Whether you are planning to start a small business or expand an existing one, the location you choose plays a crucial role in your success. Businesses looking to establish a location, either for the first time or when entering a new market, need to be careful about where they go and why. There are many push and pull factors that can influence where a business is set up. However, the most important factors to consider when choosing a business location revolve around the specific dynamics of a location and how they interact with a business’s operations, goals, and overall trajectory.
Remember to review these top 10 factors to consider when choosing a business location.
1. Target Market and Customer Accessibility
Maybe the most important consideration when opening a business location is whether there are customers nearby. In most cases, businesses should establish themselves close to their target markets to maximise their accessibility to customers. Exceptions to this typically require a highly specialised product or service where remote delivery is optimal and proximity doesn’t matter.
2. Cost of Doing Business in the Area
Another critical consideration is the cost of doing business in the area, relative to others. Costs like rent or property ownership, utilities, and local business taxes all add up. In addition, the specific industry you operate within can impact costs significantly. For instance, a KPMG study on the costs of doing business found that the most cost-effective countries in which to run a manufacturing business, in particular, were Canada, Taiwan, and South Korea.
3. Local Workforce Availability and Talent Pool
In addition to buyers, companies also need to have access to skilled workers in any new location they choose for a business. This means researching the existing talent pools in a given country and narrowing down options to those with an abundance of quality workers.
It can also mean looking into untapped markets. For example, Taiwan is an up-and-coming hotbed for tech talent that has gone underappreciated for too long. It produces over 10,000 computer science and IT graduates every year, and over a quarter of degrees are related to engineering. This makes it an ideal spot for forward-thinking tech firms looking for potential building space to plant down roots.
4. Business Regulations and Compliance Requirements
Closely related to the cost of doing business are restrictions and laws that can have both financial and legal consequences for non-compliance. The most obvious examples relate to payroll and tax obligations, such as determining whether and how much to tax workers. But others include local zoning laws, permit requirements, and health and safety regulations.
The Omnipresent global employment cost calculator can help companies understand the relative costs of engaging workers across various countries, including comparatively. Our system accounts for all elements of payroll and tax obligations for holistic estimates.
5. Proximity to Suppliers and Partners
Just as businesses need to set up where their buyers are (see #1), they should also consider proximity to their suppliers. When comparing between countries, or cities within a given country, be sure to map out where your suppliers are in relation to your new flagship.
6. Infrastructure and Connectivity
This consideration works in tandem with the one above. Your company needs to be aware of the transportation, technology, and other infrastructure in any area where you’re trying to establish a business presence. Warehouses and storefronts should be easily accessible, whether by personal vehicles or public transportation. Internet connectivity should be reliable, and IT support should be available to provide technical assistance in case of an emergency.
7. Economic and Industry Trends in the Region
On a different level entirely, it’s imperative to understand the trends in a given region and whether they are conducive to growth for your industry and company. You should seek out countries, regions, or localities that are already experiencing favorable conditions for your particular niche, or that will create an advantageous environment in the near future.
As an example, many companies are exploring expansions in Southeast Asia because of the trends their local economies are experiencing. There’s strong overall economic growth, led by a burgeoning tech sector, and the customer base is digitally-minded, which is ideal for scaling.
This is why commercial enterprises, including retail shops and office spaces, shoudl conduct thorough market analyses before selecting an area to operate in.
8. Competition and Market Saturation
This consideration is a bit of a counterbalance for #7. A location with a favorable business environment will be a boon for any company that choose to locate themselves there, but an abundance of other like-minded businesses can detract from these benefits for everyone.
A healthy dose of competition is good for any business, keeping processes sharp and prices honest. But an overly saturated market can be prohibitively difficult to enter, especially for smaller and newer companies contending with established, local or international giants.
9. Quality of Life for Employees
Another major factor is the happiness your workers can expect outside of their capacities as employees. Elements like the cost of living, purchasing power, safety, healthcare availability, and more can impact the quality of life that global workers can expect in a given location.
For reference, Numbeo maintains a quality of life index for all countries on earth, considering factors like purchasing power, safety, healthcare, and more. Countries in northern Europe—such as Luxembourg, Netherlands, and Denmark—dominate these rankings, but other top contenders by Numbeo’s criteria include Oman, New Zealand, the USA, and Japan.
10. Scalability and Future Growth Potential
Last but certainly not least, companies need to consider the potential for growth within a given location, as well as the opportunities to scale globally from that home base. This starts with considering geography, trade agreements, and development projects between countries or regions. Expansion within and across the EU will likely be easier when starting in a European country such as Germany, for instance, than if your headquarters were in Asia, Africa, or the Americas.
Choosing a Business Location for Long-Term Success
All in all, companies looking to expand into or start up fresh in a new location need to consider the specific dynamics of that location and how they interact with business operations. The most important factors to focus on are customer bases, costs of doing business, available space, talent pools, regulations, supply chains, infrastructure, economic trends, market saturation, quality of life for employees, and opportunities for global expansion.
In any case, operating in a new location may require working with an Employer of Record (EOR) to ensure compliant and seamless relationships with all workers. Omnipresent provides EOR services all across the world and can help you set up shop effectively anywhere.
Get in touch today to learn more about how Omnipresent can help.
