Distribution & Location Explore Potential Location Sites 7-1Copyright © 2011 Nelson Education Ltd. Prepared by Ron Knowles Algonquin College & Jennifer Rouse Barbeau Canadore College chapter 77

Chapter Overview Chapter 7 will:   help you select a distribution strategy and location that is best for: The customer Your type of business The options that are available 7-2Copyright © 2011 Nelson Education Ltd. chapter 77

Learning Opportunities  Understand the contribution of location to small business success.  Begin to develop a multiple distribution strategy.  Understand the uniqueness of your business location needs.  Focus on customer needs when evaluating a location.  Develop a checklist for evaluating potential sites for your business. 7-3Copyright © 2011 Nelson Education Ltd. chapter 77

Learning Opportunities  Think about if and when you should locate your business out of the home.  Use both secondary and primary sources of information in locating your business.  Understand and negotiate a lease contract. 7-4Copyright © 2011 Nelson Education Ltd. chapter 77

Business Location A business location is:  The place where you distribute the goods and services for your business. A business location is important for both your marketing and operational strategies. 7-5Copyright © 2011 Nelson Education Ltd.

Business Location location decision Your location decision will depend to a large extent on 2 major factors: 1.What your customer believes is the “best location” 2.Your distribution channel—the method or way in which a producer makes a product or service available to the consumer 7-6Copyright © 2011 Nelson Education Ltd.

Distribution Channels 2 broad channel options: 1. Direct distribution 2. Indirect distribution 7-7Copyright © 2011 Nelson Education Ltd.

Direct Distribution Selling of goods and services directly to the consumer or end user. Two types of retailing channels: 1.store 2.non-store 7-8Copyright © 2011 Nelson Education Ltd.

Indirect Distribution Wholesaling  selling of products to retailers for resale to the end userFranchising  a special kind of distribution system in which one company/individual (the franchisor) grants the right to sell its products/services to another company/individual (the franchisee) 7-9Copyright © 2011 Nelson Education Ltd.

Distribution Strategy Your distribution strategy will depend on a number of factors, such as:  Customer needs  Type of business (B2C or B2B)  Type of product/service  Transportation costs  Competition 7-10Copyright © 2011 Nelson Education Ltd.

Distribution Strategy   Successful entrepreneurs take advantage of more than one distribution channel.   Your physical location should depend on a multiple distribution strategy. 7-11Copyright © 2011 Nelson Education Ltd.

The “Best” Location A location filter will help you zero in on the “perfect” location. Rate the importance of each listed item (1 to 10). Note the highest numbers -- anything above ___Local/municipal licensing ___Neighbourhood mix ___Competition ___Security, safety ___Labour pool ___Services ___Costs ___Ownership ___Property owner/landlord ___Past tenants ___Space ___Accessibility ___Professional advice ___Parking ___History of the property ___Physical visibility ___Life-cycle stage of the area ___Image ___Hours of operation ___Utilities ___Local zoning by-laws ___Taxes ___Approvals ___Transportation ___ Your target customers Copyright © 2011 Nelson Education Ltd.

The Rise of the Gold-Collar Worker Working at home has become a major trend. 10 Major reasons for the home-based trend: 7-13 Increased Efficiency Growth of Service Industry Growth of Service Industry Computerization Higher Productivity Two-Income Families Cocooning Vigilant Consumer Improved Service Mobility Downsizing Copyright © 2011 Nelson Education Ltd.

Is Home the ‘Best’ Place? 7-14 Potential Disadvantages Potential Advantages  Low risk of expensive mistakes  Opportunity to use household resources  Low overhead  Gradual start-up and growth  No commuting time or expense  Tax advantages (with deductions allowed for part of the house)  Relatively inexpensive way to test a market  Reduced child-care costs  Increased quality time with family  Isolation and lack of contact with colleagues  Increased family stress  Need for self-discipline  Local by-laws and regulations  Less established or refined image  Conflict with neighbours  Parking problems Copyright © 2011 Nelson Education Ltd.

A Location Checklist for Home-Based Business 7-15 Consider these items when operating a business out of home. Target market Neighbourhood mix Physical visibility Competitors Life-cycle stage Image Local/municipal licence Local zoning by-laws Space/physical requirements Approvals Insurance Utilities Work habits/behaviour Lifestyle Copyright © 2011 Nelson Education Ltd.

Choosing a Home-Based Business The best home-based business depends on your ability to connect your values, experience and knowledge with current market trends. 7-16Copyright © 2011 Nelson Education Ltd.

Home-Based Business Trends Current trends include:  Technology coach  Upmarket travel advisor  Catering for a healthy lifestyle  Eco friendly cleaning service provider  Elder services provider  Concierge service agent  Personal health or fitness trainer  Pet sitting/grooming provider  Life balance, personal or business coach  Financial or advisor  Energy efficiency contractor/consultant  Home improvement/décor contractor/advisor 7-17Copyright © 2011 Nelson Education Ltd.

Sources of Information 7-18 Secondary Sources of Location Information  Census  Market Research Handbook  Statistics Canada website  Industry Canada website  Local and regional governments  Local resource centre or library  Potential suppliers  Private research companies  Commercial real estate agents Copyright © 2011 Nelson Education Ltd.

Sources of Information 7-19 Primary Sources of Location Information To find the right location, practice new-eyes research. Textbook examples of this type of research are provided for the following businesses:  Dry cleaning  Gift store  Restaurant  Travel  Home renovation Copyright © 2011 Nelson Education Ltd.

Before You Sign: Checklist 7-20  Escape clause  Option to renew  Right to transfer  Cost-of-living  Percentage lease  Floating rent sale  Start-up buffer  Improvement  Restrictive covenants  Maintenance Copyright © 2011 Nelson Education Ltd.

The Language of Leases: Key Terms 7-21 Net rent Gross rent Rentable area Common area Usable building area Building gross area Loss factor Copyright © 2011 Nelson Education Ltd.

Chapter 7 helps you prepare an important part of your business plan:  Location 7-22Copyright © 2011 Nelson Education Ltd. Business Plan Business Plan Building Block

q q What is your distribution strategy? q q What criteria are important to your location? q q What secondary research do you need to make a decision about location? q q If you plan to operate a home-based business, be sure to answer all the questions in Box 7.3. q q Define the importance of location for your target customer. 7-23Copyright © 2011 Nelson Education Ltd. Your Business Plan Checklist for Your Business Plan

q q Do you have a plan for your store layout? q q If you operate a home-based business, how have you separated work from home? q q Why have your chosen the site that you have selected? q q If you have a home-based business, identify any zoning issues you face. 7-24Copyright © 2011 Nelson Education Ltd.

QuestVest Gloria Brookstone ran a successful “QuestVest” business out of her home. Answer the Chapter 7 case study question to learn:  What “E” skills and personality traits helped Gloria start and grow her business.  What market trends helped Gloria grow her business.  The QuestVest multiple distribution strategy.  The major advantages of the QuestVest home-based strategy. 7-25Copyright © 2011 Nelson Education Ltd. Case Study