Locate and Set Up Your Business 8.1 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

Locating a Retail Business 8.1 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 Downtown Neighborhood Community Regional Super-Regional Stand Alone Warehouse Chapter 8

Downtown Areas Positive features include: Negative features include: easy accessibility convenient access for downtown workers Negative features include: higher crime rate traffic jams a lack of free or convenient parking a lack of customers in the evening 8.1 Chapter 8

Neighborhood Shopping Centers 8.1 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 8.1 Community Shopping Centers larger than neighborhood centers serve residents from multiple neighborhoods large anchor stores can increase customer traffic Chapter 8

Regional Shopping Centers 8.1 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 8.1 Super-Regional Shopping Centers largest classification of shopping centers more than 100 stores anchored by 3+ department stores very high rents not recommended for new business owners Chapter 8

8.1 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 8.1 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? Downtown Areas Neighborhood Shopping Center Community Shopping Center Regional Shopping Center Super-Regional Shopping Center Stand Alone Store Warehouses 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 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

8.1 Why would a community want to attract industrial businesses by subsidizing rents? They can attract more employers More employers = more jobs for community Rents are a small price to pay to increase the prosperity of the community 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? Nonretail Businesses – Whether customer will need to visit the location Industrial Businesses – Availability of good employees and low rent costs 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/Security 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? Trade Areas Where is the Competition Location Type & Availability Convenience for Customers 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

Lease or Buy Space Buying advantages include: 8.2 Lease or Buy Space Buying advantages include: You can receive a tax deduction on the loan interest for the property that houses your business. Loan payment may be no larger than a lease payment. 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 8.2 Commercial Leases tenant 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 ***You should always consult with an attorney before signing a commercial lease. Chapter 8

3 Types of Commercial Leases 8.1 3 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 percentage lease the tenant pays a fixed monthly rent the tenant also pays a % of monthly revenue as rent most common for prime retail locations 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 8.2 Chapter 8

Name three kinds of commercial leases. Gross Lease Net Lease Percentage Lease Chapter 8

Design the Layout of Your Business 8.2 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 8.2 Create the Floor Plan Prepare a scale drawing of the layout. Chapter 8

Layout of a Retail Business 8.2 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. Layout of a Service Business For businesses where customers visit the site, layout should be considered as carefully as a retail store. If customers do not visit on-site businesses, organization of supplies should be the focus of layout. Chapter 8

Layout of a Wholesale Business 8.2 Layout of a Wholesale Business focus on price and quality Layout should be well organized to facilitate: locating products shipping and receiving To focus on efficiency, the following should be considered: Work teams should be situated close together. Supervisors should be in close proximity to their team. 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. Layout of a Manufacturing Business

What are the major considerations for choosing a layout for a business? Business whose customers visit the location - should be attractive like a retail layout. Businesses that do not have customers on-site - should be more focused on organization and efficiency. 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

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

8.3 Chapter 8

Identify Suppliers vendors (suppliers) 8.3 Identify Suppliers vendors (suppliers) companies that sell products and services to businesses Places where Vendor info is found: Telephone Directory Advertising Section Trade Magazines Trade Associations The Internet Other companies in your industry 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? Price Service Quality of Merchandise Discount Options Chapter 8

Purchase Inventory For retailing and wholesaling: For manufacturing: 8.3 Purchase Inventory For retailing and wholesaling: Inventory is purchased with the intent of reselling it to customers. For manufacturing: Inventory consists of the parts that go into producing the business’s products: raw materials finished goods Chapter 8

Purchase Inventory for a Startup Business 8.3 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

Consequences of Being “Out of Stock” 8.3 Consequences of Being “Out of Stock” Retailer Loss of sale/business – goes to competitor instead Wholesaler Loss of sale/business – can backorder items but customer may still go to another supplier Manufacturer Lack of supplies means production shuts down until supplies obtained. Very expensive. Chapter 8

Purchase Inventory for an Ongoing Business 8.3 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? Track Sales Establish Reorder Point Determine Costs of Carrying Inventory Chapter 8