Locate and Set Up Your Business 8 Locate and Set Up Your Business 8.1 Choose a Location 8.2 Obtain Space and Design the Physical Layout 8.3 Purchase Equipment, Supplies, and Inventory

Ideas in Action A Neighborhood Business By strategically analyzing his environment, Ryan Williams was able to discern an unmet need in his local marketplace. Rapappy, Inc. provided products for a newly identified niche market. Ryan’s strategies for success include: taking risks maintaining good records persevering Chapter 8

Lesson 8.1 Choose a Location Goals Examine options for locating a retail business. Discuss factors to consider when choosing a location for a nonretail business. Describe steps to take in selecting a site. Chapter 8

Terms industrial park enterprise zones trade area Chapter 8

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

Downtown Areas Positive features of a downtown location include: easy accessibility convenient access for downtown workers Chapter 8

Negative features of a downtown location include: higher crime rate traffic jams a lack of free or convenient parking customers in the evening Chapter 8

Neighborhood Shopping Centers 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 Chapter 8

Community Shopping Centers larger than neighborhood centers serve residents from multiple neighborhoods large anchor stores can increase customer traffic Chapter 8

Regional Shopping Centers 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 Chapter 8

Super-Regional Shopping Centers 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 Chapter 8

Stand-Alone Stores 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 Chapter 8

Warehouses among the cheapest rent few frills often charge customers lower prices heavy advertising required Chapter 8

What are the main options for locating a retail business? Chapter 8

Locating a Nonretail Business 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 Chapter 8

Industrial Businesses 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 Chapter 8

enterprise zones areas that suffer from lack of employment opportunities businesses can qualify for favorable tax treatment depending on the number of jobs they create Chapter 8

Home-Based Businesses 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 Chapter 8

What are some of the factors to consider when selecting a location for a nonretail business? Chapter 8

Select Your Site trade area the area from which you expect to attract customers identify the location of competitors stores that would attract a similar customer base but that would not compete directly with you Chapter 8

Location Type and Availability Determine which type of location is best for your business. Determine what spaces of this type are available in your trade area. Chapter 8

Evaluate the Location Factors to consider when picking a location include: safety attractiveness Does the location attract your target market? Is parking adequate? Are surrounding businesses thriving? Chapter 8

What are some of the factors you should consider when selecting a site for your business? Chapter 8

Lesson 8.2 Obtain Space and Design the Physical Layout Goals Compare purchase and lease options. Describe layout considerations for different types of businesses. Chapter 8

Terms tenant landlord gross lease net lease percentage lease Chapter 8

Lease or Buy Space 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. Chapter 8

Disadvantages of buying include: 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. Chapter 8

Commercial Leases tenant landlord 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 Chapter 8

There are three types of commercial leases. gross lease tenant pays monthly rent landlord pays property expenses net lease landlord pays building insurance tenant pays rent, taxes, and other expenses Chapter 8

percentage lease the tenant pays a fixed monthly rent the tenant also pays a percentage of monthly revenue as rent most common for prime retail locations Chapter 8

You should always consult with an attorney before signing a commercial lease. Chapter 8

Compare Costs of Doing Business 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 Chapter 8

Chapter 8

Name three kinds of commercial leases. Chapter 8

Design the Layout of Your Business Your layout needs to include space for: employees customers merchandise equipment restrooms stockroom/storage offices Chapter 8

Create the Floor Plan Prepare a scale drawing of the layout. Chapter 8

Layout of a Retail Business The goal of your layout should be twofold: It should perpetually attract customers to your store. It should meet the needs of your business. Chapter 8

Layout of a Service Business For businesses where customers visit the site, the layout should be considered as carefully as a retail business. As customers do not visit on-site businesses, organization of supplies should be the focus of the layout. Chapter 8

Layout of a Wholesale Business focus on price and quality Layout should be well organized to facilitate: locating products shipping and receiving Chapter 8

Layout of a Manufacturing Business To focus on efficiency, the following should be considered: Work teams should be situated close together. Supervisors should be in close proximity to the people they supervise. Chapter 8

Exits should be clearly marked and easily accessible. Hazardous materials should be safely stored. Equipment and machinery should be positioned in a way that minimizes the potential for accidents. Chapter 8

What are the major considerations for choosing a layout for a business? Chapter 8

Lesson 8.3 Purchase Equipment, Supplies, and Inventory Goals Explain how to find and choose vendors for your business. List factors that determine the needed level of inventory. Chapter 8

Terms inventory vendors quote reorder point Chapter 8

Obtain Equipment and Supplies inventory the merchandise a business sells to its customers When starting a business, order a minimal amount of supplies. Chapter 8

Chapter 8

Identify Suppliers vendors (suppliers) companies that sell products and services to businesses Chapter 8

Evaluate Proposals quote estimate for how much you will pay for merchandise or services Other information to seek when obtaining quotes includes: quality of merchandise financing terms quantity discounts shipping and handling charges Chapter 8

What should you consider when selecting vendors for your business? Chapter 8

Purchase Inventory For retailing and wholesaling: For manufacturing: Inventory is purchased with the intent of reselling it to customers. For manufacturing: Inventory includes: raw materials finished goods Chapter 8

Purchase Inventory for a Startup Business As it is difficult to forecast actual sales, a startup business should order just enough stock to fill its shelves. Chapter 8

Purchase Inventory for an Ongoing Business reorder point a predetermined level of inventory that signals when new stock should be ordered Factors to consider when setting a reorder point include: how long it takes vendors to get merchandise to you monthly sales of the item how important it is for you not to be out of stock Chapter 8

How do you determine the amount of inventory to keep in stock? Chapter 8

PERFORMANCE INDICATORS EVALUATED Identify product opportunities. Describe the use of technology in the selling function. Explain the nature and scope of the product/service management function. Chapter 8

Identify the impact of product life cycles on marketing decisions. Develop strategies to position the product/business. Identify products to fill customer needs. Explain the nature of sales management. Chapter 8

THINK CRITICALLY Why must the clothing at the bookstore be unique from clothing carried in department stores and other retail outlets? Why are scheduled merchandise markdowns important for retailers? Chapter 8

Why should the bookstore consider Internet merchandise sales? What types of special promotions could increase sales from fans and alumni attending football and baseball games? Why should the bookstore consider Internet merchandise sales? Chapter 8