One of the biggest mistakes that promoters make, is falling in love with a business idea and believe that the idea will succeed no matter where it’s based.
Many a time, entrepreneurs start businesses they “think” people want, and get so hyped up about it. So much so that, if they didn’t get the right place, they start anywhere available, believing that customers will come to them. And that might not actually happen. The business fails.
Promoters spend a lot of time, sometimes even years, trying to find that one big idea that will click. A business idea is an opportunity that has potential in a market. But having a ‘Eureka’ moment is not enough to jump-start it as a business.
For a good business idea to win, it has to satisfy several criteria. In this post, the ‘Location’ is our topic.
What is the point of starting a business where there are no target customers? That is why, when it comes to location, the right market has to be selected. So what is a market? It can be a village, a city, a district, a region or a state, or even a country or several countries. But it needs to have the target customer segment in it.
Once the market is selected, comes the second step. The exact location of serving the clients. This is specifically important where customers or clients have to physically visit the premises.
The location in the market is crucial. It has to be located where it’s closest to the target customer and is easily accessible and visible to them. That is the reason why shops that are based in the right street but the wrong building fails. Or based in the right building but the wrong floor fails. Or based on the right floor but the wrong area fails. Or based in the right street but wrong visibility fails. It’s a very important matter and it’s a shame when a great business idea fails just because the location was not right.
So why do entrepreneurs make this mistake when it sounds like common sense? Several factors can play here.
One reason is the non-availability of space in the ideal location. In which case, we as Management Consultants would advise not to start now and wait for the right location to come up, or move into another market where the right space is available.
The second reason is the high rental of the properties in the right location. This is a tough reality and one has to be careful here. When faced with such a situation, the entrepreneur has to evaluate how much rent is viable for the business. This might be complicated for most entrepreneurs. In such cases, it’s ideal to engage management consultants or management consulting firms (like AASC) to do a detailed analysis on the financial viability of the location, and check if that rent is viable. Sometimes, a location that has high rent can still be a profitable option.
The third reason can be impatience to do a proper study. Promoters or entrepreneurs can fall in love with an idea, that they simply want to start ASAP. They get hold of the first property and launch the business there. And as the days pass by and they witness lower footfalls, they realize that the location or the building or the floor is not ideal for their customers. Here we as management consultants, always ask our clients to take it easy and do a proper study. In fact, a typical study at AASC takes about 2-3 months to complete. With the market study taking about 30 to 45 days. With such a detailed study, the pros and cons are evaluated before making a final verdict of not just the location but the business itself.
The fourth reason can be overconfidence. The illusioned belief that the product or service that the entrepreneur intends to provide to the customer is so much in demand, or the price is so attractive or the quality is so high that the customer will seek them, no matter where they are. In most cases, it does not work. And the business goes belly. But in some rare cases, it can work- for some time. This is when the customers really do need it and they take the pain of reaching you despite the trouble or the inconvenience. But the moment a competitor starts the same business in a more ideal location, all the customers will move to him. Why? Customers are not loyal to any shop or brand, they are loyal to those who provide them what they want, when they want, where they want it, and in the way they want it.
Conclusion:
Don’t kill a beautiful business idea by starting it in the wrong place. This is applicable not just to retail outlets, it’s applicable to any business be it manufacturing, hospitality, service, or education. Even online businesses, have to be careful of the locations they choose. And another place to watch out for is the location in Search Engines, as customers use it to search for businesses. If it’s not on the first page, it’s not in a good location online.
It’s always recommended to start a business after a proper study. Do good market research, select the right business model, design the right management plans and systems and assess its financial feasibility. And since entrepreneurs might get emotionally inclined towards their business idea, and because in most cases promoters are not trained to do these works professionally… it’s better to engage professional management consultants like AASC (aascglobal.com)
So location does matter.
