How to Determine How Much Real Estate Your Business Needs Here are a few things to consider when choosing a location for your business.
- Important factors to consider as you're searching for a location for your business.
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Some of the most successful companies in the world started off in the family garage — like Apple and Amazon, for example. For many entrepreneurs, evenings spent working on a side hustle slowly transform into days running a full-fledged business, leading entrepreneurs to a key question: Where — literally, where — do I take this next?
Knowing where, when and how to move your business from an informal setting to a true base of operations can be daunting. There are many factors to determine the best fit — such as commercial real estate costs, building amenities, location within your central business district or office park, parking and more. Understandably, the process can be intimidating.
While there may be headaches that come with finding the perfect space and location, here are some considerations to make the transition feel more manageable.
Where will your business thrive?
Every business has different needs for the perfect location to service its clients and customers, whether that be office space, a boutique or small storefront, a workshop or even an online marketplace.
A good starting point is to determine whether your business's primary footprint should be a physical location or online. In a recent Bank of America survey of more than 500 small business owners, we found their top three concerns when determining the best location for their businesses are customer service, employee needs and their community's needs. Sixty-five percent of business owners surveyed said they have a physical storefront as their business' primary footprint, but there are many pros and cons to consider for each option.
Today's business owners say they are experiencing challenges with their current physical location, including high utility costs and property taxes. Many also note that they had issues finding enough physical space to satisfy their business's needs. Contrarily, almost half of business owners who run a primarily online operation said a virtual format is more cost-effective, and nearly half also reported that an online marketplace is the easiest option for them to reach their target audience. So, ask yourself — which model will be best for my business while also providing the best service to my customers?
When do you make your move?
Beyond tactical considerations for your business's long-term future, looking at the current real estate landscape, state of the economy and your business's cash flow are crucial steps to determine when you should put your plan into action. While you may decide that a physical location is the perfect place for your business to flourish, there could be limitations outside of your control.
1. Real estate considerations
If real estate prices in your area are soaring or rapidly fluctuating, purchasing real estate may not be the best decision, and you may want to table a planned expansion until prices settle. Pricing should also factor into your decision on whether to rent or purchase space. Once you have budgeted accordingly to pay for a physical space, it's smart to establish a timeline that feels realistic — to meet your expansion goals in a timely fashion while still managing the day-to-day realities of running a business. Depending on the products and services your business provides, and how large of a space that requires, it can take a while to get up and running.
2. Economic impacts
With shifting economic conditions, including cooling inflation and high interest rates, some entrepreneurs are undoubtedly wondering if now is the best time to invest in their business location. In fact, 20% of the business owners we recently surveyed said interest rates are making them more likely to not have a physical location. As you consider your own business's primary footprint, evaluate all relevant economic impacts to ensure you are maximizing the value of your business's footprint.
3. Cash flow capabilities
I'd highly recommend confirming that your cash flow is in a good position to comfortably establish your physical location or digital capabilities. If you're unsure where to start, SCORE provides a very useful cash flow template that can help you manage your business' expected revenue and expenses.
How do you make your move?
Once you've determined the best fit for your business, it's exciting to jump in and take the next step. However, if you realize you'll need additional financing to move forward, you should start by looking into financing options. There are numerous options available to help make your dreams a reality, like lines of credit, Small Business Administration (SBA) loans or real estate loans, depending on your needs.
If all of these questions and considerations sound overwhelming, maybe it's time to take a step back and evaluate your business plan. Banks, such as Bank of America, provide resources and advice that can help you navigate the ins and outs of business ownership — whether you're starting from scratch and need help starting your business or have determined you'd like a physical location but don't know where to begin. If you have a relationship with a business banker, I'd recommend working closely with them throughout this process as a resource and sounding board.
There are many outside forces that can influence where, when and how you choose to structure your business. With a solid business plan in action, you can find more clarity on the business footprint that works best, allowing you to focus on growing your business.