A guide to choosing a shop for your business

A retail shopping strip in Melbourne

One of the greatest causes of business failure is the amazingly high number of businesses that open without a well-executed business plan. And when it comes to bricks and mortar business, one of the most important things to do is choose the correct shop for your business.

To get this part of your business plan right, I’m going to examine the crucial decision-making process that should go into picking your shop and by the end, you will understand why “knowledge of your location” is paramount.

1. First determine if you need a shop front

You may have already made up your mind but hear me out here.

Rent will always be one of the highest outgoings your business will have. Many successful businesses start at home; a spare room or a garage or even selling at markets. These businesses may never need a shop front.

With the huge growth of online marketplaces like Etsy and Amazon, the ability to test your product or offering digitally through a website and social media is more popular and useful than ever. A social media presence costs you nothing (unless you’re advertising) and in combination with an online store, it gives you the flexibility to keep costs under control in the early days.

If you’ve done digital and you’re ready for the next chapter, or you work in an industry where digital isn’t an option, then ok, you’ve convinced me.

Now the planning and research phase comes into play. You need to research, research and just in case you forgot, research again.

2. Figure out the best geographic location

A number of factors should go into your location choice. The main consideration is whether your business needs to be in a prime location. Prime location means high rental costs, which can drain the finances of any business.

On the other hand, if your product or service offering is a destination that people will seek out, you can be located outside of a prime area. This will cost your business less rent and look good for your bottom line.

3. Consider what location features are important to your business

There are several additional location factors to take into account. Ask yourself these questions.

  • Do I need parking nearby or on-site for my staff, customers or deliveries?
  • Do I need to be near public transport?
  • What are the clearway laws outside my store? Will customers be able to park during my business hours?
  • If I am opening a food/café venue, what is around me that might affect business?
  • Is this location a clustering of like stores that will provide a beneficial shopping ecosystem or has it reached saturation point?
  • Are there other businesses, like offices or a hospital, that will boost trade?
  • Is the location I want a seven-day trading area? Maximum hours should equate to maximum turnover, but also means hiring staff and paying wages, as you cannot work every day for very long.
  • Is the store located within a council area that is actively supportive of small business? Is there a trader’s group already established?

It’s also a good idea to spend some time scouting the area before you make a decision. Sit in your car every day of the week for seven days and watch the street. What times are busy and what times are quiet? Speak to other businesses in the area and ask what trade is like during school holidays and Christmas break as this can cause cash flow issues.

4. Calculate how much space your business will need

Another important thing to think about is how much space you’ll need. Bigger is not always better. Each business has different space needs.

If you go for a bigger shop, it can mean you’re unable to run it on your own. You may need to hire staff to handle customers in the larger space, and this will cost you more money in wages.

Bigger spaces can also create a need to buy more merchandise in a retail space, or more chairs and tables in a coffee shop/restaurant.

Big spaces have bigger utility outgoings too. Heating or cooling a large area is very costly.

If you need to refit the store at some stage this can also have an effect on cost. Refitting a large space will be way more expensive than refitting a small one.

Are you considering a two-level store? This can be appealing aesthetically, but these are notoriously difficult to run and have all sorts of occupational health and safety access issues.

A female shopper wearing boots and a skirt carries a number of large shopping bags.

5. Decide between strip shopping or a shopping centre

A few years ago I would have strongly recommended that small businesses stay away from large shopping centres for at least the first five years of trade, due to the restraints and demands many large centres place of businesses.

But now shopping centres have repositioned themselves as far more local and engaged in the community. The large department stores have handed back space and shopping centres are looking for the unique offerings and points of difference that small businesses bring.

The restraints and demands of shopping centres still stand though. Keep in mind you may need to open seven days per week and at the hours the shopping centre demands. You will have to commit to marketing and promotional levies set by the shopping centre. You will have to commit to ensure your store and its fit out reflects the image of the centre you are located in. And finally, the biggest crux of all, it’s more than likely you will have a turnover clause in your lease that will require you let the centre know your takings and pay a fee over and above a certain turnover.

6. Look at your shop through a crystal ball

You’ve examined the present, but now it’s time to look into the future.

Neighbourhoods change fast, and when you’re looking for a permanent home for your business, you may want to future-proof against foreseeable issues.

Check with your council if there are any major redevelopments in the area. Maybe there’s a four-year car park redevelopment that your leasing agent failed to tell you about. This could have a huge impact on foot traffic. Or maybe a large government office or hospital in the area is planning to relocate to another area, taking half of your turnover away.

Do some research into the demographics of the area by talking to locals. Will your product or service still be relevant to the location during the life of your lease? Is the demographic gradually changing for better or for worse?

Another great tool for researching locations in Victoria is MyVictoria, which gives you a wealth of data on your area, from household demographics to what types of businesses are already operating.

Finally, make sure you meet with your potential landlord before signing your lease. Try your best to find out what their plans are for the future of the building. Are you going to spend a lot of money on a fit out only to find the building was sold during your tenancy and the new owner plans to redevelop? This could cause all sorts of road blocks for your business in the long run.

A final word on shop fitting

Once you’ve picked your shop, you’ll be excited to fit it out. While we all have our own dream and vision for what our store/facility should look like, the people who make the most out of small businesses are quite often the shop fitters!  At first keep it simple and to keep costs under control. You can always upgrade as the business grows!