Finding an Optimum Location for a Small Business. The Location Plan. Locating the Brick-and-Mortar Startup. Brick-and-Mortar Store

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1 The Location Plan Part 3 Developing the New Venture Business Plan PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. Locating the Brick-and-Mortar Startup Brick-and-Mortar Store The traditional physical store from which businesses have historically operated The Importance of the Location Decision High cost of constructing a physical location Effect of poor location on eventual success of the firm Type of business affects the importance of business location to customers Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 9 2 Finding an Optimum Location for a Small Business Personal Preference Work at home Friends and relatives nearby Lifestyle advantages Customer Accessibility Convenience for target customers Environmental Conditions Laws and taxes Weather Competition Site Availability and Costs Incubator or leasing options Resource Availability Raw materials Transportation Labor supply 9-3 Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 9 3

2 Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 9 4 Other Factors in Selecting a Location Neighbor Mix Who s next door? Security and Safety How safe is the neighborhood? Services Is there municipal trash pickup? Past Tenants Fate What happened to them? The Life-cycle Stage of the Area Is the site in the embryonic, mature, or declining stage? Leasing vs. Buying Advantages of Leasing 1. Conserving cash 2. Minimizing risk Advantages of Buying 1. Freedom to design or modify structure 2. Guaranteed location 3. Hedge against inflation Lease 9-4 Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 9 5 Building Layout Factory Layout Retail Store Layout Process Product Grid pattern Free-flow pattern Fixedposition 9-6 Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 9 6

3 Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 9 7 Equipping the Physical Facilities Manufacturing Equipment General purpose equipment Machines that serve many functions in the production system Special-purpose equipment Machines designed to serve specialized functions in the production process Retail Store and Office Equipment Retail Display racks Sales counters Cash registers/ POS systems Image Luxury/utilitarian customer furnishings Lighting Displays Signage Office Equipment Computers Fax machines Copiers and printers Telephone systems Filing cabinets Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 9 8 Locating the Startup in the Entrepreneur s Home Home-Based Business A business that maintains its primary facility in the residence of its owner Attraction of a Home-Base Business Low start-up and overhead costs Convenience for family and lifestyle Technology Advances in office equipment allow home-based business to compete with commercial sites. Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 9 9

4 Copyright 2006 Thomson Business & Professional Publishing. All rights reserved Locating the Startup on the Internet E-Commerce The paperless exchange of business information via the Internet Internet A huge, loosely connected computer network that links smaller networks all over the world World Wide Web (WWW) A system of Internet servers accessible with browsers, which navigate via hypertext links E-Commerce Business Models Exhibit 9.4 Copyright 2006 Thomson Business & Professional Publishing. All rights reserved Types of Retail Locations Central Business Districts (CBD) - traditional downtown business area in a city or town. Typically the hub for public transportation. Gentrification - redevelopment of the downtown areas. Neighborhood CBD - the traditional shopping area located in smaller towns, or a secondary business district in a suburb or within a larger city. Shopping Centers - a group of retail and other commercial establishments that is planned, developed, owned, and managed as a single property. Strip Centers - usually have parking in front of the stores and open canopies connecting the store fronts (neighborhood, community and power centers). Advantage: 1) Less congestion and 2) Greater convenience. Malls - have a pedestrian focus. They are enclosed with climate-controlled walkway between two facing strip centers. Advantages:1) Many different stores, combining shopping and entertainment, 2) Tenant mix is planned, and 3) Retailers don t have to worry about external environment. Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 9 12

5 Copyright 2006 Thomson Business & Professional Publishing. All rights reserved Site Evaluation Accessibility - the ease with which a customer may get into and out of a site. Macro and micro analysis. Locational Advantages Within A Center Cumulative attraction - Cluster of complimentary stores increase the drawing power. Terms of Occupancy Types of Leases (percentage of sales, specified minimums and maximums, sliding scale, fixed-rate, graduated, net, etc.). Terms of Leases (prohibited use, exclusive use, escape clause, etc.). Legal Considerations Environmental Issues - EPA, hazardous materials. Zoning and Building Codes - Specific use for site. Signs - Size and style. Licensing Requirements - Local ordinances, etc. Region and Market Area Trade Area: Trade areas can be divided into two or three zones. Such trade areas are called (concentric) Polygons because their boundaries conform to streets and other map features. Primary Zones - the geographic area from which the store or shopping center derives 60 to 65% of its customers (sales).usually 3 to 5 miles radius from store or less than 5 minute drive. Secondary Zones - the geographic area of secondary importance in terms of customer sales, generating about 20% of store s sales. Usually extends 3 to 7 miles radius (5 to 10 minute drive time)from the store. Tertiary Zones - the outermost ring including customers who occasionally shop at the store or shopping center. Usually extending 15 to 50 miles radius from the store. Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. Key Terms brick-and-mortar store enterprise zones business incubator general-purpose equipment special-purpose equipment home-based business zoning ordinances e-commerce Electronic Customer Relationship Marketing (ecrm) business model business-to-business (B2B) model business-to-consumer (B2C) model 24/7 e-tailing auction sites content/information-based model transaction-based model Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 9 15