Why Is business location important?

Written by jules halliday Google
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Why Is business location important?
The location of a business can be instrumental in its success. (Getty Images/Lifesize/Getty Images)

The location of a business can be an important contributing factor to its success. Choosing the most appropriate location for your business premises is a critical decision which can impact your sales, staff and future development according to Business Gateway. There are several factors to consider when deciding on a location including cost, convenience, infrastructure and future growth.


According to the Times 100 Business Case Studies, researching the options and weighing up the pros and cons of prospective locations is crucial. They recommend choosing between a range of push and pull factors to ascertain if the business venue is likely to contribute to maximised revenues and minimised costs. Push factors include rising competition in the area, rising costs, poor communication systems and falling demand. Pull factors include government incentives, low labour costs, good communication systems and developing markets.


The cost of the business premises can be a deciding factor between one venue and another. Those situated in prime locations such as city centres are far more expensive to rent or buy then edge-of-town premises. Some businesses may choose a more expensive venue in a prime location. This may be more cost effective in the long term if it encourages more customers to use the service provided.


Many companies select a location that is convenient and easily accessible. Considerations may include if the business relies on walk-by customers, traffic and parking restrictions and public transport links. Customers like to shop in a safe environment so checking the surrounding area or outdoor lighting available after dark in the location selection process would increase the prospects for repeat business.

Area demographics

Many businesses thrive on local customers so researching the area demographics can help with decision-making. Research should include local demographics, such as age range, average disposable incomes, size of the population and typical spending habits. This will help the business identify if the location is suitable for their target market. Asking the opinion of local residents about the reputation of the area and if the service or product would add value to their lives can be a key indicator.


Depending on the type of business, being in close proximity to competitors may be an advantage. Retail businesses benefit by being close to other competing brands. A shopping district attracts a greater number of customers than a standalone venue. On the other hand, neighbouring competing businesses have to offer competitive pricing, reducing profits.


Another consideration of business location is the facilities that support the everyday economic activity. An efficient transport network will allow suppliers to make deliveries and staff to arrive on time. Manufacturing companies may need to be close to the source of raw materials and markets. Call centres for example will need strong utility services such as telecommunications and broadband.

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