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Is Your Location Harming Business Growth?

By John Waddicker

February 7 2020 - Location is king when it comes to setting up a business or finding a new HQ. You could have the most unique idea in the world or the best business plan possible, but if your location doesn't fit your business model, you're instantly limiting your potential for success.

'Serial entrepreneur' Scott Gallaway has reviewed how location has impacted the success of 'The Four; - the world's largest tech companies, Amazon, Apple, Google and Facebook. Gallaway suggests that all these companies being founded in San Francisco and Silicon Valley are more than just coincidence - the proximity to some of the best engineering universities in the world has allowed each business to flourish.

Nonetheless, all businesses need to consider the pros and cons of their location - not just household names.

We've taken a look at the main benefits of setting up shop in both big cities and smaller towns and outlined exactly what businesses need to think about when looking for new premises.

The benefits of a city-centre location

From London to Los Angeles, major cities are business hubs and the most common areas to establish new startups. With a greater population, higher levels of tourism and dedicated business regions like Manchester's Media City and the East London Tech City, big cities are attractive locations for many business leaders.

1. Desirability

One of the biggest benefits about choosing a city centre location for your business is that it's a desirable location. Many people prefer to pursue careers in well-known cities instead of towns because they have more to offer residents. Whether it's high-end restaurants, up-and-coming bars, a thriving music scene or a cultural heritage, working and living in a big city offers your employees a fantastic work-life balance.

2. Deep talent pools

With a higher population comes a much wider net of potential talent to recruit. Although desirability obviously plays a part in attracting talented workers to move to big cities to find exciting employment opportunities, Universities also contribute. Large cities with established universities are producing fresh graduates every year who are eager and ready to dive into the market. This is especially the case in cities that are home to multiple universities.

3. Networking opportunities

With a higher concentration of businesses clustered in large cities, networking is a much easier endeavour. You are much more likely to grow your professional network in an area with a higher number of companies in your industry. Working in smaller towns simply doesn't offer networking on the same scale, meaning a significant amount of travel would be needed to experience what city-centre businesses have on their doorstep.

4. Greater footfall

With an increase in digitisation and online businesses, footfall isn't often taken into consideration as much as it once was. It's important to remember, though, that in some industries, it can make or break a company. Industries like retail and hospitality rely heavily on footfall, so choosing a city-centre location guarantees a constant stream of potential customers that smaller towns aren't able to provide.

The benefits of a smaller town location

The other option for a business location is to take advantage of opportunities in smaller towns. Steering away from major cities is a popular choice with startups and first-time business owners, as generally, business parks and industrial estates require significantly lower funding and can often provide a niche service to areas that would otherwise need to travel.

1. Reduced costs

The best reason for choosing a location outside of cities is that your outgoings will be lower across the board. Business rates, building rent and staff wages are all more cost-effective in smaller towns and can save you a small fortune - essential for small businesses that are just starting out and have limited funding. For example, the cost of communal services such as parking, security, and cleaning staff are shared by every company situated on a business park. The cost of living is also much lower than that of city-centre life, helping to attract talent that are looking to keep their living costs to a minimum.

2. Less competition

For most businesses in cities, they'll find that a dozen other companies are offering the same product or service. In smaller towns, however, a brick and mortar store will be faced with much less competition. This means you'll position yourself to gain a higher customer base, if not the lion's share. Unique businesses with a niche product are the ones who will benefit the most from this aspect, as you're likely to be the first company of your kind in the area.

3. Closer community

Although being based in large cities is easier for networking, it's in smaller towns where you'll make real connections. Towns are known for their strong sense of community spirit, which gives businesses the chance to capitalise in local areas. As a business owner, you'll form more close-knit relationships with customers and clients, rather than competing in the dog-eat-dog competition of big city business.

4. Easier travel

One of the main problems with setting up businesses in city centres is that they can be difficult for staff to get to. Extortionate parking fees and morning rush hour can cause more than a few headaches for people travelling to and from work. Setting up your business in a smaller town makes travelling much smoother for you and your staff and is almost always free to park on-site. Plus, business parks are usually located within a convenient distance from rail and bus stations, making public transport easier too.

What to consider when choosing your business' location

Choosing whether to set up a business in a town or a major city needs careful consideration, and it's not always a simple decision to make. We've listed a number of details to think about before committing:

  1. Accessibility - It's not just your staff that need to reach your business, your customers do too. If you're hard to find and rely on a high footfall, you're limiting your potential to grow. Suppliers are another thing to think about, as businesses that require frequent deliveries need to make sure they're easily accessible.
  2. Competition - Gauging the competition in the area is an interesting one, as it's not necessarily a bad thing to be located near competitors. Restaurants and car dealerships regularly operate in close proximity to one another, as they give customers the chance to compare other options before making a purchase.

    If there is too much competition in an area, consider relocating to a more suitable location. On the other hand, if your business offers a new spin on a popular market and you're confident you can out-perform established companies, choosing to set up shop near competitors is a good way to quickly pick up customers and create a presence.

  3. Research all costs - You wouldn't move into a home that you couldn't afford, so why would you move your business into a building you can't afford? It's crucial to make sure you thoroughly research everything that you'll need to pay to operate in the location you've chosen. That includes the big costs like rent and business rates, but also smaller, easy to forget fees like whether you and your staff need to pay for parking or if the premises needs a deposit.
  4. Skill base in the area - Finding the right talent is a must, and your location plays a big part in this. Depending on your industry, choosing between a major city and smaller town can have an impact on attracting the right people, but choosing which city or town can be just as crucial. For example, one of the best locations for launching a tech startup is East London, whereas Sheffield is the manufacturing capital of the UK.
  5. Potential for growth - Regardless of whether you find a location that ticks all other boxes, you need to consider business growth. As a business owner, you'll want your company to succeed. But what if succeeding means expanding?

    Are you looking for a short-term location with plans to move in the future, or are you looking to keep your HQ grounded? If it's the latter, making sure your premises can accommodate the growth of your business means you won't need to deal with the costly and time-consuming act of moving your business.

Understand what's right for your business

Finding the right location can make or break your business venture. Each business has different targets to meet, so choosing the wrong location can seriously harm business growth.

Make sure you do your research and come up with an in-depth strategy to find the perfect location. It's also important to remember that no two businesses are the same - what worked for one company might not be right for you. Whether you want to put down roots in a bustling city or the close-knit community of a smaller town, make your decision based on what gives your business the best chance at success.

About the author

John Waddicker is a director at Positive Commercial Finance, an award winning financial broker for businesses.



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