Considerations of location selection for small business

Considerations of location selection for small businesses are stated step by step. We will describe the consideration of location for the manufacturing unit and then for a retail store. At last you will find a calculation table for location selection for small business.

Factors to be considered in choosing a location for a manufacturing unit

Considerations of location selection for small business
Considerations of location selection for small business

1. Transportation: Will there be quick access to an interstate highway that allows overnight delivery to markets far from the site?

2. Labor force: Does the labor supply have the skills needed to run the plant’s productivity?

3. Community size: Should the entrepreneur locate in a nonmetropolitan area? What is the standard of living in the area? What is the quality of life?

4. Water pollution: What minimum levels of water pollution control must the entrepreneur adhere to?

5. Land: How much land will be needed not only for making the product but also for parking and -air pollution control equipment? Should the entrepreneur buy more land than he or she needs at present to provide for future expansion and as a hedge against the upward trend in the land price?

6. Fuel and Power: Will there be ample sources of energy available now and in the future?

7. Air Pollution: What kind of equipment must be installed to treat the emission of air pollutants?

8. Taxes: What effect will slate and local tax structures have on the cost of manufacture?

9. Financing Opportunities: Will the community or the state help finance the plant?

This is of questions is by no means complete. But does underline the complexity of picking the right location for a manufacturing plant.

Although expensive, consultants are available to help the entrepreneurs choose a plant location. An example illustrates how the process of site selection might work.

Considerations of location selection for small business (retail store)

On the City

  • Breakdown by age, income, and occupation?
  • How many similar stores are there now in the city? Where are they located?
  • Is the city growing? If so, how fast?

On an Area Within the city

  • What do area consumers buy when they go to such a store?
  • What is the area’s population? Is it growing?
  • Are they mostly white-collar workers, laborers, or retired persons?
  • What is the average family income? What is their total buying power?
  • How many other similar stores are located in the area? How successful are they?

On a Specific Site Within the Area

  • How close is the nearest competing store?
  • Is the site surrounded by well-kept homes?
  • Is there a steady flow of foot traffic by the site?
  • What is the floor area? Is there any room to expand?
  • Can deliveries be made from the rear?
  • Will nearby stores draw customers to the site?
  • Is the appearance of the site pleasing? Will customers want to shop there?
  • Is there a divider on the road that may discourage some potential customers?

Is there plenty of parking space available next to or near the site?

  • Is the site accessible by bus?
  • What zoning requirements must be met?
  • How far will customers have to travel to shop in the store?

Choosing the best location calls for painstaking attention to detail. Entrepreneurs should narrow their choices to the most likely sites and then dig out the facts about each one.

The process of deciding where to locate a manufacturing plant is more complex and requires painstakingly thorough marketing research compared to a retail store.-

To find the right location for their plants, entrepreneurs generally should try to balance three site factors:

  • Transportation costs
  • Potential sales revenues
  • Manufacturing costs

These factors vary in importance, depending on the entrepreneur’s marketing area. For example, if planning sells its product to customers within a narrow geographic area, entrepreneurs should attempt to minimize transportation costs in relation to customers and ignore the location of rivals.

Before selecting a site, the entrepreneur first must find the answer to various relevant questions. That area can be ranked in order of magnitude and importance such as the following: 

Rating Sheet on Sites

Grade each factor: 1 (lowest) to 10 (highest)

Weigh each factor: 1 (least important) to 5 (most important)

  1. Centrally located to reach the target market
  2. Raw materials are readily available
  3. Quantity of available labor.
  4. Provision for future expansion
  5. Tax burden
  6. The topography of the site (steppe and foundation)
  7. Quality of police and fire protection
  8. Transportation available
  9. Labor rate of pay/estimated productivity.
  10. Adequacy of utilities (sewer, water, power, gas)
  11. Local business climate. Housing availability for workers and managers
  12. Environmental factors (school, cultural, community atmosphere).
  13. An estimate of the quality of this site in a year.
  14. An estimate of this site in relation to my major competitor



















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