Pick Your Spot

All Over the Place

"If you've ever taken a marketing course in college, one of the first things you learn is the four Ps," says Sean O'Halloran, CEO of GeoMarketing Research in Oreland, Pennsylvania. "Those Ps are product, price, promotion and place, and place tends to be the most ignored. Which is interesting, because of all of those, 'place' tends to be the most permanent. You can always change your price or promotion strategies, and you may tinker with your product, but leases and mortgages tend to be long-term situations. If you make a bad decision, you can be stuck for a long time. More optimistically, if you find the right location for your business, you can reap the benefits for years to come."

O'Halloran, who has a degree in geography, likens entrepreneurs trying to find the right locations for their businesses to animals. "You have to ask yourself, 'What kind of animal am I? Am I a retail rat who can survive anywhere, like a McDonald's? That's a good thing to be. Or am I a giant bamboo-eating panda who can only thrive in the rain forest? What habitat is right for me?" Just as a panda wouldn't do well in a desert, your restaurant may not do well if it's in a deserted part of downtown.

On the other side of the country, Stephen Roulac is thinking about location issues just as intently. His San Rafael, California, company, which has offices in Hong Kong and India, specializes in giving advice on complex real estate decisions, and his clients have included everybody from Bank of America and Texaco to the U.S. Department of Labor.

Are You Expanding?
Thinking of opening a second location? Find out what you need to consider in Opening a Branch Location .

"If you're going to be an entrepreneur, there are three markets you have to deal with," says Roulac. "You deal with the customer market, the employee market and the capital market. Location affects all of those. Depending on where your business is, it can hinder your ability to attract customers and have them stay with you; and it's [the] same with employees and the capital market."

Roulac ticks off some potential concerns:

Does the community you're located in give people a favorable impression about your company? If you're located next to a city dump, will potential customers think of your business as trash?

How will investors be influenced by your location? Says Roulac, "If you're [in the] financial technology sector, your chances are better if you're located in a Silicon Valley-type of area than if you're not."

And what of future employees? "People want a compelling place to live, to work, to learn, to shop, to play and to prosper," he says. So if you want to set up shop where customers are, but it's not much fun to live, your best employees might move as soon as they've earned enough to escape. Conversely, if you're located in the middle of nowhere, you may not be able to staff your business with the right people. But wait--there's more. How is the housing market in the town you plan to set up in? The schools? Did you even think about that? "And since September 11, employees are asking a new question," says Roulac. "Is your company a safe place to work?"

All the questions kind of make a start-up want to cry.

But don't. If you believe your business is someday going to swell to 20 employees--or 200--these are issues you need to mull over. But if you have no employees now, they're not questions that demand an immediate answer.

For now, you can locate your business inside the city dump. You'll just have to know how to spin it to everybody else. Consider how the fictional Ed on NBC's Ed beams with pride every time somebody mentions that he has a law practice inside his bowling alley. "Some companies can take their mismatch and play with it," says Roulac. "Think of Gateway Computers and their commercials with all those cows. They basically play on the fact that you wouldn't expect to find a computer company in Iowa."

You don't anymore. Gateway is now headquartered in San Diego. But Roulac is right about one thing: The company was founded on an Iowa cattle farm.

Ready to run out and sign a lease? Hold it! Let's take one more look at the factors you need to consider.
  • Parking: What's it like for the harried and hurried consumer? If they have to go through an obstacle course, why should they come?
  • Roads: Check with the city. Are they doing any nearby construction soon? The last thing a start-up needs are orange cones and gridlock in front of its business.
  • Safety: If your business is going to be open after the sun goes down, will you have proper lighting at night? Will your customers feel safe coming and leaving your business? Will you?
  • Natural Environment: Are you in a flood plain? Could a tornado wipe you out? A hurricane? The right insurance might protect you from being in the wrong location.
  • Customer Environment: If you target teenagers, maybe the business district isn't a bright idea. If your customers are conservative, being next to a nightclub may not be wise. Find out where customers are and where they'll be going.
  • Tax Programs: With 125 designated empowerment zones in the United States, most states and many cities have incentives for starting a business in an economically disadvantaged area. For instance, if you're in the Oakland Enterprise Zone, which is in a suburb of San Francisco, you might find yourself receiving six different tax credits, like one for hiring an unemployed person and another for bringing aboard somebody who has been in prison. Before you pick a location, contact your city's business development office and see what they have to offer.

Geoff Williams has written for numerous publications, including Entrepreneur, Consumer Reports, LIFE and Entertainment Weekly. He also is the author of Living Well with Bad Credit.

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This article was originally published in the June 2002 print edition of Entrepreneur with the headline: Pick Your Spot.

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