Business location

Location is the place from which a business operates. It may be a shop, an office, a workshop or a warehouse. The choice matters because it affects costs, how easily customers and staff can reach the business, and the chance of making a profit.

A trade-off

Choosing a location usually involves a trade-off: a site that is good for one factor may be poor for another. A bigger unit, or one that is already fitted out, may suit the business better, but its cost of premises — the rent or purchase price — is usually higher. Rent is a fixed cost paid every month whether or not the business sells anything, so high premises costs must be covered by enough revenue. If they are not, profit falls.

Weighing up the options

No site is perfect, so the owner picks the balance that best suits the business. A small print and copy shop is comparing two units.

The owner chooses the edge-of-town unit. Its rent is £1,050 a month lower, a saving of £12,600 a year, which covers the £4,000 of electrical work in about four months. After that the saving is kept every month, and the extra space allows for more equipment and storage. This is the trade-off: a lower rent and more room, against the cost and delay of fitting out the cheaper site.