By now you have figured out the ‘Who’ of your plan and the ‘What’. If not, please go to Research Your Business Plan – Part I. Now that you know you are qualified to do the job and you have figured out your customers, competition, and suppliers, it is time to determine the ‘Where’ of the plan. Keep in mind, you are not formally documenting this, but you should keep really good notes. The reason is that if you are able to answer all those questions and you are still raring to go, then you’ll have your notes to draft the plan.
There is a process to determine the where of your plan. Sometimes it is obvious, if retail, then a retail location is ideal. If service and the customer travels to you such as a professional, then an appropriate office location is important. Focus on the type of office environment, medical should try to locate in or around other medical facilities. If legal, find an office park or on the main street in town. Your location needs to match your product or services.
There are five conditions that you need to address prior to identifying appropriate sites:
1. Economically Appropriate Location:
Think about what the customer or client has to endure to find you. If you are going to be off the main road, can you be mapped easily? If you are in a small town, then it is generally accepted to be in odd or off the road location; but if in an industrial or densely populated area, think about your customer. If you serving the elderly, are they going to have trouble finding you and many will give up especially if any kind of night time driving is involved.
If you are going out to your customer and your fleet of vehicles have to travel some distance to get to the main road, think of the costs involved. A simple formula is around 40 cents per mile in marginal costs to send a car or small truck/van. So if you are 5 miles off the main road because you got some great deal to park your fleet of service vans at an office/warehouse facility, then let’s calculate the cost.
If you have a fleet of 3 units and they each travel both ways, that’s 30 miles of travel per day (3 vehicles x 5 miles x 2 trips – back & forth). At 40 cents a mile, you end up expending $12 per day for transportation expenses. This doesn’t count the cost associated with the payroll for the travel time for your employees. It totals out to over $2,496 per year just for the vehicles. Staff time will run you more than $1,000 per year. Combine the two and divide by 12 and you could spend upwards of an additional $290 per month in rent and walk away even. So it is important to do the math. Other considerations include driving up the costs for your employees to get to you. They will want to offset that cost via higher wages. It drives up your personal costs too, not to mention the time involved.
You want to find an appropriate spot that makes sense to not only you, not only what you will do, but it makes sense to the customer. It also must fit the customer’s profile, locate your facilities as near to the primary customer as possible. If you are oriented to young college age customers, then you should be near a university, some form of a campus or a youth facility.
2. Condition of the Facilities:
As you tour possible locations, do they meet the requirements for your business operation. If retail, is there appropriate window space, how about floor space, room for inventory and room for office personnel. If in the service industry, does the office space have enough rooms, a common area, kitchen area, and a reception area. Does the customer have to endure any challenges to get to you? Do you have appropriate bathroom facilities? I once had a medical practitioner that failed to address the need for water in several of the patient rooms. Plumbing is expensive! That cost to get water and the proper fixtures into those rooms exceeded the budget by over $65,000. That was an unforeseen cost the practitioner did not consider during the research phase.
Is there adequate power and energy available? Does the building meet the current code? Get somebody to inspect for you, a $400 inspection fee goes a long way in answering questions you may have. Remember, you are not committing here, you are exploring the possibilities. Each time you look at a potential location, you will learn more and after a while, you’ll know more than the agent showing you vacancies.
Don’t forget to ask how the facility is zoned and what that zoning code definition entails.
Here’s a short list of items to address:
• Zoning code
• Adequate Power
• Adequate water and fixtures
• Proper layout of the building
• Building access
• Parking lot access, enough spaces
• If technology or office equipment intensive, do you have enough outlets and circuits
• Configuration of windows
• Handicap facilities
• Bathroom convenience and are they modern; if your business is generally female gender based, do you have enough toilets. Remember most people are like you, they will want privacy for personal reasons.
• Is there a conference room?
• Door lock system, exterior and interior doors?
• Alarm system, video monitoring system, gated, fenced?
• What type of A/C system and heat does the facility have? The #1 complaint of staff is that the office is to cold! Guess what? The #2 complaint is that the office is to hot!
• Proper décor in paint, carpet, trim, and ceilings
• Proper clearance for equipment, bay doors, or vehicles.
3. Who are the neighbors?
The most important aspect of this condition is having an appropriate neighbor. For example: the local pharmacy in town was right across the parking lot from a very large family practice. Now that is a great neighbor for the pharmacist. Of course, you don’t want it the other way around either. If you are mental health care practitioner, noise is an issue. The guy on the other side of the wall should not be a dentist. The sound of the drill will drive your patients crazy. If you are in the office environment, you don’t want a restaurant next door. The smell, rodents, flies, and do you think you will not see a cockroach? Just the odor from pest control will drive your staff crazy.
It’s important to pay attention to the details. The better your neighbor(s) the more likely you will be successful in your endeavor.
Now for one of those funny stories: A fast food restaurant installed a drive through and of course the speaker box faced the backyard of a residential neighborhood. The homeowner complained several times to the manager, the owner, and even the police, but to no avail. He finally had enough, one night he walked over to the box, and took a baseball bat to the speaker. The problem was that the staff wouldn’t turn down the volume. They couldn’t hear on the speaker on the inside. The owner finally spent the money and installed a higher quality system with headphones for the staff. P.S. A little communication goes a long way.
Get good neighbors.
4. What is the history of the building?
You wouldn’t think something like this is important, but actually it is. Imagine if you found out that someone had died in that building in the past, or some serious crime was committed there. I’m pretty sure some of your potential customers are aware of these types of facts. So get the history, you might have some positive history which will make it great stuff to talk about with new customers.
Also, learn about the structural history; why was the building constructed, and even the construction methods. All of this has a bearing on the potential of your business operation.
5. Terms and Conditions:
Now if the top four conditions meet your satisfaction, ask for the lease terms and conditions. It’s important to get a copy of this document. Read it once, then put it down and read it again about two to three days later. Read it again five days later. DON’T SIGN ANYTHING OR AGREE TO ANYTHING. Remember, you are here to gather information.
Hopefully, this gathering of information will shock you into what business owners face from day to day. The idea here is to put you to the test, teach you about the need to pay attention to the details. You will be surprised by the costs associated with the decisions you make.
Now that you have gathered this information, it’s time to move onto the ‘When’ and ‘How’ of the potential business plan. The next article will address these two elements in the research of your business plan. Knowledge is Power.
If you have any comments or questions, e-mail me at dave (insert the usual ‘at’ symbol) businessecon.org. I would love to hear from you.
This article is one of several parts helping the small business entrepreneur learn how to develop a good business plan. The others in this series include the following:
Basic Economic Principle of Time and Money – find out how the most basic economic principles are applied to one of the world’s oldest profession. When you understand how these fundamental principles work, then you can apply them to your business.
Do I Need a Business Plan? – Find out if you need a plan first before spending time and money in developing a plan.
Research Your Business Plan – Part I – Research is the first step in developing a plan. Find out how to conduct research for your plan before proceeding further.