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Site Unseen: How to Choose the Best Location for Your Small Business

June 23, 2016

Location, location, location. Any retail store owner or coffee shop entrepreneur has had the importance of location dinned into them. But how much have you really heeded this message?

Smaller chains and franchises need to consider location even more than the “big guys”. For every Starbucks and Dunkin’ Donuts opening clusters of stores to dominate a market, you might only have one. What’s more, when you’re the only ones in a new area, there were no economies of scale — no shared distribution, no marketing overlap, and worst of all, no brand recognition.

All of this has taught successful entrepreneurs one lesson in selecting a location for your small business: pay more than you think you should. That’s it.

Being 100 feet away from traffic is a million miles from success.

Consider this example: a franchisee wants to put their shop around the back of a large shopping center with zero visibility and no chance for foot traffic. “I’ll save a bundle in rent,” he thinks.

Not really. Any savings gained from a sub-par location would’ve been given back threefold in marketing discounts to try to incentivize visitors.

“But Starbucks has a line out the door across the street,” he might counter.

Sorry, you aren’t Starbucks. They’re synonymous with coffee. And their branding is everywhere — if there’s a location across the street, you can bet customers can easily see their logo from most any spot at this intersection.

A lot of smaller businesses stumble when it comes to selecting the perfect location. The key to success? Looking at it like a customer — How do I enter the shopping center? How do I get out? Is this on the way to the freeway? What’s parking look like? All of those are good questions to ask before you sign a lease.

But take heart: even big-box stores struggle to find the perfect location and occasionally misfire. Let’s consider Target Canada’s recent decision to close 130 locations. What can businesses looking to expand learn from their mistakes?

1. Too many stores too quickly. Because Canadians shopped heavily at US Targets, Canada Target assumed Canadians would be drawn to the brand name. Target Canada went big several years ago by opening 130 locations – which they later decided to shutter. If they had just opened a handful of stores and then listened to customer feedback, they could have made crucial changes quickly to deliver on the Target brand promise. Operational issues are hard to fix once you’re open. You must study your potential customer first and foremost before opening. ‘Build it and they will come’ simply doesn’t hold up.

2. Location, Location, Location. Target couldn’t change the aging sites they had chosen fast enough. That’s why retailers often can get deals on older locations that may not be as convenient or visible as newer spaces. Either way, starting out in a weak location is not a good way to start. You never want to be 100 feet from success; pay more money for the best site.

Final Thoughts
Opening additional locations can be a smart way to grow your business. Just make sure you look before you leap. Plan, assess and ensure you have demand in the new area first.

And finally, before you open that new location, make sure you train new employees in your existing culture. Consistent experience is critical to ensuring continuity from location to location.