additional space in the same building or complex?
- Storage capacity: If your inventory and product lines increase over time, will your storage space be able to meet those demands?
Lease and contract flexibility
A flexible contract is important to meet any potential changes to your business to support long-term growth. If your business plan changes, are you able to sublet your location? Will periodic rent rate adjustments depend on the market or your business’s financial situation? Review and negotiate clauses in the lease that may impact your future, including operating expenses, rent escalation, real estate taxes, maintenance and alterations, escapes and extensions.
Neighborhood trajectory
Investigate the strength and future of your community by attending local public forums or visiting your city’s economic or development department for details on updates that may affect the area. Signs that a neighborhood is on the rise may include new construction or renovation, an uptick in new businesses, government-led initiatives or demographic changes like an influx of young working professionals.
Adaptability for future business models
Your business will undoubtedly change over time along with the retail market, and it’s important to determine whether your location can adapt to these shifts. Will your storage area be able to accommodate an increase in inventory if online sales increase? What about growth in other products and services?
Consider alternative business locations
Finally, consider if you need a traditional space at all. Several alternative options could offer more flexibility and lower overhead costs — especially for very small businesses.
Home-based business
Starting a home-based business is a great way for small businesses to avoid the high cost of leasing a commercial property. Just be sure to check with your local zoning laws and homeowners association to confirm that you can legally operate a business from your home.
Co-working spaces
Co-working spaces are another cost-effective way to house your small business with the traditional amenities of an office but shared with other freelancers, independent workers or small companies. If you choose this path, it’s important to carefully review the membership agreement, as it’s typically a license rather than a traditional commercial lease.
Pop-up shops and incubators
Pop-up shops and incubators can be great low-cost opportunities for a startup or small business to introduce their brand, generate buzz or tap into a new market without committing to a long-term lease.
- Pop-up shops: These temporary retail spaces let businesses create a unique shopping experience for their consumers without a long-term commitment.
- Incubators: A business that provides support to small businesses, often to help them establish a retail space and gain access to funding and other resources.
Mobile businesses
A mobile business operates without a fixed location, often using vehicles like food trucks, service vans or trailers to bring their goods and services directly to consumers. This can offer greater flexibility and a lower cost than traditional leases. It is important, however, to check local laws and permits and to consider how you will handle inventory and storage. A branded vehicle can act as a moving billboard, but there are other ways to promote your small business at a low cost and get the word out.
