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Analysis of the Business Situation

Analysis of the Business Situation. Location, Location, Location. The right location for your business depends on: the kind of business you plan to operate the type of customer you want to reach. Locating a Retail Business. Positive features of a downtown location include:

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Analysis of the Business Situation

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  1. Analysis of the Business Situation Location, Location, Location

  2. The right location for your business depends on: the kind of business you plan to operate the type of customer you want to reach Locating a Retail Business Chapter 8

  3. Positive features of a downtown location include: easy accessibility convenient access for downtown workers Downtown Areas

  4. higher crime rate traffic jams a lack of free or convenient parking customers in the evening Negative features of a downtown location include:

  5. consist of 3 to 15 stores good for stores selling goods or services that people need to purchase frequently rent is usually low convenient for local shoppers Neighborhood Shopping Centers

  6. larger than neighborhood centers serve residents from multiple neighborhoods large anchor stores can increase customer traffic Community Shopping Centers

  7. designed to attract customers from an entire region have 40 to 100 stores anchored by one or more large department stores focus on apparel rents are high Regional Shopping Centers

  8. largest classification of shopping centers more than 100 stores anchored by three or more department stores very high rents not recommended for new business owners Super-Regional Shopping Centers

  9. may be located just outside of shopping centers or far from other businesses depend on drive-by traffic less expensive rent advertising is required to draw customers to the store Stand-Alone Stores

  10. among the cheapest rent few frills often charge customers lower prices heavy advertising required WarehouseS

  11. Service Businesses Location is important for service businesses that rely on customers coming to their locations. restaurants or hair salons Location is less important for service businesses that visit the customer. plumbing or carpet-cleaning Locating a Nonretail Business

  12. Manufacturing and wholesale companies ship their products directly to customers. do not rely on customer traffic industrial park a section of land that is zoned exclusively for industrial businesses space is less expensive Industrial Businesses

  13. areas that suffer from lack of employment opportunities businesses can qualify for favorable tax treatment depending on the number of jobs they create • enterprise zones

  14. Benefits of home-based businesses include: cost savings more freedom convenience Challenging aspects of home-based businesses include: lack of space can limit expansion it can be hard to separate business and family life a feeling of isolation can arise Home-Based Businesses

  15. Buying advantages include: You can receive a tax deduction on the loan interest for the property that houses your business. The loan payment may be no larger than a lease payment. Lease or Buy Space

  16. Purchasing a building requires capital which can be beyond the budget of an entrepreneur. You are locked into a specific location. You are responsible for building maintenance costs. Disadvantages of buying include:

  17. Lease Advantages and Disadvantage • Advantage: • Rent may be less than mortgage payment • May benefit from other businesses in same complex • Landlord responsible for fixing the building • Disadvantages: • You don’t own anything, building no equity • Customers may get frustrated if you move often • Landlord may limit what you can and can not do with your shop

  18. tenant the person who pays rent to occupy the space owned by someone else landlord the person who owns and rents out the building or space Commercial Leases

  19. gross lease tenant pays monthly rent landlord pays property expenses net lease landlord pays building insurance tenant pays rent, taxes, and other expenses There are three types of commercial leases.

  20. the tenant pays a fixed monthly rent the tenant also pays a percentage of monthly revenue as rent most common for prime retail locations • Percentage lease

  21. When deciding where to locate your business you should calculate how much rent you would pay per customer. Rent per customer = Rent per month ÷ customers per month Compare Costs of Doing Business

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