This revision presentation outlines the key factors considered by a startup when choosing the location for the new business.

1. Locating a New
Business

2. Introducing location
• Small businesses are started in various locations -
where depends on several factors
• Technology (particularly communications) has made
the choice much easier, particularly for service
businesses
• Most start-ups begin life at home, but then need to
find extra/different space as the business grows
• The location cost and proximity to customers are key
factors in choosing the best location
• An entrepreneur will often have to compromise –
there is rarely a “perfect business location”

3. Main factors affecting choice of location
• Cost (vital)
• Flexibility
• Communications
• Labour
• Customers
• Suppliers
• Government assistance

4. Main location costs
• Rent (to the landlord)
• Maintenance charges
• Insurance (can be substantial)
• Rates (local government tax)
• Energy costs (electricity, gas)
• Housekeeping (e.g. cleaning, security)

5. Why location flexibility matters
• A start-up or small business needs to:
– Minimise its costs
– Set up operations that can be scaled-back or
scaled-up when needed
– Avoid being locked into a location which might
not prove suitable in the future
• Examples of flexibility
– Short-term leases
– Hot-desking

6. Communication
• This includes transport facilities (road, rail,
air) as well as information technology
infrastructure
• Transport links are particularly important if
the business delivers products, sells direct
using a sales force or is dependent on
imports and exports
• Information technology now makes the
choice wider – most start-ups can quickly
establish reliable broadband Internet
connections

7. Labour
• When a start-up needs to
hire employees, then access
to a reliable pool of staff with
relevant skills is important
• Businesses that are labour-
intensive often look to locate
in areas of traditionally low
wages
• Manufacturing businesses
tend to locate where they
can access trained employees

8. Market – Customers & Population
• A start-up may need to be located near
particular centres of population
• For example, if the product is a service
targeted at affluent older-aged people,
then it is important to be located where
there is a sufficient population of such
people
• Franchise businesses often analyse the
population characteristics of a potential
new territory before setting up in a new
location
• For a retailer, the choice of location for
the retail outlet is critically important –
needs to have a strong customer
“footfall”

9. Suppliers
• The business may be
dependent on supplies of a
particular raw material, so
costs will be lower if the
business is located near
the source of supply
• This factor tends to be
more important for
manufacturing businesses
rather than service
businesses

10. Government help
• Aims to encourage start-ups &
business growth in poorer
locations
• Assisted areas – benefit from
grants & low-cost loans
• Regional Development Agencies
– focus government investment
in target regions and industries
• Government support can be the
difference between one location
and another – particularly if it
affects the location costs

11. Home-based start-ups
• 60% of new businesses
are started from home
• 2.1 million home-based
businesses in the UK
• Popular sectors
– Business & professional
services
– Online trading
– Food products

12. Running a business from home
Advantages Disadvantages
Very low cost - the big advantage Requires greater self-discipline
Less travelling, although customers and Work is often interrupted – e.g. by
suppliers might still need to be visited callers to the home or by family
Work can be combined with domestic Work never goes away – it is difficult to
tasks and responsibilities (e.g. child separate work from home life
care)
Reduced risk and a lower break-even Potentially lonely – lack of simulation
point from colleagues
Environmental benefits – lower carbon Working from home can give a poor
footprint impression to potential customers
You can wear what you like! Some hidden costs – e.g. extra
household insurance, potentially higher
capital gains tax when the house is sold

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