SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 1 CHAPTER 8 Location and Facilities OBJECTIVES 8-1Explain the role of convenience in choosing a location for a business. 8-2Differentiate the three categories of consumer goods. 8-3Describe the location options available for retail businesses, industrial businesses, professional offices, and home-based businesses. 8-4Discuss various aspects of commercial leases. 8-5List the advantages of buying a commercial space. 8-6Explain the importance of properly evaluating potential facilities and their surrounding environment.

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 2 The Importance of Convenience Location, location, location Being in the right place at the right time Relationship, or correlation, between time and place Convenience saves time, and time is finite. Time cannot be created or extended. There are only 24 hours in a day. Saving time is often worth money to customers.

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 3 Convenience Theory

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 4 Types of Consumer Goods Convenience goods Shopping goods Specialty goods

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 5 Convenience Goods Convenience goods are products that people expect to find in many places. They are readily available in a variety of stores, including convenience stores, drugstores, and grocery stores. Businesses that sells convenience goods must be accessible to large markets.

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 6 Shopping Goods Shopping goods are products that are also easily found, although they are not as widely distributed as convenience goods. They are normally available in all communities in sufficient quantities to meet average consumer needs. Examples of shopping goods include tires, jewelry, popular fashions, and compact discs.

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 7 Specialty Goods Specialty goods are products that people are willing to go out of their way to buy. The purchases are usually planned in advance. Examples of specialty goods include wedding dresses, cars, and computers.

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 8 Choose a Business Location If the demographics of your local community support your business idea, you would be wise to locate there for several reasons. 1.You will be working in a familiar area. 2.There will already be a small nucleus of customers in place, made up of friends and acquaintances. 3.You may know bankers, attorneys, or accountants who would be part of an important support system for your new business.

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 9 Retail Businesses Downtown Shopping Districts Shopping Centers Neighborhood shopping centers Community shopping centers Regional shopping centers Super regional shopping centers Big box store centers Discount outlet centers Stand-Alone Stores

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 10 Industrial Businesses Industrial Parks Incubators

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 11 Professional Office Space Many types of offices are available, from small suites in stand-alone buildings to penthouses at the tops of skyscrapers. The spaces are leased, and expenses vary depending on location, size, and what services the landlord offers.

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 12 Home-Based Businesses Advantages Limited costs No lease agreement restrictions and obligations Owner can be at the business site around the clock Disadvantages Space limitations Difficulty separating business and family activities Isolation from the business community

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 13 Lease Arrangements Lease agreements for commercial property are usually long and complex contracts that should not be viewed lightly. Commercial leases are written in terms of a stated base rent per square foot of leased space. Retail leases often include a percentage rent clause, which requires that the tenant pay additional rent if and when revenues exceed a certain dollar amount.

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 14 Lease Arrangements (continued) A lease agreement may include other charges besides rent. Examples of other charges Common Area Maintenance (CAM) HVAC charges Tax escrow payment Insurance escrow Merchant association fee

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 15 Buy a Business Location Buying commercial property is rarely a good choice for a new business start-up. However, once the business is established and proven, it can be a very profitable step. Successful stand-alone operations in particular should consider owning the property from which they operate.

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 16 Buy a Business Location (continued) Advantages No landlord to raise the rent or make demands Property value can escalate Disadvantages Large down payment Short term for loan

SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 8Slide 17 Evaluate the Facilities Size Structural soundness Image