The Location Plan Part 3 Developing the New Venture Business Plan

Looking Ahead After studying this chapter, you should be able to: Describe the five key factors in locating the brick-and-mortar startup. Discuss the challenges of designing and equipping a physical facility. Understand both the attraction and the challenges of creating a home-based startup. Understand the potential benefits of locating a startup on the Internet. 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.

Location Options for the Startup Exhibit 9.1 Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Five Key Factors in Determining a Good Business Location Exhibit 9.2 Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Key Factors in Selecting a Good Location Customer Accessibility Customer convenience (high traffic) Access by targeted customers (niche market) Avoidance of shipping costs (local markets) Business Environment Conditions Climate-related factors Business environment factors Presence of established competitors Regulations, legal requirements, and restrictions Tax structure, exemptions, and incentives Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Key Factors in Selecting a Good Location Availability of Resources Nearness to raw materials Availability of a suitable labor supply Access to adequate and reliable transportation Personal Preference of the Entrepreneur Familiarity with home community environment Support of entrepreneur by the community Desire for a particular lifestyle Contribution to the community Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Key Factors in Selecting a Good Location Site Availability and Costs Difficulty of locating a good site Business incubator: provides shared space, services, and management assistance for new businesses Buying: large costs and commitment required to purchase site outright Advantages of leasing: Avoids a large cash outlay Allows the owners to postpone committing to the site before the business becomes a success Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

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? Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Designing and Equipping the Physical Facilities Design Requirement Challenges Physical facilities should be of adequate size and accommodation; not too large or too luxurious. Considerations Age and condition of building • Fire hazards Heating and air conditioning • Entrances and exits Lighting and restroom facilities The ideal building meets the functional requirements of the business and projects the appropriate image to customers and the public at large. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

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 Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Manufacturing Equipment HANDLE WITH CARE General-Purpose Equipment Low purchase cost Flexible production Good resale value Special-Purpose Equipment Low labor cost High hourly output Limited resale value Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Retail Store and Office Equipment 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.

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.

Home-Based Businesses Challenges Business image of a home-based business Professional image is difficult to maintain in a home environment. Family and business conflicts There is a need to observe regular business hours and establish spatial boundaries (specific work areas) to avoid distractions. Legal considerations Local laws and zoning ordinances prohibit many types of home-based businesses. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Entrepreneurs’ Reasons for Operating a Home-Based Business Source: “Home-Based Business: The Hidden Economy,” The Small Business Advocate, Vol. 19, No. 2 (Spring 2000), p. 6. Exhibit 9.3 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 Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Benefits of E-Commerce to Small Firms Provides the opportunity to compete with larger firms in larger markets Helps with cash flow problems by compressing the sales cycle Builds better customer relationships through better service Electronic Customer Relationship Marketing (eCRM) An electronically based system that emphasizes customer relationships Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

E-Commerce Business Models A group of shared characteristics, behaviors, and goals that a firm follows in a particular business situation Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

E-Commerce Business Models Exhibit 9.4 Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Types of Customers Served Business-to-Business (B2B) Model A business model based on selling to business customers electronically Business-to-Consumer (B2C) Model A business model based on selling to final customers electronically Auction Sites Web-based businesses offering participants the ability to list products for bidding Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Degree of Online Presence Content/Information-Based Model A business model in which the Web site provides information but not the ability to buy or sell products and services Transaction-Based Model A business model in which the Web site provides a mechanism for buying or selling products or services 24/7 E-Tailing: electronic retailing providing round-the-clock access to products and services 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.