1. 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

2. 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
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3. 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.
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4. 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
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5. 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
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6. 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
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7. Community Shopping Centers
8.1
Community Shopping Centers
larger than neighborhood centers
serve residents from multiple neighborhoods
large anchor stores can increase customer traffic
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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
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9. 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
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10. 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
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11. Warehouses among the cheapest rent few frills
8.1
Warehouses
among the cheapest rent
few frills
often charge customers lower prices
heavy advertising required
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12. 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
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13. 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
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14. 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
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15. 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
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16. 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
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17. 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
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18. 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
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19. 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.
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20. 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?
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21. 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
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22. Lesson 8.2 Obtain Space and Design the Physical Layout
Goals
Compare purchase and lease options.
Describe layout considerations for different types of businesses.
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23. 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.
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24. 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.
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25. 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
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26. 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
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27. Name three kinds of commercial leases.
Gross Lease
Net Lease
Percentage Lease
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28. 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
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29. 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.
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30. 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.
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31. 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

32. 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.
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33. 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.
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34. Obtain Equipment and Supplies
inventory
merchandise a business sells to its customers
When starting a business, order a minimal amount of supplies.
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35. 8.3
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36. 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
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37. 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
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38. What should you consider when selecting vendors for your business?
Price
Service
Quality of Merchandise
Discount Options
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39. 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
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40. 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.
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41. 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.
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42. 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
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43. How do you determine the amount of inventory to keep in stock?
Track Sales
Establish Reorder Point
Determine Costs of Carrying Inventory
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