1. Locating and Setting Up Your Business
Unit 4

2. 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
Your location plan will help ensure that your product is available in the right location to reach your target customer
Also consider whether you will have
Inside sales
Outside sales
Inside sales: customers will come to your place of business to purchase the product
Outside sales: you will travel to the customer’s residence or place of business.

3. Downtown Areas Advantages: Disadvantages:
Downtown areas represents an easily accessible, central location
Convenient location for downtown workers
Disadvantages:
Higher crime rates
Traffic jams
Lack of free or convenient parking
Lack of customers in the evening
Some downtown areas have lost business to neighborhood, community, and regional shopping centers

4. Neighborhood Shopping Centers
Small shopping centers that serve a certain neighborhood
Often called strip malls
Generally consist of 3 to 15 stores
Typically anchored by a supermarket
Good location for stores selling goods/services that people need to purchase frequently
Rent is usually low, ideal for small businesses
Customers are mainly residents of the surrounding area who shop at the centers because of their convenience. It could be a disadvantage for your business if the only customers you have come from the immediate area

5. Community Shopping Centers
Larger than neighborhood centers and offer a wider range of goods
Designed to serve residents from many neighborhoods
Apparel, furniture, toy, sporting goods, & electronic stores
Usually have one or two major anchor stores
Small department stores (Kohl’s JCPenney)
Discount department stores (Walmart, Target)
Large Supermarkets (Kroger, Publix)
Super drugstores (Walgreens, CVS)
Home improvement stores (Home Depot, Lowe’s)
Although rent is generally higher than in neighborhood shopping centers but its still pretty affordable
These stores can earn higher profits. Anchor stores advertise heavily and attract customers throughout the community. Other businesses in the shopping center typically benefit from the advertising

6. Regional Shopping Centers
Designed to attract customers from an entire region.
Usually have 40 to 100 stores (many are malls)
They are anchored by two or more large department stores
Macy’s and Nordstrom
Offer a variety of products/services
Majority of the stores sell apparel
If your business requires a large amount of walk-in traffic to be successful, you may want to locate in a regional shopping center.
Rents are high—making it difficult to earn profits

7. Super-Regional Shopping Centers
The largest classification of shopping centers
More than 100 stores offering an extensive variety or merchandise and services
Anchored by three or more large department stores
Serves a larger population base than the other types of centers
Mall of America
Very high rents; not as convenient
Not recommended for new businesses

8. Stand-Alone Stores
Can be located just outside of shopping centers or far away from other businesses
Large jewelers, auto parts stores, and flower and garden centers
Rent is often less expensive and no near competing businesses
Often depend on drive-by traffic
Must have plenty of parking, good signs, and effective lighting
Advertising is often necessary
People must have a specific reason to come to the business

9. Warehouses Some retail stores operate in warehouses
Appliance dealers or furniture sellers
Generally one of the cheapest rental facilities
Few frills inside or outside
Location here may allow you to charge lower prices than your competitors
Potential customers may not notice or be aware of you
Must advertise heavily

10. Locating a Nonretail Business
Service Businesses
For some, location considerations are the same for many retail businesses
They are offering an inside service
Convenience can be an important factor
Customers never visit businesses that offer outside services
Does not need to be in an expensive location but might be smart to have a location near customers

11. Industrial Businesses
Industrial businesses (manufacturing and wholesale) ship their products directly to their customers
Customers rarely see their facilities
Do not need to operate in upscale locations
Availability of good employees and low cost are the key factors in determining location

12. Industrial Parks
A section of land that is zoned for industrial businesses only
Usually located where space is less expensive, away from housing developments and downtown areas
Communities sometimes subsidize rents in industrial parks in order to attract businesses

13. Enterprise Zones
Areas that suffer from lack of employment opportunities
Entrepreneurs may be eligible for favorable tax treatment based on the number of jobs their businesses create
These tax benefits can be attractive
However, they may not make up for the lack of an appropriate customer base
Or the increased risk of crime in those areas

14. Home-Based Businesses
Some of the reasons entrepreneurs decide to set up their business in their home include:
Cost savings
More freedom
Convenience
Tax benefits
Disadvantages may include:
Limited space
Lack of separation between business and home-life
Isolation from the business community
Missed opportunities to network with colleagues
Separate rent, utility costs, and maintenance fees for the business are eliminated; more capital available for promotional activities and the purchase of inventory
Do not have to sign a lease agreement for the business, they are not subject to the restrictions and obligations of a lease
Can work more flexible hours and does not have to commute to and from another location
Operating a home office offers some tax savings. You can deduct a portion of your home’s expenses, such as mortgage, property taxes, and repairs and maintenance, against your business income

15. Starting a Virtual or Online Business
E-Commerce: consists of buying and selling product/services over the Internet
Offers an alternative means of conducting business transactions that traditionally have been carried out by telephone, mail, or face-to-face

16. Advantages of Online Businesses
Quick and easy setup
Allows for an immediate presence
Cost savings
Save money of rent, marketing, customer service, and order processing
Large customer base
Not limited by location
No time restrictions
Ease of data collection
Collecting and managing info. about customer behavior is quick and easy
Customer movements and selections on a website are tracked and used to improve customer relations

17. Disadvantages of Online Businesses
Special expertise
Takes knowledge of computers, programming, and the Internet
Internet downtime
Could lose a lot of time and money if website goes down
Security breaches
Hackers may steal consumers’ personal information

18. Online Business Precautions
Do not use free web space
More professional to buy your own domain
Use a creative website design that appeals to customers
Should reflect the image you want to project for your business
Don’t use all text and no pictures
Be aware of the loading speed
If it takes too long to load, customers may get frustrated
Don’t leave outdated information on your website
Keep it current

19. Selecting Your Site Try to map and mark your trade area
The geographic area from which you expect to attract a majority of your customers
Indicate on the map all of the locations that might be appropriate for your business
Use a different color or symbol to mark your direct competitors
And other businesses that may attract similar customers

20. Location Type and Availability
Identify which type of location is right for your business?
Community shopping center?
Stand-alone store?
Downtown?
Knowing this will help narrow down your search
What spaces of this type are available in your trade area?
Search through ads, websites, realtors, etc.

21. Evaluate the Location Compile a list of possible locations
Inspect and evaluate each location to see how it meets your needs
Factors to consider:
Hidden costs, renovations, and taxes
Convenience for customers
Proximity to suppliers and vendors
Local labor market (# of potential employees in area)
Safety (crime rate) of the location
Image projected by the location
Room for growth in case of expansion
Zoning laws

22. Lease or Buy Space Advantages to buying space
Offers a bigger tax advantage
Get a tax deduction on the interest you pay on your loan for the building
The loan payment is typically no more than a lease payment
Disadvantages to buying space
Lacking to money to purchase property
Do not want to be locked into a location
Paying for upkeep and maintenance on the building
Most businesses lease space

23. Commercial Leases When leasing property, a contract is required.
There is a tenant and a landlord
Three kinds of commercial leases:
Gross lease: the tenant pays rent each month for the space occupied, landlord covers all property expenses for that space
Property taxes, insurance on building, & maintenance
Net lease: the landlord pays building insurance, tenant pays property taxes, & any other expenses
Percentage lease: tenant pays a base rent each month, landlord also receives a percentage of the tenant’s revenue each month.
Most common for prime retail locations
Beneficial for both tenant and landlord
Each kind of lease requires different levels of responsibilities
3. Landlord shares in the business’s profits, and the tenant has the advantage of a lower base rent, which can make rent more affordable during slow sales periods.
Commercial lease agreements are usually long and complex. Consult with an attorney.

24. Compare Costs of Doing Business
Calculate how much rent you will be paying per customer for each potential location
Example: music store, two potential locations
Downtown
Shopping Center
Rent per month
$925
$1,100
Projected customer traffic per month
÷8,500
÷12,000
Rent per customer
$0.11
$0.09

25. Design the Layout
Your layout must include enough space for employees, customers, merchandise, and equipment
Space for restrooms, stockrooms, storage, and offices
Create a Floor Plan
Take measurements
Draw the floor plan to scale
Let 1 inch represent 1 foot of actual space
Indicate the planned use of each area:
Furniture, display cabinets, shelves, fixtures, and equipment
Decide on a layout, outside sign, and window displays that match your image.
Measure the height and width of the walls and any doorways and window frames. Measure furniture and other large pieces that will go in your business
Your drawing will help you identify potential problems in your layout. It will also help you communicate with the people who may be helping you organize your space

26. Layout of Retail Business
Visual merchandising: the process of combining products, environments, and spaces into an appealing display to encourage the sale of products/services
The goal of your layout should be twofold:
To attract customers to your store and keep them coming back
To meet the needs of your business

27. Layout of a Retail Business
Ways to send a positive message about your store:
Appropriate lighting for the merchandise your sell
Good lighting is important if customers need to inspect merchandise closely
Use window displays to show off new merchandise or seasonal items
Make the entrance inviting
Leave at least 4 feet of aisle space
Makes it easier to move around
Use common sense when organizing the merchandise
Customers should always easily find what they want
Inventory and supplies should be well organized as well
Create attractive in-store displays
Use wall space wisely
Wall space may be too high for customers to reach, but it can be used to display merchandise
Place the cash register in a central location
Customers should not have to search for a cashier

28. Layout of a Service Business
Two types of service business:
Businesses where people come to the business location to receive a service
Restaurants, hair salons, automobile, repair services
Businesses that travel to the customer’s location and perform the service on-site
Exterminators, plumbers, cleaning services
The layout of the first type should be considered like that of a retail business
On-site service businesses rarely are visited by customers, so an attractive layout is not important
Organization should be a major consideration so that supplies are easy to find

29. Layout of a Wholesale Business
Customers of wholesale businesses are concerned with price and quality, not physical appearance
Needs only to have an efficient and well-organized layout
Wholesale businesses can do the following to facilitate shipping and receiving:
Locate in a one-story warehouse
Keep merchandise close to the shipping dock
Store most popular items in the most accessible locations
Be sure there are areas that can accommodate merchandise of all sizes
Keep walkways free so that employees can exit quickly
Store items safely (i.e. do not stack too many boxes)

30. Layout of a Manufacturing Business
The layout should facilitate the production process
Attractiveness does not count.
Important considerations:
Work teams should be situated close together
Supervisors should be able to easily observe
Their offices should be located near the employees
Exits should be clearly marked and easily accessible
Any hazardous materials should be stored safely
Equipment and machinery should be positioned in a way that reduces the chance of an accident

31. Obtaining Equipment and Supplies
Every business needs to analyze its operational needs and select equipment, supplies, and goods/services based on those needs.
Equipment includes:
Machinery, computers, cash registers, and furniture
Inventory consists of the products that a business sells to its customers
As well as the materials needed to make those products
A business cannot operate properly without those things

32. Obtaining Equipment and Supplies
To determine the equipment and supplies you need to start your business
Your list should include standard items needed by all businesses and items specific to your particular business
Be sure to list the minimum quantity you need right now, not the amount you might need if your business succeeds. Being overly optimistic could leave you with many bills that will be difficult to pay if your sales fall short of your projections

33. Activity
Using your chromebooks, identify at least two vendors for each of the items on the standard equipment and supply list.

34. Identify Suppliers
Vendors: companies that sell products and services to businesses.
Valuable sources of vendor info. Include:
Telephone directory advertising section
Trade magazines, which carry vendor ads
Trade associations
The Internet
Other companies in your industry
SBA and SCORE

35. Evaluate Proposals How will you decide which vendors to go with?
Before making a purchase, contact several vendors and ask them to quote you a price
Quote: an estimate for how much you will pay for the merchandise/service
Also ask vendors about the quality of their merchandise, their financing terms, quantity discounts, and shipping/handling charges.
The lowest price is not always the best option if paying a little more means receiving better quality and service

36. Purchase Inventory
Retailing, wholesaling, and manufacturing businesses must purchase inventory before they can open for business
For retail and wholesale, inventory is merchandise (a finished product)
For manufacturing, inventory consists of the business’s finished product as well as the parts that go into producing the finished product

37. Purchase Inventory for a Startup Business
It is particularly difficult for owners of new businesses
They do not yet know what their level of sales will be
You do not want to purchase too much inventory and tie up your cash if you can’t sell it quickly
You also have to consider the space to store inventory

38. Purchase Inventory for an Ongoing Business
Once the business is up and running, you’ll have a better idea of how much inventory you need to operate
To avoid running out of stock, you should track it and establish reorder points for each product
Reorder point: a predetermined level of inventory that signals when new stock should be ordered
how low you set the reorder point depends on:
how long it takes your supplier to get merchandise to you
how many units of the item you sell each month
how important it is for you not to be out of stock

39. Activity—E-mail Etiquette
Read the excerpt about etiquette on page 239 of your book
Send an to a potential vendor asking for a quote for office supplies that you need for your new business
Compose the you would send.
Follow the guidelines given in the excerpt