Small Business Management BA 313-01
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The Location Plan - Chapter 9 - Outline/Overview

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Outline:

LO1 Describe the five key factors in locating a brick-and-mortar startup.

A. Locating the Brick-and-Mortar Startup

1. Importance of the location decision
• Begin by appealing to the common-sense notion that the best product at the lowest price will not sell if it is inaccessible.
• Emphasize the difficulties associated with changing locations.
• If you live off campus, relate your location concerns relative to the campus. (Some probably wish they lived closer to campus, others farther away.)
2. Key factors in selecting a good location
a. Customer accessibility. See if you have a student seated next to a boyfriend or girlfriend. If so, point out that location selection is related to accessibility.
b. Business environment conditions. Referring again to seating in the class, ask if seat selections were made to avoid street noise near a window or otherwise to improve environmental conditions.
• Many states have enterprise zones that offer location incentives in order to attract businesses.
(1) Nearness to raw materials—abundant source of materials are easily accessible.
(2) Suitability of labor supply—low wage pool, technical training.
(3) Availability of transportation—accessible to trains, planes, railroads, etc.
d. Personal preference of the entrepreneur. Continue with the seating example. Ask whether students chose their class seating location simply because they had a personal preference for the front or back row.
e. Site availability and costs. Suppose it cost $1 to sit in the front row, $2 to sit in the second row, etc. Where would students choose to sit?
(1) Site availability—a business incubator may be right for a new startup.
(2) Site costs—most make decision to lease or buy. Leasing is recommended for new firms. Avoid cash outlay and reduce risk.
(3) Designing and equipping the physical facilities.
(4) Challenges in equipping the physical facilities.
• Manufacturing equipment. (Note: Generally speaking, it is difficult to get students interested in the subject of manufacturing equipment.)
1. General-purpose equipment—cheap and flexible
2. Special-purpose equipment—expensive, inflexible, efficient
b. Retail store equipment. You may choose to stress retail equipment, especially recent advances in supermarket checkout technology.
c. Office Equipment
a. Computers
b. Fax machines
c. Copiers and printers
d. Telephone systems

LO2 Discuss the challenges of designing and equipping a physical facility.

B. Designing and Equipping the Physical Facilities

1. Challenges in Designing the Physical Facilities
• Building size and configuration depends on the nature of the business
2. Challenges in Equipping the Physical Facilities
• Manufacturing equipment
• Retail Store equipment
• Office equipment
3. Building Image
• Building must match the image desired.

LO3 Understand both the attraction and the challenges of creating a home-based startup.

C. Locating the Startup in the Entrepreneur’s Home

1. The attraction of home-based businesses
a. Financial considerations (reduced costs)
b. Family lifestyle considerations (desire to spend more time near family)
2. The Challenges of Home-based businesses
- Consider potential conflicts between business and family interests in the home setting. Is this conflict similar to that between students’ study responsibilities and personal interests in a residential setting?
a. Business image—must maintain a professional atmosphere
b. Legal considerations
• Zoning ordinances—local land may pose problems for home-based businesses
• Tax issues
• Insurance considerations
3. Technology and home-based businesses (advances such as personal computers, fax machines, voicemail, and E-mail help home-based businesses to compete with commercial-site businesses).
Cite examples of home-based businesses you know of and list the strengths and weaknesses of these.

LO4 Understand the potential benefits of locating on the Internet.

D. Locating the Startup on the Internet

• The Internet provides many opportunities for small businesses and a global presence.
1. What is E-Commerce? (Electronic Commerce)
2. Benefits of E-Commerce Startups
• Small firms can compete with bigger businesses on a more level playing field.
• Shortened (compressed) sales cycle
• One-on-one customer relationships through Electronic Customer Relationship Marketing (eCRM)
3. E-Commerce Business Models
• A business model describes a group of shared characteristics, behaviors, and goals that a firm follows and should include:
a. Type of customers served
1. Business-to-Business Model (B2B)—selling to businesses
2. Business-to-Consumer Model (B2C)
• Amazon.com is a good example
• B2C model enjoys the advantages of speed of access, speed of transaction, and 2417 e-tailing.
3. Auction site models—web based businesses who sell products by auction
• EBay is a classic example of auction site models.
b. Degree of Online Presence
1. Content/Information-Based Model
• Web site provided access on company information but cannot conduct buy or sell transactions.
• Examples of such web sites. 2. Transaction-Based Model
• Can buy or sell on the web site (online stores)

As part of laying the foundation for preparing your own business plan, respond to the following questions regarding location.

1. How important are your personal reasons for choosing a location?
2. What business environment factors will influence your location decision?
3. What resources are most critical to your location decision?
4. How important is customer accessibility to your location decision?
5. What special resources do you need?
6. How will the formal site evaluation be conducted?
7. What laws and tax policies of state and local governments have been considered?
8. What is the cost of the proposed site?
9. Is an enterprise zone available in the area where you want to locate?

Physical Facility Questions:

1. What are the major considerations in choosing between a new and existing building?
2. What is the possibility of leasing a building or equipment?
3. How feasible is it to locate in a business incubator?
4. What is the major objective of your building design?
5. What types of equipment do you need for your business?

Home-Based Startup Location Questions

1. Will a home-based business be a possibility for you?
2. What are the advantages and disadvantages of a home-based business?
3. Have you given consideration to family lifestyle issues?
4. Will your home project the appropriate image for the business?
5. What zoning ordinances, if any, regulate the type of home-based business you want to start?

Internet Startup Questions

1. What type of customers will be served by the Internet startup?
2. What degree of online presence will you strive for?

OVERVIEW:

A great business location may be hard to find. There are five key factors affecting the desiraability of a business location. They are: personal preference, environmental conditions, resource availability, customer accessibility, and site availability/cost. Their relative importance depends on the nature of the business. Since customers usually visit stores, accessibility is generally the most important factor to a retailor.

There may be a special appeal of an enterprize zone to an entrepreneur seeking a good location for his or her business. Enterprise zones are designed to lure businesses to an economically deprived area by offering regulatory and tax relief. These benefits can be substantial though they are not sufficient to offset the negative effects of poor management or an ill-conceived idea. In any case, economic zones can provide a generous boost to help "jump start" a new business.

Other business owners hometown may be either a good or bad location. The fact that it is a hometown may provide certain advantages in that the owner knows the community and the cultural background of the people. It also may be simpler to establish credit and banking connections in one's hometown. Economic advantages or disadvantages of the location are unaffected by the fact that it is ahometown.

It may be logical for the owner to consider personal preference in locating a business. A busines owner is also an individual, and he or she may be happier in one part of the country than in another. However, personal considerations of this type should be weighed against any economic disadvantages that a fafavorite location might have.

For an example, look at what resource factors might be vital to a new manufacturing venture that produces residential furniture. There would be at least three major resource factors to consider; the closeness of raw materials, the suitability of the supply of labor, and the availability of transportation. These would be important to a residential furniture manufacturer, especially one which competes primarily on cost/price. Transporting raw materials over long distances may be cost prohibitive. That is why most furniture manufacturers are grouped near major supplies of hardwood timber. And while skill labor of local labor may not be as critical as the closenes of raw materials, the cost of labor is certainly an important factor. Finally, transportation is esssential to the operation of a furniture manufacturer, so this is an important factor of location of the firm.

A new firm may find it logical to buy a building if no satisfactory space is available or if the cost of adapting a leased space is too great. Also, a business may have such specialized operating requirements that a unique structure is needed. For most new firms, renting is the best choice.

Today, many entrepreneurs operate a home-based business. In this case , there are some revelant factors to consider, like zoning laws, impact of the business on family life, the need to work as a team with others in the firm, and customer client expectations. The effect of the home location on personal and family life may conceivably be positive, but it can easily be destructive. These and pehaps other issues must be weighed in judging the practicality of basing a busines in the home. Also thee are tax and insurance issues related to what can and what cannot be treated as business expenses. Homeowner insurance policies are not possible if there is a business in the home. There are other considerations that you will see in the chapter as well.

Potential benefits for locating a startup on the Internet: E-Commerce offers small firms the opportunity to compete with bigger companies on a more level playing field. Internet operations can help small firms with cash flow problems compressing sales cycles. E-commerce allows small firms to build stronger customer relationships. New versions of business-to-business (B@B) model continue to develop and evolve. The three main advantages of online business-to-consumer (B2C) firms are speed of access, speed of transaction, and contineous access to products and services, referred to as 24/7 e-tailing. Auction sites are online firms that bring buyers and sellers together. The role of a website can range from merely offering content and information to permitting the buying and selling of products and services online.

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