Choosing a Location for Your Small Business

Choosing where to base your small business depends in great part on the type of business you will be running. The ideal requirements for starting a manufacturing plant are quite different from those involved in entering the field of software development or the arts. The key components to consider are operating costs, talent pool, and product or service demand.

Operating Costs

The first thing to take into consideration when choosing the location for your new business is startup costs. The costs associated with each field are different based on the business. Let’s look at a few examples.

If your business will be focused on some sort of manufacturing you will need several features to defray the cost as much as possible. First, you will need excellent access to affordable energy. Ideally, this means a location that has a robust infrastructure already in place and access to inexpensive electricity. Some states have deregulated the energy market, making it easier for larger businesses to shop around for the best rate on sites like TXU Electric

Second, it will also be important to have easy access to transportation. This could mean a seaport, railroad access, a nearby airport, or being situated near an interstate access point depending on the type of transportation you intend to utilize.

If you are creating something that is more dependent on intellectual creation such as software development, you will likely want access to office space rather than manufacturing space. If this is the case, you will need to find a location that is easy to access, has ample parking, technology connectivity, and access to the types of amenities that would be appealing to your potential work pool. If the space will also need to serve as a storefront, the location is even more important and should be conveniently situated in such a way as to facilitate discovery and access.

Talent Pool

Another consideration is the latent amount of talent available in each area. While it is possible to persuade people to move to whatever location you choose, it will be easier to obtain a sufficient selection of potential employees if they are already nearby. What does this look like in practical application?

If you are building a manufacturing plant, it’s best to go somewhere that has an established history in the field with a population which has some experience in the field. This could be facilitated by an active manufacturing culture in the area where people are predisposed to view the career opportunity positively. It could also mean locating near a trade school that is open to partnering with a new business to train students in the appropriate techniques and methodologies necessary to successfully work in the new business.

There are certain areas that are well known as being hubs of entrepreneurship and startup endeavors such as Silicon Valley and Austin. If these are the type of industries one is considering then this type of urban creative hub would be ideal. Having a large selection of critical thinkers is essential. While these are the two most well-known centers, there are locations in each region of the country, it is simply a matter of seeking them out.

Supply and Demand

The Law of Supply and Demand is a central focus in business and economic courses for an important reason. If the supply for what your business will create is already high in the area and is sufficient to the demand, it is likely the ability of the business to thrive will be low. Similarly, if there is no supply but there is also no demand, this may be a negative indicator for the location. However, if the demand is high and the resources available to meet the demand are insufficient it is more likely that the business will do well. Market analysis is an important consideration when choosing the new location of a business.

Starting a new business is an exciting and terrifying prospect. The vast number of decisions that must be made before anything can officially begin is almost staggering. Many people assume the location of their new business must be near their current location, yet this may not be the best place from which to begin. By taking the time to carefully assess all possibilities, it is possible to give your new business the best foundation from which to grow. 

About the author

Amanda Green is a site contributor that often writes on personal finance, marketing and business. In her free time she enjoys reading and playing volleyball with family and friends. Her work may also be found on


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