What’s inside
- 1. What type of business location do you need?
- 2. Do you want to license, lease or buy your business premises?
- 3. What is your budget?
- 4. What business location will best suit your customer base?
- 5. How will your business location affect hiring?
- 6. What is the competitor landscape?
- 7. What infrastructure do you need at your business location?
- 8. Will you want to expand in the future?
Whether you are starting a business or looking to expand your organisation, choosing a business location is one of the most significant decisions you can make as a business owner.
While it may seem obvious when discussing certain industries, such as the retail and hospitality sectors, the importance of your business location may be a bit less clear if you are not reliant on foot traffic.
However, it doesn’t matter if you are looking for a small office, a warehouse, or another type of premises altogether – your business location can affect your costs, your growth, and how your business is perceived.
That is why we have put together a guide to help you pick the perfect business location, regardless of what kind of property you are looking for.
1. What type of business location do you need?
First of all, you will need to decide what type of business location you need. This, of course, will be informed by your industry, but also by your size and what stage of growth your business is at. The following are some of the main types of business premises:
Retail
If you run a retail business, then you could consider additional options beyond the traditional high street shop.
- Would your business initially be better suited to a market stall, which has a lower cost commitment?
- Would you want to try a pop-up store first, before renting or buying a retail unit, to test the viability of your business?
- Would a unit in a shopping centre be a better fit than on a high street? What about a retail park?
Food and drink
Similar to the retail industry, your options when searching for a location for your food or drinks business can be more varied than a traditional bricks-and-mortar restaurant or bar.
- Could you first try a stall at a food market to assess demand?
- Would the mobility of a food truck make more sense than renting or buying premises for your restaurant?
- Could you test out a pop-up bar or restaurant in your chosen area?
Offices
Not all office spaces are the same, so it is important to consider what will work best for your business.
- Do you want a traditional office dedicated to just your business, where it will be down to you to furnish the space and design how it is used?
- Would you be better suited to a managed office, where you will work with a third-party manager to design a personalised space?
- Is the flexibility, collaboration and hands-off nature of a serviced office, also known as a coworking space, more appealing for your business?
» MORE: Six tips to help you find your first office space
Industrial premises
Due to the square footage often required, you may have less choice when it comes to finding industrial premises, such as a warehouse or manufacturing plant. Many of your decisions will be based on the size of the location, its accessibility, and any legal requirements that affect your business.
Home-based businesses
If you run a home-based business, then you may benefit from thinking of any new property as a business location as well as a living space. Depending on what you do, that may include asking the same questions around cost, size, accessibility and growth that you would when considering more traditional business premises.
» MORE: How to start a business
2. Do you want to license, lease or buy your business premises?
Once you’ve decided on what type of business location you require, you need to consider how you are going to procure it.
In the UK, your three main options for a bricks-and-mortar business location will likely be through a licence, a lease, or a commercial mortgage.
| Licence | Lease | Commercial mortgage | |
|---|---|---|---|
| Duration | Licences are usually granted for six months, although they can be longer. They can either be for a fixed duration, or ongoing. Both the landlord and licensee may have the right to terminate the licence early, with notice. | The length of a commercial lease can vary greatly, and can last as long as 25 years. Typically, however, they run for three to five years, with shorter leases between one and three years. | As long as you keep up with your payments, if you buy a commercial property it will be yours until you want to sell it. |
| Security | A licence grants the licensee, in this case a business, permission to use a landlord’s property for a particular purpose. A licence isn’t exclusive, meaning you may have to share the property with another business, and the landlord can enter at any time. Licences create fewer legal rights for the licensee than a lease. | Leaseholders typically benefit from the security of knowing that, for the length of the contract, they will have full, exclusive access to the premises. They may also have the opportunity to renew the lease before it expires. | As long as mortgage payments are met, buying a commercial property allows businesses the security of knowing their location is fixed for as long as they want to stay there. It also means businesses are investing in an asset that can be sold at a later date, or potentially be rented out to another business. |
| Costs | Licences include, but are not limited to, rental payments, business rates and utilities. | Leases may include, but are not limited to, rental payments, stamp duty, business rates and utilities. | Mortgages may include, but are not limited to, a deposit, mortgage repayments (with interest), stamp duty, business rates, and utilities. |
» MORE: What is a commercial mortgage?
3. What is your budget?
How much you can afford to spend on securing a business location will play a huge role in determining the premises you choose. Costs to factor into your budget include:
- Commercial mortgage or rent payments:This will likely be the biggest cost involved in finding a business premises, and will be informed by the size of the property, its function, and its geographical location.
- Business utilities:While business energy and business water costs can vary greatly depending on the industry, getting an idea of a tenant’s previous bills can give you an idea of how expensive a building will be to run. You will also need to remember connectivity costs, such as business broadband.
- Business rates:Whether you are leasing your commercial property or buying it, you will likely need to pay an annual business rates bill. This will be calculated by multiplying the rateable value of your property by the multiplier, as set out by your national government.
- Business insurance:If getting a new business location requires increased interaction with the public, or hiring staff for the first time, then you may need to budget for a jump in your business insurance costs.
- Hiring:If you are looking to hire, your business location can play a big role in determining salary. This is because the cost of hiring someone in the UK is higher in certain areas, such as London, than others.
- Renovation: Your chosen business premises may require building work, such as refitting or redecorating the space, so it better suits your needs.
» MORE: The most recession-proof places in the UK
4. What business location will best suit your customer base?
When it comes to picking a location, what is good for your customers and clients is likely to be good for your business.
Of course, the needs of a high street shopper vary wildly from a client visiting your accountancy office. However, keeping your target demographics at the forefront of your mind will help you choose the right business location.
Make sure you consider:
- Accessibility:How easy is it for customers and clients to get to your business location? Are there good public transport links or parking for anyone arriving by car? Similarly, how easy is it for clients to get into your premises?
- Visibility:Will customers and clients easily be able to find your business? This is among the most important factors for businesses that rely on foot traffic.
- Safety:How safe is the location? Customers and clients alike may be put off visiting your premises if they do not feel safe doing so.
- Perception:What does your business location say about your business? It is a good idea to try to match the brand you are promoting to the area you choose for your premises, as it may affect the clientele you attract and the amount you can charge for your services.
» MORE: How to promote your business
5. How will your business location affect hiring?
Your business location doesn’t just need to work for your customers. It needs to work for your employees as well, including how easy it is to get to, and how safe it feels.
And just as you would keep in mind your target customer when selecting a business location, you should also factor in your target employee.
For example, does the area have a pool of graduates or a strong university presence? Is the area known for a specific industry, indicating that you will be able to find employees with the skills you need? Will you be able to afford the level of experience you require based on the average labour costs in a given region?
» MORE: How to interview someone
6. What is the competitor landscape?
When it comes to choosing a business location, it is worthwhile carrying out some competitor analysis.
Looking at the kinds of locations and premises similar businesses have chosen may give you an idea of how you want to position your business and your brand, and whether there is a gap in the market you can fill.
Meanwhile, assessing the density of businesses that do the same thing you do in a specific geographical area will help you work out whether that market is oversaturated, and if there will be any demand for your business. It is also a good idea to observe if the other businesses in the area complement the brand identity you are trying to create.
You should talk to businesses in the areas you are considering to see how happy they are with their location, and what challenges they have faced. This will further flesh out whether an area is a good pick for your business premises.
» MORE: The best cities to start a business in Great Britain
7. What infrastructure do you need at your business location?
Beyond the basics, such as business energy and water, you will need to take into account what kind of infrastructure your business location needs to have. This can include everything from ensuring you have a strong enough internet connection to cover your business needs, to the necessary transport links and access points to easily take big deliveries from suppliers. It might even be as simple as ensuring there is adequate parking at your business premises.
8. Will you want to expand in the future?
Ideally, the business location you choose will not only accommodate where you are now but where you want your business to be in the future.
This doesn’t mean renting a massive office space for just a few people, in the hope you will grow into it or purchasing a restaurant that seats far more people than you can realistically attract.
Similarly, it doesn’t mean wherever you choose will be your business’s home forever. There may be a time when you have to search for a new business location, or a second building, to match your growth.
However, it is wise to choose a business location that can match your medium-term ambitions, as laid out in your business plan. For example, you may want to pick business premises that you can physically expand if the demand materialises.
» MORE: How to grow your business
Image source: Getty Images
About the Author
Dive even deeper
Public Liability Insurance: What is it and What Does it Cover?
by Duncan Ferris
Small Business Grants and Start Up Business Grants in England – Apply now for 2025
by George Harrison