what is location and facilities in business plan

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• Write Your Business Plan | Part 1 Overview Video
• The Basics of Writing a Business Plan
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• The Main Objectives of a Business Plan
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• Write Your Business Plan | Part 2 Overview Video
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• How to Use Your Business Plan to Track Performance
• How to Make Your Business Plan Attractive to Prospective Partners
• Is This Idea Going to Work? How to Assess the Potential of Your Business.
• When to Update Your Business Plan
• Write Your Business Plan | Part 3 Overview Video
• How to Write the Management Team Section to Your Business Plan
• How to Create a Strategic Hiring Plan
• How to Write a Business Plan Executive Summary That Sells Your Idea
• How to Build a Team of Outside Experts for Your Business
• Use This Worksheet to Write a Product Description That Sells
• What Is Your Unique Selling Proposition? Use This Worksheet to Find Your Greatest Strength.
• How to Raise Money With Your Business Plan
• Customers and Investors Don't Want Products. They Want Solutions.
• Write Your Business Plan | Part 4 Overview Video
• 5 Essential Elements of Your Industry Trends Plan
• How to Identify and Research Your Competition
• Who Is Your Ideal Customer? 4 Questions to Ask Yourself.
• How to Identify Market Trends in Your Business Plan
• How to Define Your Product and Set Your Prices
• How to Determine the Barriers to Entry for Your Business
• How to Get Customers in Your Store and Drive Traffic to Your Website
• How to Effectively Promote Your Business to Customers and Investors
• Write Your Business Plan | Part 5 Overview Video
• What Equipment and Facilities to Include in Your Business Plan
• How to Write an Income Statement for Your Business Plan
• How to Make a Balance Sheet
• How to Make a Cash Flow Statement
• How to Use Financial Ratios to Understand the Health of Your Business
• How to Write an Operations Plan for Retail and Sales Businesses
• How to Make Realistic Financial Forecasts
• How to Write an Operations Plan for Manufacturers
• What Technology Needs to Include In Your Business Plan
• How to List Personnel and Materials in Your Business Plan
• The Role of Franchising
• The Best Ways to Follow Up on a Buisiness Plan
• The Best Books, Sites, Trade Associations and Resources to Get Your Business Funded and Running
• How to Hire the Right Business Plan Consultant
• Business Plan Lingo and Resources All Entrepreneurs Should Know
• How to Write a Letter of Introduction
• What To Put on the Cover Page of a Business Plan
• How to Format Your Business Plan
• 6 Steps to Getting Your Business Plan In Front of Investors

What Equipment and Facilities to Include in Your Business Plan Investors will want a detailed list of the equipment your business requires and where you plan to operate. Here's a checklist to get you started.

By Eric Butow Oct 27, 2023

Opinions expressed by Entrepreneur contributors are their own.

This is part 2 / 12 of Write Your Business Plan: Section 5: Organizing Operations and Finances series.

A manufacturer will likely need all sorts of equipment, such as cars, trucks, computers, telecom systems, and machinery of every description for bending metal, milling wood, forming plastic, or otherwise making a product out of raw materials. A lot of this equipment is expensive and hard to move or sell once purchased.

Moreover, manufacturers often require a facility to house this equipment and operate the business.

Related: How to List Personel and Materials in Your Business Plan

Naturally, investors are very interested in your plans for purchasing equipment and facilities. But this part of your plan doesn't have to be long—just be sure it's complete.

Make a list of every sizable piece of equipment you anticipate needing. Include a description of its features, its functions, and, of course, its cost. In addition, list all facilities you plan on buying or leasing.

Be ready to defend the need to own the more expensive items. Bankers and other investors are loath to plunk down money for capital equipment that can be resold only for far less than its purchase price. Also, consider leasing what you need if you are starting out. Once you show that you are responsible for paying your bills and sales look good, you can apply for a small business loan or a line of credit with greater success.

Related: How to Write an Operations Plan for Manufacturers

Unless you're a globe-trotting consultant whose office is his suitcase, your plan will need to describe the facilities in which your business will be housed. Even home-based business owners now describe their home offices as the trend continues to snowball, thanks largely to mobile communications.

Land and buildings are often the largest capital items on any company's balance sheet. So it makes sense to go into detail about what you have and what you need. Decide first how much space you require in square feet. Don't forget to include room for expansion if you anticipate growth. Now consider the location. You may need to be close to a labor force and materials suppliers. Transportation needs, such as proximity to rail, interstate highways, or airports, can also be important. Next, ask whether there is any specific layout that you need.

Related: What Technology to Include In Your Business Plan

Draw up a floor plan to see if your factory floor can fit into the space you have in mind. Manufacturers today do most of their ordering and communications online, so you need to ensure that your location has excellent connectivity.

To determine the cost of facilities, you'll first have to decide whether you will lease or buy space and what your rent or mortgage payments will be for the chosen option. Don't forget to include brokerage fees, moving costs, and the cost of any leasehold improvements you'll need. Finally, take a look at operating costs. Utilities, including phone, electric, gas, water, and trash pickup are concerns; also consider such costs as your computer connections, possibly satellite connections, maintenance, and general upkeep.

Related: Bursting at the Seams? Tips for Expanding Your Startup's Office Space

Facilities checklist

Use this checklist to analyze your facility's requirements.

• Initial space
• Expansion space
• Total space
• Technology requirements, including connectivity
• Proximity to the labor pool
• Proximity to suppliers
• Transportation availability
• Layout Requirements:
• Purchase/lease costs
• Brokerage costs
• Moving costs
• Improvement costs
• Operating costs

These aren't the only operations concerns of manufacturers. You should also consider your need to acquire or protect such valuable operations assets as proprietary processes and patented technologies.

Related: How to Determine How Much Real Estate Your Business Needs

For many businesses— for example, Coca-Cola with its secret soft drink formula comes to mind—intellectual property is more valuable than their sizable accumulations of plants and equipment. Investors should be warned if they must pay to acquire intellectual property. If you already have it, they will be happy to learn they'll be purchasing an interest in a valuable and protected technology.

More in Write Your Business Plan

Section 1: the foundation of a business plan, section 2: putting your business plan to work, section 3: selling your product and team, section 4: marketing your business plan, section 5: organizing operations and finances, section 6: getting your business plan to investors.

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What Is a Business Location Strategy?

Why is a business location strategy important, how to choose a business location, examples of business location strategies that worked and why, final thoughts, business location strategy: a complete guide to finding your optimal location.

Jul 24, 2024

You have a great idea for a business. The plan is ready to go, and you have your financing lined up. Now, you just need to choose your location to get started—but the right decision is not always obvious and calls for careful analysis.

In this guide, we’ll explain the concept behind business location strategy and some key considerations to keep in mind when choosing the best spot for your business. Plus, we’ll provide some examples of real business owners’ location strategies and how they worked out.

A business location strategy is your plan to find the optimal location for an organization. This requires an analysis of company goals and objectives and finding a location that meets them. Your company’s location strategy should align with any overriding corporate structure or strategy.

Some businesses require foot traffic, such as retail and restaurants. Medical practices and other healthcare facilities might prioritize patient access or proximity to growing neighborhoods. Yet others serve B2B customers, so location objectives may focus more on expense reduction.

Having a strategy in place for choosing your business’ location is important because it allows you to make better decisions about choosing a location that balances all the things you need.

Business location, regardless of your industry, affects your operating costs and your stakeholders.

Think About Your Customers

Think about the type of customer you hope to attract. If your business location is off the beaten path, is difficult to find, or does not offer parking, that can be an issue. If you’re not in a safe neighborhood or one that’s well-lit and you have hours after dark, that can also be a problem.

An urgent care clinic, for example, may be fine in a strip mall with enough parking. However, a surgery center may need a more discreet location.

If your business caters to locals, you may be fine in a city center or congested area. If people travel from out of town, you’ll probably want to be near a major roadway.

If you run a B2B business, most of your business dealings might be handled face-to-face, online, or on the phone. In that case, where your business is located might not matter to your customers.

Think About Your Employees

Your business’ location can make a big difference in attracting and retaining employees.

For example, easy access to free parking or public transportation to and from can play a role. If an employee has to pay for parking every day, it cuts into their paycheck. You may prefer to open your business in a location with restaurants or coffee shops nearby to make it easy for employees to grab a meal or take a break.

Think About Your Suppliers

If your business needs to store substantial inventory, think about your supply chain. Faster delivery cuts down on your costs and gets products back in stock more quickly. Locations without street parking or in a difficult-to-access area may increase costs for deliveries.

“Site selection is a process of elimination,” said Christine Wong Rambo , CEcD, MBA, certified economic developer, and president and founder at the economic development marketing firm Upsize Marketing Strategies .

Data should be your guide when choosing real estate for your business.

Data-Driven Site Selection

“The site selection process is driven by data,” said Rambo. “Collecting this type of data may be challenging if a company is not using a site selection consultant. Companies can partner with state, regional, or local economic development organizations to gather this information based on the company’s criteria.”

For example, in the healthcare sector, it’s common to do cohort analysis to find patterns in patients and care. The Agency for Healthcare Research and Quality provides detailed information on medical expenditures for cohort analysis.

Site selection criteria include a range of attributes, including:

• Real estate costs
• Site work needed
• Cost of doing business, including taxes
• Market potential
• Competition
• Potential for future expansion
• Neighborhood reputation
• Available infrastructure

Consider Key Metrics

The elements or metrics most important to your business will determine your ideal business location. However, nearly every organization will have some common themes.

According to Rambo, most optimal locations will:

• Meet consumer or production demands
• Improve operational efficiency and costs due to proximity to other resources
• Lower overall business costs
• Offer sustainability and potential for growth
• Meet workforce requirements
• Provide a more favorable business climate

Consumer businesses that carry large inventories will want to consider the cost of warehouse space and distance from shipping hubs.

Access to a Skilled Workforce

“For the professional services sector, the ability to recruit a skilled workforce and proximity or access to a major client would be important considerations,” said Rambo.

Healthcare facilities, clinics, and medical practices may want to be located near hospitals or universities that train medical professionals for easier access to potential employees. Field service businesses may want to be near a community college, vocational tech school, or career training center. Businesses with a less-skilled labor force that pays lower wages may need to be near public transportation.

Access to Customers

“Your business can optimize its operations and market reach if it’s located in the right location,” said Michael Hammelburger, CEO at business consulting firm The Bottom Line Group . “This is especially true for retailers and food-related establishments that take advantage of heavy foot traffic in areas during rush hour. When situated in the right location, they can reach more people and thus have the potential to sell more.”

For consumer-facing businesses, accessibility and safety for customers are key considerations. The same applies to healthcare facilities. Patients have to be able to access your facility easily and feel safe when doing so.

Consider the Long-Term Implications

Your business location strategy should be far-ranging to accommodate your future plans. If you are open to the possibility of expanding your footprint in the future, you want to make sure there’s enough real estate nearby to make that a reality—even if it may be years down the road.

“When you start a business, you may have assumptions on what business you are in, where you are located, and where your customers are,” said Joseph Meyer, financial consultant and business strategist at The Dollar Soldier . “These assumptions are locked in for your business. If you try to change those assumptions after you start, the risk of business failure grows.”

The assumptions you make today about your business location strategy can help or hinder your efforts down the road.

For businesses that rely on foot traffic or get regular visits from customers or patients, location is crucial. For example, 62% of patients said they selected a physician based on the convenience of the location . Fifty-eight percent of patients that had a choice of hospitals to use said they prioritized locations as a key factor in their choice.

The only factor that was more important than location was whether a practice or facility accepted a patient’s health insurance. After that key consideration, location ranked second.

For businesses that don’t rely on foot traffic or customer visits, the location selection strategy is quite different. Mold Busters , a field service company that handles mold removal, wanted a central location that was close to their customers.

“Our teams out in the field may gather supplies and equipment in the morning then travel to customers,” said Charles Leduc, Mold Buster’s COO. “A location that provides minimal miles in between locations or jobs helps keep expenses down.”

Ralph Severson , president at Flooring Masters , agreed.

“Our crews must be able to get the equipment and supplies that they need each morning with minimal travel time,” Severson said.

At the same time, Severson said they wanted a location that balanced the convenience with lower costs.

“We chose our location because it is only 10 minutes from Louisville, Kentucky, the most densely populated city in the area, but we are north of the Ohio River in Indiana, where overhead costs are lower,” he said.

The right location for your business plays an important role in your success. Businesses need to assess their overall goals and think carefully about how they are serving their customers and employees to optimize their strategy.

Ready to take the next step in protecting your career and business? Take a few minutes to learn more about our suite of insurance products and find out how Berxi can help you.

Image courtesy of iStock.com/ Orbon Alija

Last updated on Jul 24, 2024. Originally published on Aug 25, 2021.

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How to Write the Operations Plan Section of a Business Plan

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

How to Write the Operations Plan Section of the Business Plan

Stage of development section, production process section, the bottom line, frequently asked questions (faqs).

The operations plan is the section of your business plan that gives an overview of your workflow, supply chains, and similar aspects of your business. Any key details of how your business physically produces goods or services will be included in this section.

You need an operations plan to help others understand how you'll deliver on your promise to turn a profit. Keep reading to learn what to include in your operations plan.

Key Takeaways

• The operations plan section should include general operational details that help investors understand the physical details of your vision.
• Details in the operations plan include information about any physical plants, equipment, assets, and more.
• The operations plan can also serve as a checklist for startups; it includes a list of everything that must be done to start turning a profit.

In your business plan , the operations plan section describes the physical necessities of your business's operation, such as your physical location, facilities, and equipment. Depending on what kind of business you'll be operating, it may also include information about inventory requirements, suppliers, and a description of the manufacturing process.

Staying focused on the bottom line will help you organize this part of the business plan.

Think of the operating plan as an outline of the capital and expense requirements your business will need to operate from day to day.

You need to do two things for the reader of your business plan in the operations section: show what you've done so far to get your business off the ground and demonstrate that you understand the manufacturing or delivery process of producing your product or service.

When you're writing this section of the operations plan, start by explaining what you've done to date to get the business operational, then follow up with an explanation of what still needs to be done. The following should be included:

Production Workflow

A high-level, step-by-step description of how your product or service will be made, identifying the problems that may occur in the production process. Follow this with a subsection titled "Risks," which outlines the potential problems that may interfere with the production process and what you're going to do to negate these risks. If any part of the production process can expose employees to hazards, describe how employees will be trained in dealing with safety issues. If hazardous materials will be used, describe how these will be safely stored, handled, and discarded.

Industry Association Memberships

Show your awareness of your industry's local, regional, or national standards and regulations by telling which industry organizations you are already a member of and which ones you plan to join. This is also an opportunity to outline what steps you've taken to comply with the laws and regulations that apply to your industry. 

Supply Chains

An explanation of who your suppliers are and their prices, terms, and conditions. Describe what alternative arrangements you have made or will make if these suppliers let you down.

Quality Control

An explanation of the quality control measures that you've set up or are going to establish. For example, if you intend to pursue some form of quality control certification such as ISO 9000, describe how you will accomplish this.

While you can think of the stage of the development part of the operations plan as an overview, the production process section lays out the details of your business's day-to-day operations. Remember, your goal for writing this business plan section is to demonstrate your understanding of your product or service's manufacturing or delivery process.

When writing this section, you can use the headings below as subheadings and then provide the details in paragraph format. Leave out any topic that does not apply to your particular business.

Do an outline of your business's day-to-day operations, including your hours of operation and the days the business will be open. If the business is seasonal, be sure to say so.

The Physical Plant

Describe the type, size, and location of premises for your business. If applicable, include drawings of the building, copies of lease agreements, and recent real estate appraisals. You need to show how much the land or buildings required for your business operations are worth and tell why they're important to your proposed business.

The same goes for equipment. Besides describing the equipment necessary and how much of it you need, you also need to include its worth and cost and explain any financing arrangements.

Make a list of your assets , such as land, buildings, inventory, furniture, equipment, and vehicles. Include legal descriptions and the worth of each asset.

Special Requirements

If your business has any special requirements, such as water or power needs, ventilation, drainage, etc., provide the details in your operating plan, as well as what you've done to secure the necessary permissions.

State where you're going to get the materials you need to produce your product or service and explain what terms you've negotiated with suppliers.

Explain how long it takes to produce a unit and when you'll be able to start producing your product or service. Include factors that may affect the time frame of production and describe how you'll deal with potential challenges such as rush orders.

Explain how you'll keep  track of inventory .

Feasibility

Describe any product testing, price testing, or prototype testing that you've done on your product or service.

Give details of product cost estimates.

Once you've worked through this business plan section, you'll not only have a detailed operations plan to show your readers, but you'll also have a convenient list of what needs to be done next to make your business a reality. Writing this document gives you a chance to crystallize your business ideas into a clear checklist that you can reference. As you check items off the list, use it to explain your vision to investors, partners, and others within your organization.

What is an operations plan?

An operations plan is one section of a company's business plan. This section conveys the physical requirements for your business's operations, including supply chains, workflow , and quality control processes.

What is the main difference between the operations plan and the financial plan?

The operations plan and financial plan tackle similar issues, in that they seek to explain how the business will turn a profit. The operations plan approaches this issue from a physical perspective, such as property, routes, and locations. The financial plan explains how revenue and expenses will ultimately lead to the business's success.

Business Location Analysis: The Key to Strategic Decision Making

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Location, location, location! It's a mantra we've all heard before, but how many of us truly understand its significance in the business world? This isn't just about picking any spot on the map. It's about making strategic choices that propel your business towards remarkable growth and success. Let's delve into the crucial factors to consider during business location analysis.

What is business location analysis?

Business location analysis is the process of studying and evaluating potential physical locations for business operations. It's the cornerstone of strategic planning, with a powerful influence on a company's performance, profitability, and overall success. The significance of choosing the right location cannot be overstated—it provides easy access to customers, employees, and suppliers, and can greatly enhance your brand's visibility.

Choosing the right business location is a crucial step in your company's journey. It's more than just a place—it's the setting for your story and the stage for your success.

Why do businesses use location analysis?

Location analysis pops up as a champion in the realm of business operations, offering a strategic edge to businesses across the globe. It's more than just pinning a spot on the map – it's about designing a roadmap to successful business outcomes. It's the silent hero behind boosting your business' competitive edge, accessibility, and brand visibility.

1. Competitive Edge: Become the Market Leader

Location analysis aids in identifying the best locales to set foot in, where competition is minimal and opportunities are abundant. This is where the magic of strategic positioning comes into play.

By understanding the competition landscape, businesses can strategically place themselves in a position that sets them apart, helping them get ahead in the race.

2. Customer Accessibility: Be Where Your Customers Are

Location analysis also plays a vital role in making businesses more accessible to customers. It’s not about being in the most popular spot, but being in the right spot where customers can easily find and reach you.

• Convenience: A location that's easy for customers to reach can significantly boost your business.
• Visibility: Being in a spot where you’re easily seen can naturally attract more customers.

3. Brand Visibility: Shine Above the Rest

Brand visibility is about more than just being seen – it’s about being remembered. Location analysis helps position your business in an area that not only garners high foot traffic, but also aligns with your brand identity.

Whether it's a bustling city center or a serene suburb, the right location can amplify your brand’s presence, ensuring you're not just seen, but also remembered.

4. Optimizing Operational Efficiency

Location analysis optimizes business efficiency. A strategic location enhances logistics, influencing factors such as supply chain efficiency , distribution convenience, delivery speed, and employee commute. The right location streamlines operations, saving time and resources.

Beyond operations, an ideal location grants access to crucial business services like banking, legal, and marketing consultancy. It facilitates not just survival, but also growth.

Because when we think location, we think efficiency. And in business, efficiency isn't just a buzzword - it's a lifeline. So, are you ready to optimize?

Components of Effective Business Location Analysis:

Data Collection:

Any savvy entrepreneur knows that location is key. But how do you determine the right location for your business? It starts with data collection. You'll need to gather and analyze a variety of data types to make an informed decision. Let's break it down:

• Demographic Data: This is the first type of information you need. Who are your customers? What are their ages, income levels, and occupations? You'll want a location surrounded by your target demographic.
• Traffic Data: How many people walk or drive by the potential location each day? More foot traffic could lead to more customers. But remember, that traffic needs to align with your target demographic.
• Competition Data: What other businesses are in the area? Other businesses could be complementary, boosting your sales. Or they could be competitors, potentially taking away customers.

Remember, data should guide your decision, but it shouldn't make it. Use the data to inform your choices and align them with your business goals.

It's a tricky balance, but armed with the right data, you can make a choice that sets your business up for success.

2. Spatial Analysis & Visualization:

Gas Station Density in Saudi Arabia's Key Regions

When it comes to running a successful business, location is key. That's where Spatial Analysis and Visualization come into play, taking us on a deep dive into the world of Geographic Information Systems (GIS).

GIS serves as a powerful tool in the analysis and interpretation of geographic relationships, patterns, and trends. It integrates hardware, software, and data to capture, store, analyze, and interpret all forms of geographically referenced information. Essentially, it allows us to view and understand data in ways that reveal relationships, patterns, and trends in the form of maps, globes, reports, and charts.

"A Geographic Information System (GIS) helps businesses to visualize, question, analyze, and interpret data to understand relationships, patterns, and trends."

• Mapping: GIS converts complex data into a visual format, simplifying the process of decision making. It can display demographic data, consumer behavior, and competitor locations in an easy-to-understand map.
• Analysis: GIS analyzes the data to identify patterns and trends. It provides insights into the best locations for business expansion or the areas that are most profitable.

Incorporating GIS into your business location analysis allows you to make informed decisions based on concrete data. It's like turning on a light in a dark room, illuminating opportunities and potential challenges that were previously hidden.

Benefits of Using GISExamplesEnhanced Decision MakingChoosing the best location for a new store or officeImproved CommunicationVisualizing potential business growth areas for stakeholdersIncreased EfficiencyRouting deliveries to reduce fuel consumption and save time

As we dive deeper into the realm of location analysis, it's crucial to recognize the role of Geographic Information System (GIS). In today's tech-savvy world, GIS tools are transforming the way businesses analyze their location choices. These powerful tools offer a range of benefits, all contributing to a more informed and smart decision making.

3. Predictive Analytics:

Imagine having a crystal ball that foretells how your business would fare in different locations before you even set foot there. That's precisely what predictive analytics offers! This remarkable blend of technology and statistical methods can help you anticipate potential performance in various locations based on historical data, customer behavior, market trends, and more.

How does it work?

• Predictive models gather data: First, these tools collect a wealth of valuable data from various sources, such as customer databases, demographic information, and market research.
• They analyze the data: Next, they use advanced algorithms to analyze this data, identifying patterns and trends that could impact business performance.
• They forecast future outcomes: Based on these patterns, the models can then make predictions about how a business might perform in different locations.

Businesses can use these forecasts to guide their location-based decisions, helping them choose spots with the highest potential for success. But remember, while predictive analytics can be an incredibly valuable tool, it's not infallible. It's always important to consider other factors, such as your business goals, target audience , and competition, to make the most informed decision possible.

Ultimately, predictive analytics is like a compass guiding your business through the complex landscape of location-based decision-making. It helps you avoid the pitfalls of choosing a location based on gut feelings alone and increases your chances of setting up shop in the most favorable locations.

Real-world Applications and Success Stories:

Let's look at some real-world applications and success stories that exemplify the power of strategic business location analysis.

Case Study 1: Starbucks

Starbucks, a global coffee juggernaut, is renowned for its strategic location choices. The company uses a sophisticated location analysis system, incorporating data like traffic flow, area demographics, and nearby businesses. This strategy has been key in their worldwide growth and success. source

Case Study 2: Walmart

Walmart, a multinational retail corporation, stands as a testament to the effectiveness of location analysis. The company focuses on establishing its stores in small towns, where competition is minimal. This strategy, combined with its vast product range and competitive pricing, has led to Walmart's dominance in the retail market. source

Case Study 3: McDonald's

McDonald's, a global fast-food chain, attributes much of its success to location analysis. The company strategically places its restaurants near highway exits, busy city centers, and suburbs. This approach, paired with their quick service and popular menu, has solidified McDonald's status as a fast-food leader. source

In conclusion, these case studies highlight the immense power of location analysis in business strategy. It demonstrates how, with careful consideration and smart decision-making, businesses can leverage location to maximize brand visibility, profitability, and growth.

Challenges in Business Location Analysis:

Choosing a business location is akin to playing a high-stakes game of chess. One wrong move can spell disaster for your venture. Yet, while choosing the right location can be daunting, understanding common pitfalls can ease the process.

• Common Pitfalls and Misconceptions: Many entrepreneurs fall prey to the misconception that a cheap location means higher profits. It's crucial to understand that a location's value is not solely determined by its cost, but also by its accessibility, demographic alignment, and potential for growth. Weigh these factors before making a decision.
• Overcoming Data Inaccuracies: Quality data is the bedrock of informed decision-making. Ensure the data you base your choice on is accurate, up-to-date, and relevant. Misinterpreted or outdated data can lead to costly mistakes.
• The Evolving Nature of Neighborhoods and Local Markets: Neighborhoods and markets are fluid, continually changing and evolving. A location that seems perfect today might not be the same in a few years. Always consider long-term projections and future growth trends in your analysis.

Remember: You're not just choosing a location, you're choosing a future. Make sure it's one where your business can thrive.

How xMap Can Empower Your Location Analysis?

Unlock the potential of your business with xMap , a cutting-edge platform that transforms location analysis. With a plethora of features at your disposal, xMap empowers you to make strategic, data-backed decisions about your business location. Here's how:

• Data Visualization:

xMap's intuitive interface presents data in a visually appealing and easy-to-understand format. This enables businesses to analyze complex data sets effectively and make informed location decisions.

• Comprehensive Database:

database of all the restaurants in dubai with their key information

With xMap, gain access to a vast database of demographic, geographic, and economic data that can be crucial in selecting the perfect location for your business.

• Advanced Analytics:

Use the power of xMap's advanced analytics to uncover hidden patterns, trends, and insights that can significantly impact your location strategy.

With xMap, the power to choose the right location for your business is literally at your fingertips. The platform's unique combination of data richness and user-friendly design makes it an invaluable tool for businesses of all sizes.

Now, let's talk benefits. The advantages of incorporating xMap into your business strategy are manifold:

• Increased Profitability: By providing you with actionable insights based on data, xMap aids in selecting locations that promise maximum profitability.
• Improved Decision Making: xMap's data visualization and advanced analytics facilitate better, quicker decision-making, saving valuable time and resources.
• Competitive Edge: With access to comprehensive data and analytics, you can stay ahead of the competition and identify untapped market opportunities.

Ready to take your business to new heights? Don't wait any longer to harness the power of location analytics with xMap. Whether you're a small startup or a well-established corporation, xMap has got you covered. Explore xMap today or get in touch for a personalized demo.

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Business Location Analysis Example – Site Selection in Business Plan

Proper site selection for your business influences whether you succeed or fail in making money. Your business location analysis should take into account demographics, psychographics, census and other data. Whether you’re trying to decide where to open a new store or where to locate a second office, follow this business plan location analysis example to maximize your chances of success in site selection.

Table of Contents

Location Analysis Definition

Location analysis definition : using data to figure out where to locate your business.

Determining where to put your store, office or even online presence requires careful thought. If you get this wrong, you could be trapped with a commercial lease that costs you a lot of money but doesn’t result in getting new customers.

Business Plan Location Analysis

There is a saying that the three most important considerations in business are location, location, location. If you’re starting a new business that operates primarily offline, location is critical. You want to be near your customers.

But is it critical for online businesses, too? Yes, in a different way. Online location is akin to having the right domain name, online advertising, and search engine optimization so that prospects can find your business.

In two slightly different ways, location is still an important part of doing business. A business plan has two purposes and will serve one or both: 1) raise additional capital and 2) outline in detail how you can succeed in your business (like a user’s manual).

Essentially, you want to answer two questions:

• How can I succeed here?

You will need to answer both of these questions for your site selection analysis.

Site Selection

Answering “why here,” for a brick and mortar location, will address the physical address (or addresses) where your business will take place.

For an online business, “why here” will address your website’s domain, web hosting service, and presence in search results.

Some of this material may overlap with your marketing plan (download a free sample marketing plan ).

Provide data for each of these elements in your business location analysis:

• The elements that attracted you to this location.
• The process you went through to identify this location as the location of choice; in other words, how you narrowed it down from the entire city to the specific location, or from the vast range of URLs to the specific URL you will use.
• Demographic analysis of the people in the area. Be sure to focus in on the make-up of your target market. If you market to women ages 18- 35, talk about what the overall demographic makeup is in your area and (in greater detail) the demographics of the areas women ages 18 – 35.
• Traffic patterns (for example: Time of day – are there rush hours when you’ll be busier?)
• Refer to your marketing plan section where you might talk about how your signage will receive greater exposure at certain times or how your advertising appropriately targets your market.
• Access to future employees: are there enough people qualified to work for your business in the area?
• Competition in the area.

Location Analysis Example

Food chain Whole Foods , now owned by Amazon, picks their locations based on many factors, not just population density in a neighborhood. They found that one of the key drivers that determines whether patrons will shop at their grocery stores is their level of education. As a result, their site selection process looks at locations with a higher per capita level of college degrees.

Costco takes into account population trends to ensure that the neighborhoods in which they locate their stores can sustain sales of their bulk-packaged products.

Walmart uses advertisements to see how far people will go to buy products at their stores. They track usage of mobile advertisements and create a geofence boundary to identify who goes where to buy what. This analysis helps them with their site selection for new stores.

Business Location Analysis

Next, analyze the data you gathered above. This is an important step because it shows the considerations and thought process you put into your business location analysis. Many location analysis examples overlook this part.

Including only the data reduces your chances of success. Add these elements to put perspective on your reasoning:

• Challenges you will overcome. For example, is it difficult to make a left turn across traffic to get to your store? Do people have to “feed the meter”? Those could substantially reduce your target market.
• What your competitors are doing and what you will do differently. You probably already did quite a bit of this in the marketing plan section of your business plan, but this has a slightly different focus and you may want to reference some of those ideas.
• Outline best case scenario and contingency plans, referencing your marketing plan against your demographics.
• Highlight the strategies you can use to access the area’s workforce as your business grows. A good indicator is the presence of companies like yours, which provides an opportunity for you to recruit qualified employees.
• Find competitors in the same area, or in an area of similar demographics, and identify what they’re doing to be successful.

Avoid picking a new location just because it has cheap rent. Signing such a business lease could spell disaster for your business because you may not have access to the clientele and workforce you need to succeed. Paying a little more for for the right address can boost your profits in a big way.

Do the research and think through the implications of your data to dramatically improve your chances of success at your new location.

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Guide to building the right location strategy

Building a comprehensive corporate location strategy is a crucial aspect of modern business planning. Depending on your business objectives, various types of location strategy can help your company become more visible to your customers, reduce operating costs, or gain access to global engineering talent.

To succeed in location planning, companies need to perform meticulous market research, analyze their competitors' moves, formulate a precise but flexible roadmap, and execute it flawlessly. Despite that complexity, making informed decisions on where to locate a new office (or an entire branch of a business) is practically always worth it, as the benefits of operating at an optimal location greatly outweigh the costs of finding it.

Maxima Consulting has successfully supported companies in many industries, including the financial sector , telecommunications , and logistics, in expanding to new locations. Read this article to discover our approach to building workforce and location strategies for our clients and learn what we do to ensure that a company's location strategy results in gaining market advantage, reaching set diversity goals, improving employee productivity, and maximizing operational cost-effectiveness.

Contact us if you plan to outsource locating services, and our expert consultant will provide you with research-based advice tailoerd to your unique business needs.

What is a location strategy, and why is it important?

A location strategy is a detailed action plan used in business to determine where an organization should hire its workers and establish offices, stores, or warehouses. A well-crafted strategy can become a powerful tool in optimizing the placement of employees and facilities, whether a company's plan is to expand into a new country or region (offshore location strategy) or to consolidate some of its jobs and functions to streamline operations and cut costs (onshore location strategy).

A well-executed location strategy can enhance the company's operational efficiency and pave the way for future growth opportunities. However, developing successful location strategies requires a deep understanding of many factors, including local economic incentives for investing companies, regional political stability, workforce compatibility, and market maturity. To navigate this complexity, many companies choose to team up with specialized consulting partners with experience in the local market, strategic analysis capabilities, and a comprehensive understanding of both the global economy and local regulations.

Fill out the contact form and learn how our consulting services can improve your operations.

Our representative will reach out to you in 24 hours and schedule a free consultation to answer all your questions.

Five steps to a successful new location strategy

Step 1: define business goals for each new site and each existing facility.

Determining what success looks like and setting measurable goals for all locations influenced by your new strategy is a crucial step to developing a conscious and flexible roadmap for your company and all its employees.

Defined requirements and objectives will help everyone understand what stakeholders demand from them and facilitate collecting relevant data, which will be needed to evaluate the strategy execution process later.

Step 2: Research prospective locations and new markets

Perform thorough location analysis and asset evaluation. By analyzing local business ecosystems, workforce and market trends, and competitors' behavior in all prospective locations, businesses facilitate making better decisions, reduce the risks associated with such a huge investment, and develop favorable conditions for their future growth. By evaluating their existing assets, companies can pinpoint strong and weak points and aviod location redundancy.

To learn more about this step, consult the list of key factors to consider when researching locations below.

Step 3: Develop your new location strategy and stick with it

Whether your strategy involves building a new remote site or reducing the number of existing facilities to streamline the operations, the site selection process is quite similar. Developing a precise implementation plan will immensely increase your chances of success.

Compare data from your location research with the goals and requirements you defined to facilitate the decision process. You need to carefully consider several location-specific factors, analyze what resources and services are available at each site (internally and externally), and conduct a cost-benefit analysis to identify locations with the most promising future.

After weighing the pros and cons of each location, calculating risks and rewards, and making a final decision, stick with it. Even if other companies seem to have better results elsewhere, remember that your company is unique, and you made a deliberate choice based on your specific situation . Give your location strategy enough time to gather more data necessary for evaluation and optimization.

Step 4: Execute the program and focus on meeting your goals

When the choice is made and confirmed with stakeholders, it's time to communicate the decision to employees and customers and execute the service location strategy. In operations management, measurable goals will be your guidelines. A precise action plan for new site development and your trusted partner , a company specializing in location strategy and business incentives advisory, will support your expansion activities, so everything that remains is to focus on the strategy implementation. Remember to document your progress, as it will come in handy in the next step.

Step 5: Evaluate your progress and revise the strategy

No matter how well-prepared your business is, no location strategy is ever perfect. No expert can predict all obstacles coming your way in a new location, and no process can prevent all challenges arising from your consolidation efforts and the ever-evolving needs of your customers . With so many factors influencing your business's success, the best location strategies are the ones flexible enough to make adjustments when necessary without sacrificing your key requirements.

In reality, the evaluation and optimization step plays a significant role no matter how successful the strategy is. Even if everything is going exactly as expected, your new experience in a new location is bound to broaden your horizons and generate new ideas for increasing the productivity and profitability of your company.

Keep an open mind and remain responsive to local culture and community to unlock even more business benefits in the future.

Key factors to examine when researching new locations

Physical proximity

The physical proximity of the prospective facility to your existing locations and potential impact on efficient communication capabilities and transportation costs.

Talent quality and talent availability

The quality of local talent usually results from the education system's quality, the number of graduates, and international migration trends. Talent availability is affected by the relative strength of your job market competitors and the overall ratio of supply and demand for relevant skilled labor in the local community.

Business ecosystem

Judging the business ecosystem at any given location calls for examining how business-friendly local economic policies and other governmental regulations are, whether the country is a signatory to any trade and other international agreements, and whether there are special economic zones or other notable incentives for foreign investors. This complex factor needs to be approached differently when considering a store location strategy in retail and a warehouse location strategy in logistics.

Estimated cost of investment

When estimating the cost of establishing a site, make sure to account for facility/office space costs and other infrastructure costs, talent acquisition and labor costs, transportation costs, energy and amenity bills, typical rates of all necessary external services, costs of regulatory compliance (e.g. to cross-border data transfer regulations) and taxes.

Local culture and other societal factors

Evaluate the general quality of life in the country, its capital, and other larger cities. Assess the availability of healthcare , political stability, crime rate, and shared community values.

More tips to improve your location strategy

Consider the recommendations below to maximize your chance of building a good corporate location strategy!

• Before committing to building a new site, research the alternatives, including founding a new office in a Build-Operate-Transfer model with a specialized partner and going for relevant managed services .
• Examine the shape of the local real estate market, including current and projected office space cost and the overall quality of existing office locations. Consider utilizing location intelligence/location planning software to expedite your research.
• Determine the proximity of your potential office locations to other big cities in the area.
• Investigate the impact of necessary transportation costs on your bottom line in all prospective locations.
• Leverage official population and labor data to evaluate education levels, assess talent supply and talent demand, and uncover projected population growth.
• Find out how many of your competitors already contend for the same talent in the same exact location.
• Adapt your job postings and the recruitment process to accommodate the expectations of local employees.
• Identify at least one key opportunity to differentiate your organization from other companies operating in the local market and become a desirable employer (for example, in a country where companies prefer their employees to work from the office, consider allowing remote work).

Strategic advantage for your business

Make your IT and workforce strategies drive your business value with support from delivery-focused consultants.

Let's build the best location strategy for your business

In today's dynamic global economy , the importance of location strategy can't be overstated. To remain competitive, businesses must form research-based location strategies when deciding where to set up their new facilities and hire new employees. Investing in an optimal location will enhance any company's efficiency and result in more growth opportunities in the future.

Increase your chances of formulating the right location strategy by partnering with Maxima Consulting. Leverage our vast expertise in setting up remote excellence centers and specialized onshore and offshore teams for global clients in various industries. Learn more with our guides to outsourcing in India , offshoring to Poland , and setting up a business in the Netherlands .

Contact us today to schedule a free consultation with one of our workforce and location experts.

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How to Choose a Business Location

8 min. read

Updated January 5, 2024

Choosing the perfect business location is more than finding a place that looks like you envisioned.

It’s about being in a competitive location that helps grow your business, staying within budget, and meeting local and state regulations and laws.

In this guide, we’ll work through key questions to narrow your location search and provide additional resources to help you find the right spot.

• 1. What location type fits your business?

To start your search, you should understand the different types of business locations. 

• Retail: These are storefronts, malls, or commercial streets suitable for businesses that rely on foot traffic and visibility to attract customers.
• Office space: Suitable for businesses that rely on something other than walk-in customers. It can be a shared office space, a serviced office, or a dedicated office in a commercial building.
• Industrial: These are locations suitable for manufacturing or warehousing businesses. They are usually located outside the city center and have heavy machinery and storage facilities.
• Home-based : Suitable for businesses that do not require a physical storefront or office, such as online businesses or freelancers.
• Pop-up: Temporary spaces that businesses can rent for a short period, often used for testing a new market or for seasonal businesses.
• Mobile business: For businesses operating from vehicles, such as food trucks or mobile services.

Identifying what physical setup best fits your business will make your search more focused and efficient. If you’re unsure which location type fits your needs, the remaining questions should provide additional clarity.

Dig deeper: What to consider when selecting an office space

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2. What’s your budget?

The next step in narrowing your location search is to bring your budget into the conversation.

Your budget will determine the locations you can afford and solidify the areas feasible for your business. 

Understanding your budget involves more than knowing how much you can afford to pay on rent. It also includes your startup and operational costs and additional charges to make the location viable for your business. 

Tip: To truly understand your financial position, we recommend you create a financial forecast .

Here are some additional questions to answer:

• Will you have to do extensive renovations before you can move in?
• How much are state and local property taxes? How much are income and sales taxes? 
• Could you pay less by choosing to start up in another state?
• Can you afford to pay your employees at least the minimum wage?
• Do you qualify for any government economic programs or incentives? Might you qualify somewhere else?

A clear and comprehensive understanding of your budget and all associated costs will enable you to make an informed decision about your business location. It will also help you avoid any unexpected expenses.

Dig deeper:

Budget-friendly alternatives for your business location

Is price the most significant factor when selecting a location for your business? Narrow down your search with typically lower-cost options like coworking spaces and non-traditional rental properties.

Why you should consider a coworking space

Coworking spaces provide far more benefits than cheaper-than-usual rent. From networking to improved facilities—sharing space may be a significant growth opportunity for your business.

Understand your startup costs

Know what it will cost to rent or purchase a space for your business and handle any renovations to met your needs.

Create a financial plan

Understand how the cost of your location will impact your finances by forecasting your potential sales, expenses, personnel costs, and cash flow.

• 3. Does it meet customer expectations?

Your business location plays a significant role in shaping customer perception. It’s not just about the physical place but how the location aligns with your brand image and the expectations of your target market .

Your location should resonate with your target audience and meet their expectations regarding convenience, accessibility, and overall vibe.

For example, an artisanal coffee shop would fit well in a trendy, artistic neighborhood or near cultural spots where customers seek a unique, cozy atmosphere. It wouldn’t work in a busy commercial area or near fast food chains and big box stores where cost and speed are likely more important to consumers.

It’s essential to conduct market research to understand the preferences and expectations of your target market. Consider factors such as:

• Demographics of the area
• Presence of competitors
• Atmosphere of the neighborhood

Remember, your location is an extension of your brand. Choosing a location that aligns with your customer’s expectations will help you attract and retain them.

• 4. How safe is the location?

Don’t underestimate safety when choosing a location. A location viewed as unsafe can deter potential customers, make it challenging to attract and retain staff or lead to a higher risk of theft or vandalism.

Here are a few ways questions that can help you gauge overall safety:

• What is the crime rate in the area?
• Is the area well-lit, especially during the evening?
• Is the location easily visible from the road or other businesses?
• Is there a high level of foot traffic in the area?
• What is the overall reputation of the neighborhood?

Remember, choosing a location that is both actually safe and perceived as safe by your target audience is essential.

Dig deeper: How to set up a safe working environment

• 5. Is there increasing demand?

Choosing an area that is thriving and poised for growth is crucial for the long-term success of your business. Growing demand indicates a healthy economy, leading to increased foot traffic, higher sales, and a good network for partnering or networking with other companies. 

Here are some key questions to consider:

• Is the population in the area growing?
• Are there new businesses opening in the area?
• Are property values increasing?
• Are there any planned infrastructure developments or investments in the area?
• Are there opportunities for networking or partnering with other businesses?

A real-world example of this is the tech boom in Silicon Valley. 

The area became a hub for technology companies, attracting a highly skilled workforce, and led to increased demand for services and housing in the area. 

Dig deeper: The best places for high-growth businesses

• 6. Is the location accessible?

For a location to be truly accessible, it should be easy for you, employees, vendors and suppliers, and your customers to reach your business. 

Since accessibility needs vary, here are some key questions to consider:

• Is convenient parking available?
• Is the location easily accessible by public transportation?
• Is the location near other businesses or attractions that your target market frequents?
• Are there any physical barriers that could make it difficult to access your location?

You likely don’t need to answer “yes” to every question for a location to work. Just be sure that a lack of accessibility won’t negatively impact your sales, recruiting, or brand perception.

7. Are you able to legally do business at this location?

Ensuring that you can legally operate in a given location is crucial. 

To determine your legal ability to conduct business, start with zoning regulations and ordinances. These affect your ability to purchase the property, make changes, and even operate your business there. Remember, many of the same zoning laws apply even if you plan to operate your business from home. 

To determine the zoning of a property, contact your local planning agency or consult an attorney. A simple online search may also provide a zoning map of your area. 

Additional legal considerations include:

• Business licenses and permits: Ensure you have obtained all necessary licenses and permits, including a business license, health permit, fire department permit, signage permit, etc.
• Building codes and regulations: Ensure the building complies with all local building codes and regulations. This may include compliance with fire safety standards, accessibility requirements for people with disabilities, and other structural and safety standards.
• Landlord approval: If you rent the space, ensure that the landlord approves of the nature of your business and any modifications you plan to make to the property. This may involve negotiating a lease agreement that clearly outlines the permitted uses of the property and any restrictions.
• Restrictive covenants: Restrictive covenants are legal obligations imposed on a property by a previous owner or the homeowners’ association and may include restrictions on the type of business that can operate on the property, the hours of operation, noise levels, etc.
• Insurance: Necessary insurance coverage may include property insurance, liability insurance, business interruption insurance, etc.

Remember, it is essential to thoroughly research and understand all legal requirements and restrictions before finalizing your business location. 

Additional resources for choosing the right location

13 tips to identify a great business location.

Do you need help figuring out how to start your location search? Try exploring one of these business location factors, courtesy of the experts from the Young Entrepreneur Council.

How to establish a business in a new location

If you’re changing the location of an existing business, you likely have some idea of what to look for in a location. So, your focus should be on what it will take to reestablish your business successfully.

• Start your location search

Knowing what kind of location you want and what you need to consider is all very well, but where do you go to find a physical business location? While not an exhaustive list, here are a few ways to get started:

• Your local SBDC
• The local Chamber of Commerce
• Walking the neighborhood, keeping an eye open for rental signs
• Commercial real estate agencies

Are you planning to run an online business? Check out our guides on starting a home-based business and setting up your business’s online presence .

Finding the right location is one of the final steps to start a business . Now it’s time to solidify your team , get your marketing strategy in place—and ensure that opening day at your new location is well-staffed and well-attended.

Kody Wirth is a content writer and SEO specialist for Palo Alto Software—the creator's of Bplans and LivePlan. He has 3+ years experience covering small business topics and runs a part-time content writing service in his spare time.

Table of Contents

• 2. What’s your budget?
• 7. Can you legally do business?
• Additional resources

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10 Factors to Consider During Business Location Analysis (2021)

Selecting the best location for your new business is a decision that you should not take hastily.

Your first consideration in terms of comfort and cost concerns is to go on a quest to find the perfect location for your business.

In this article, we are going to shed more light on the concept of business location selection and then go deeper to discuss the terms of business location analysis and business location strategy and talk about their importance on business location selection.

Business Location Analysis: Definition and Objectives

Location refers to the choice of the region and the selection of a particular location for establishing a business or a factory.

But the choice is made only after the cost and benefits of the various alternative sites are considered.

It is a strategic decision, which can not be changed once it has been undertaken.

If the location is only changed at a considerable loss, it should be selected according to its requirements and circumstances. Every plant is a case in its own right.

A businessman will attempt to find the most suitable or ideal location.

An ideal location is one where the cost of the product is kept to a minimum, with a large market share, the least risk, and the highest social gain.

It is the location of the highest net benefit or which offers minimum unit cost of production and distribution.

Business Location Analysis Definition

Location analysis is a dynamic procedure in which entrepreneurs evaluate and compare the suitability or otherwise of alternative sites for choosing the best site for a given client. It is composed of the following:

1. Demographic Analysis

This includes the analysis of population in the region in terms of total population (in numbers), age distribution, per capita income, level of education, occupational structure, etc.

2. Trade Area Analysis

This is the analysis of the geographic area that offers the company continued clientele.

This analysis would also consider the possibility of entering the trade area from alternate locations.

3. Competitive Analysis

This analysis helps in assessing the nature, location, size, and quality of competition in a given area of trade.

4. Traffic Analysis

To get a rough understanding of the number of potential customers passing through the proposed site during the working hours of the location, the traffic analysis is aimed at determining possible locations in terms of foot and car traffic passing through a site.

5. Site Economics

Under this section, alternative sites are analyzed in terms of establishment costs and operational costs.

Establishment costs are the costs incurred for permanent physical facilities but operational costs are incurred for running a business on a day-to-day basis, these are often called running costs.

Business Location Analysis Objectives

The location of a business needs to be determined while keeping the following targets in mind:

1. Holding Minimum Investment And Operating Costs

The primary goal of choosing a suitable location is to ensure minimal investment and lower operating costs.

This could be achieved by locating the business in a place where raw materials, labor, transportation, and power are readily, regularly, and sufficiently available.

2. To Make Sure The Business Operation Is Smooth

Another goal of the optimal location is to ensure the business operations are running smoothly.

This could be achieved if the business is located in a place where banking, communication, transportation, repair, and maintenance services are easily and regularly available.

3. To Improve Welfare Of The Employees

If the business is located where educational recreational, media and religious needs of the employees are met, they will definitely feel attached to the business and develop loyalty and commitment to it.

4. To Coordinate With The Government Policies And Regulations

Whilst selecting a location, the entrepreneur must ensure that their decision does not conflict with the policy of balanced regional development issued by the government.

Business Location Strategy Factors

Being in the right location is a crucial ingredient in the success of a business.

If a business chooses the wrong location, it may not have sufficient access to customers, workers, transportation, materials, etc.

Consequently, location often plays a significant role in the profit and overall success of a business.

A location strategy is a plan to achieve the optimal location for a company by identifying the needs and goals of the company and searching for locations with offerings that are compatible with those needs and goals.

In general, that means the company will try to maximize opportunities while minimizing costs and risks.

The location strategy of a business should adhere to its overall corporate strategy, and be part of that plan.

Therefore, if a company dreams and plans to become, for example, a global leader in fashion production, it must consider establishing plants and warehouses in regions that are consistent with its strategy and optimally positioned to serve its global clients.

Executives and managers of a company usually develop a business location strategy but companies however, may select consultants (or economic development groups) to undertake the task of developing a location strategy, or at least assist in the process, especially if they have little experience in location selection.

The standard formulation of a business location strategy includes the following factors:

• Facilities: Planning facilities requires deciding what sort of room a organization would be required, considering its short-term and long-term objectives.
• Feasibility: Analysis of feasibility is an assessment of the various running costs and other considerations related to the different locations.
• Logistics: Logistics assessment is the examination of the transport choices and costs for the manufacturing and warehousing facilities in question.
• Labor: Analysis of labor determines whether or not prospective locations can meet the labor needs of a company, given its short-term and long-term objectives.
• Community and Site: Evaluation of the Community and site includes understanding whether or not a business and a prospective community and site would be compatible in the long term.
• Trade Zones: Companies will want to consider the advantages that free-trade zones provide, which are closed facilities supervised by customs services where goods can be brought in without the normal customs requirement. There are some 170 free-trade zones in the United States and other countries have them too.
• Political Risk: Companies considering expanding and spreading to other countries must take political risk into consideration when establishing a business location strategy. Because a number of countries do not have stable political environments, if companies plan long-term operations in such countries, they must be prepared for upheaval and turmoil.
• Governmental Regulation: Companies can also face government barriers and severe constraints and regulation if they plan to expand to other countries. Therefore, when developing location plans, businesses need to investigate regulatory – as well as cultural – challenges in other countries.
• Environmental regulation: The various environmental regulations that could affect their operations at different locations should be considered by companies. Environmental regulation can also impact the relationship of a company with the environment surrounding a prospective venue.
• Incentives: Incentive negotiation is the process of negotiating land between a business and a group, including any incentives that the business may obtain, such as tax cuts. Incentives can play an important part in the selection of a site by a business.

Companies may also have to look at other aspects of prospective locations and communities, depending on the type of business. Based on these considerations, businesses are able to choose a site that best serves their needs and helps them develop a business location strategy and therefore achieve their objectives.

Requirements Of The Company

The initial part of developing a business location strategy is to determine what a firm will need from its locations.

These needs then serve as some of the primary criteria that a business uses to evaluate various options. Some of the basic criteria that an organization has to remember are:

• Size: A business has to determine the size of the property or the facility it requires for its actions.
• Traffic: If you are in the service business, your company must obtain statistics on traffic volumes or the number of pedestrians passing by a prospective location every day.
• Population: If you are running a service or a manufacturing activity, your company needs to analyze the population of prospective locations to ensure a sufficient number of potential clients (if a service business is in discussion) or a sufficient number of qualified or trainable employees. Additionally, manufacturers also benefit from being close to their customers, because customer proximity reduces shipping time and cost and increases customer responsiveness for the company.
• Total costs: Companies should determine the maximum total cost of a new location that they are willing to pay. Total costs include costs related to production, property, labor, taxation, services, and construction. More baffling costs, such as materials for shipping and costs of  supplies transportation and the loss of customer responsiveness should also be considered if it moves further away from the customer base.
• Infrastructure: Businesses need to consider what their infrastructure requirements are going to be, including what modes of transport they will need and what types of telecommunications services and equipment they will require for their operations.
• Suppliers: All businesses need to consider the types of suppliers they will need close to their locations. Additionally, having nearby suppliers can help companies lower their cost of production.

In addition to these specific criteria, businesses have to take their particular specifications of prospective locations into consideration. These requirements may be consistent with their overall corporate strategy and corporate goals, and with their specific industries.

Business Location Strategy Trends

Over the last thirty years, globalization and technology have been the greatest drivers of change in the business location selection process.

In recent decades, location activity has been very high due to technological changes, economic growth, international expansion and globalization, and corporate consolidation, mergers, and acquisitions.

Price, infrastructure, labor characteristics, policy and political problems, and the environment are the top five location considerations for global companies.

The availability and quality of labor force, the quality and reliability of utilities, the quality and reliability of transportation modes, telecommunications systems, wage rates, worker motivation, government stability records and industrial relations laws are crucial sub-factors.

Other sub-factors such as patent protection, availability of management resources and specific skills, and cost of system and integration are becoming increasingly important.

Whereas wages and the environment of industrial relations are important factors in making decisions about multinational locations, the main determinant is by far the market size of the host country.

Moreover, global economic considerations have become dominant in the business location strategy, as businesses consider the advantages offered by various locations in terms of positioning themselves on international markets and against other competitors.

In general, when companies seek new locations, they strive to keep operating and start-up costs low, and so they often choose locations to achieve these goals in collaboration with economic development groups.

Companies also now expect to move faster than in the past to new facilities so they tend to focus more on leasing facilities than buying land and building new facilities.

Plus, by leasing equipment and facilities, businesses can migrate every few years if they are required by the market.

Mapchise Technology

Technology, in particular communications technology, has not only been a catalyst of change, but also facilitated the location selection process.

Managers can get initial information via the Internet and promotional software on alternative locations.

Site selection agencies are increasingly using Geographic Information System (GIS) technology, and email has become the most powerful and popular mode of communication in the quest and through negotiation of business locations.

Location databases have allowed businesses to do their own initial screening, thereby reducing their need to rely on economic developers to provide only very basic information and position details — such as commuting habits and workforce characteristics.

This is where Mapchise comes to play. Mapchise is a platform for analytics and location management, designed to expand and manage current and prospecting locations.

The primary purpose is intended for multi-chain prospecting and management.               

Analytics Map is built on demographic analysis for prospect locations. This concept is the primary product and principal selling point of Mapchise.

It consists of three different sources of data: Demographics and Socio-demographic (still in production), Commercial Real Estate, and Residential Property. Socio-demographic is a categorization of different age groups, race, and income.

The main features of this product include:    

• Commercial Real Estate Data (Data is for all of US)
• Competitor analysis                                                               
• Customized target demographic reports to clients needs                                                    
• Socio-demographic data                                                                   
• Real estate data
• Traffic and regional market analysis                                                             
• Territory zoning to prevent canabolization                                                                
• Different layers customized to clients target demographic   

Why Choose Mapchise?

• It provides all the data you need to open a location easily. The data is also proprietary so it won’t be found online for free.
• Task management system is designed and built for multi-chain stores and ease of use by corporate and store management.
• Fully Customizable analytics system designed for the users target market and target demographic, the map and data are built around users provided target market. After answering a few simple demographic questions, the map is fully customized to users’ input.
• Competition Analysis on the map
• Task management system is incorporated into the map for easier management of all locations tasks

How To Find The Best Location For Your Business?

Every business owner has to figure out how the location will (or will not) contribute to the success of a business — and select a spot according to it.

Although when you are looking for a space to house your business, there are many issues to consider, make sure you ask yourself these four important questions:

• Is location significant to the success of your business?

What kind of location would be best for your business?

How much rent you can afford to pay.

• Is the location you have in my mind appropriate for what you want to do there?

Is Location Significant To The Success Of Your Business?

The classic “location, location, location” advice for some businesses is right on the mark— location can bring the difference between feast or famine into reality.

But location may be far less important for other businesses than finding affordable rental space.

In fact, for some businesses, the location is almost irrelevant: service businesses that do all their work at the locations of their customers (such as roofers and plumbers) and businesses that have little public contact (such as mail order companies, Internet-based businesses, and wholesalers).

Picking a low-cost spot in an out-of-the-way location might be a benefit because these types of businesses can pass on rent savings to their clients and their profit margin.

The key to choosing a profitable location is to evaluate the factors that will increase the amount of customers for your company. Ask yourself questions such as:

• Will customers be walking to your location?
• Will customers drive and, if yes, where will they park around your area?
• If you locate near other similar businesses, will you receive more customers?
• Will the reputation of the neighborhood or even of a specific building help you attract more customers?

Bear in mind that different types of businesses draw clients in different ways.

Foot traffic versus car traffic is one of the main distinctions.

For example, if you are opening an urban coffee shop, you can expect your customer volume to be the highest if there is plenty of pedestrian traffic nearby during the hours you plan to keep your business open.

On the other hand, the most suitable locale for an auto repair shop is a well-traveled street where many drivers will see the shop, and are able to easily pull into the lot.

Note also that it would be of benefit to your business to be around similar businesses that already attract the same type of customers you are planning attract.

For example, a women’s clothing store will certainly profit from being close to other clothing shops because many people who shop for clothes prefer to spend at least a few hours in a given location.

In the end, the perfect location for any business is a very individual matter. Spend some time finding out the consumer preferences you would like to draw to your business, and then pick the most suitable location that meets all your needs.

Chances are that you will eventually rent out instead of buying a space for your business.

Most small businesses do not posses the funds to purchase real estate, and in any case it is not necessarily a smart idea to saddle the company with high interest payments.

When looking for a commercial space to lease, one obvious and important concern is finding a location that you can afford.

When preparing your financials (as part of your business plan), you would have calculated how much rent your company will be able to pay on a monthly basis, considering its expected sales and other expenses.

How to assess the average rent in any area?

Agents and brokers are excellent sources of rental cost knowledge in different neighbourhoods.

They will generally give you an average figure for the cost of commercial space per square foot per year in a given area. If you have this number, you can compare it to other spaces you are considering to rent.

If you have not already done so, check out the average rental costs in your area to make sure that the amount you have budgeted for rent makes sense, considering the cost of commercial space in your area, and how important your location is to your business.

For instance, if you decide that location is very important to the success of your business, make sure your budget would allow you to rent a good space given the average cost of space in your area.

If not, then your business plan may need to be reworked.

Is The Location You Have In My Mind Appropriate For What You Want To Do There?

The biggest consideration when choosing a business location is sometimes not where it is but what it is.

The building facilities must be suitable for (or adaptable to) your business. For instance, if you intend to open a coffeehouse, you need a place with limited kitchen facilities, at least.

Unless you are able to convince the landlord to put in the necessary equipment — plumbing, electrical work, and the rest — it is highly unlikely that it will be worth it to lay out the cash to do it yourself.

In short, if a building lacks something substantial that is essential for your business, you should probably look for something else.

Communications Wiring

Another consideration that is important for many businesses these days is having access to modern phone and other data lines that are required by the business.

When considering a particular space, ask the agent or the landlord for communications wiring details, such as whether the space is connected to a fiber optic network or wired for DSL or T1 line (high-volume Internet connections).

Even try to find out who the landlord sold the rights to the risers (wire conduits) in the building. A commercial landlord can not be involved in exclusive contracts with a single provider of telecommunications, such as MCI or AT&T.

It could however be expensive to bring in another provider of your choice.

Electricity and Air Conditioning

Besides high-tech communications wiring, when choosing a business space, do not overlook plain-old electrical power as an important consideration.

Make sure that every room you are looking at has enough power for your needs, both in terms of space outlets and the capacity of the circuits.

If you are going to be operating machinery or other electricity-hungry equipment, find out how much energy the circuits can tolerate from the landlord, and if a generator is available during power outages.

Moreover, if you are going to keep sensitive computer equipment in your office, ask the landlord how many hours of air conditioning will be included in the terms of your lease, and if necessary negotiate longer hours.

Another growing requirement for many businesses is sufficient car parking.

If a significant percentage of your customers come to your establishment by car and there is not enough parking at your chosen spot, looking elsewhere is probably the best alternative.

In addition, the city planning or zoning board can not allow you to function in a space with inadequate parking.

Zoning Rules

At last, the location that you choose for your business needs to be legally acceptable for whatever you plan to execute there.

A certain spot may be good for business, but you are asking for trouble if it is not zoned for what you are planning to do.

You must never sign a lease without being sure that you will be allowed to operate what you are planning in that space.

Your city planning or zoning board will determine what activities are allowed at a given location.

If your zoning board is having a problem with any of your business activities and you are not willing to work out a way to accommodate your company, you may need to find another space for your business.

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If you're experiencing success as a business owner, you might be inspired to expand your horizons and increase profits by opening an additional store in a new market. Just be careful to approach the location selection process the same way you did with your first business. If you don't put a lot of thought into your decision, you may run into issues down the road.

When choosing your next location, there are several things you should think about to set yourself up for success. For instance, do the location demographics reflect your target audience? Are you looking for a large plot for a manufacturing facility or a small site for an office building? Where are your competitors located? By answering questions like these, you can get a better idea of what you're looking for.

Here are four key considerations to help you choose the best location for your next business opportunity:

1. Workforce development

Your workforce will be an integral part of your company. As such, considering workforce development opportunities can help you home in on specific locations. For instance, does the economy in the area support affordable housing and a reasonable cost of living? Will employees have access to schools, museums, parks, and playgrounds?

Although you might plan to hire remotely, it's important to think through what your business needs. "Even with the rise of remote work, your business expansion plan should factor in the prospective region’s talent pool," Missouri Partnership CEO Subash Alias writes in a Chief Executive article. "Some roles can be performed from anywhere, but you might need local employees who can commute to your new location during the workweek."

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So think about what qualities you want your future employees to have. Do they need to be creative? Flexible? Innovative? Should they share the same vision and goals as your company? Search for locations with workforces that align with your ideal employees. If you find a community that's a good fit, you'll have an easier time hiring and recruiting.

2. Your business model

Your business model is another important factor to consider. What do you need from a daily operations standpoint? Matt D’Angelo, a small business freelance writer, poses this example : "If you're working in the industrial sector, or you're running a business that receives large supplies of goods, pick a location with warehouse storage space and easy delivery options for clients and customers. A business that specializes in shipping and holding goods needs certain structural amenities, like loading docks."

You should also evaluate the infrastructure of the locations you're considering. Are you looking at an existing building? Does it have the ability to support your modern business's high-end technology needs? Does it have central air, heating, and cooling? Stairs and an elevator? If you're considering building on a new site, is there ample room for parking? Will it be easy for employees, customers, and purveyors to get to you? Is the site certified and "shovel-ready"?

Finally, you'll want to look into the success—or lack thereof—of previous businesses in the same location. If multiple businesses failed in the same area, you should do some research and find out why. If there's a chance you could fail for similar reasons, you'll want to look elsewhere.

3. Hidden costs

Your location needs to fit your budget, and this includes any hidden or surprise costs. "You might think this goes without saying, but the rent price is not all you need to consider when it comes to money," an Enterprise League blog says . "When choosing a business location, you must consider the hidden cost of doing business as well. Renovations, taxes, utility upgrades, minimum wage requirements, and economic incentives are costs that can increase your costs or save you some money.”

Hidden things that can factor into your startup costs may vary based on location. For instance, local business and property taxes will vary by state. You may also need to navigate unexpected renovations or building costs, such as installing a water softener system if the region's water supply has too many minerals. If you're choosing an area that's notoriously expensive, you'll likely need to pay employees a competitive rate. After all, 67% of full-time employees in the U.S. expect their salaries to factor in cost of living.

4. Advertising and marketing needs

Location can also factor into your marketing and advertising costs and plans. The way you market your business will vary based on the demographics in your area, such as age, gender, occupation, and household income. If the community isn't a good target audience for your business, you may need to spend more on marketing or reconsider your location.

It’s important to think about places in terms of scalability, too. If you're nestled between several other stores or located on floor 20 of a high-rise building, it'll be harder to attract customers.

"You may find a business location that isn’t in a convenient or high-foot-traffic location," a ZenBusiness blog says . "If so, you may need to compensate. This may require extra marketing so that customers know where and how to find you. Online business listings, print advertisements, websites, and social media platforms are all helpful tools."

If you’re thinking about expanding your business, you’re on the cusp of a very exciting time. But before you choose your next location, it’s important to consider what workforce development opportunities are available, what your business model needs to succeed, which hidden costs might pop up, and how a location could impact your marketing and advertising plan. Once you consider these factors, you'll be in a better position to choose the best location for your business.

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Module 12: Managing Processes

Facility location and layout, learning outcomes.

• Explain facility location
• Explain facility layout

Facility Location

Of all the pieces of the planning puzzle, facility location is the most strategic and critical. Once you build a new manufacturing facility, you have made a substantial investment of time, resources, and capital that can’t be changed for a long time. Selecting the wrong location can be disastrous. Some of the key factors that influence facility location are the following:

• Proximity to customers, suppliers, and skilled labor
• Environmental regulations
• Financial incentives offered by state and local development authorities
• Quality-of-life considerations
• Potential for future expansion

The next step, after planning the production process, is deciding on plant layout—how equipment, machinery, and people will be arranged to make the production process as efficient as possible.

Practice Question

Facility layout.

After the site location decision has been made, the next focus in production planning is the facility’s layout. The goal is to determine the most efficient and effective design for the particular production process. A manufacturer might opt for a U-shaped production line, for example, rather than a long, straight one, to allow products and workers to move more quickly from one area to another.

Service organizations must also consider layout, but they are more concerned with how it affects customer behavior. It may be more convenient for a hospital to place its freight elevators in the center of the building, for example, but doing so may block the flow of patients, visitors, and medical personnel between floors and departments.

There are four main types of facility layouts: process, product, fixed-position, and cellular.

The process layout arranges workflow around the production process. All workers performing similar tasks are grouped together. Products pass from one workstation to another (but not necessarily to every workstation). For example, all grinding would be done in one area, all assembling in another, and all inspection in yet another. The process layout is best for firms that produce small numbers of a wide variety of products, typically using general-purpose machines that can be changed rapidly to new operations for different product designs. For example, a manufacturer of custom machinery would use a process layout.

Figure 1. An Example of a Process Facility Layout. Source: Adapted from Operations Management, 9th edition, by Gaither/Frazier.

Products that require a continuous or repetitive production process use the product (or assembly-line ) layout . When large quantities of a product must be processed on an ongoing basis, the workstations or departments are arranged in a line with products moving along the line. Automobile and appliance manufacturers, as well as food-processing plants, usually use a product layout. Service companies may also use a product layout for routine processing operations.

Figure 2. An Example of a Product Facility Layout. Source: Adapted from Operations Management, 9th edition, by Gaither/Frazier.

In the following video, Jansen, a Swiss steel maker, describes how the company’s offices were designed to maximize the productivity and creativity of its engineers:

You can view the transcript for “Office Space – Jansen” (opens in new window)  or  text alternative for “Office Space – Jansen” (opens in new window ).

Some products cannot be put on an assembly line or moved about in a plant. A fixed-position layout lets the product stay in one place while workers and machinery move to it as needed. Products that are impossible to move—ships, airplanes, and construction projects—are typically produced using a fixed-position layout. Limited space at the project site often means that parts of the product must be assembled at other sites, transported to the fixed site, and then assembled. The fixed-position layout is also common for on-site services such as housecleaning services, pest control, and landscaping.

Figure 3. An Example of a Fixed-Position Facility Layout. Source: Adapted from Operations Management, 9th edition, by Gaither/Frazier.

To see an excellent example of fixed-position layout, watch the following video that shows how Boeing builds an airplane. (Note that this video has no narration; only instrumental music. Access audio description by using the widget below the video.)

Access the text alternative for “Making of a Boeing Airplane” (opens in new window).

Cellular layouts combine some aspects of both product and fixed-position layouts. Work cells are small, self-contained production units that include several machines and workers arranged in a compact, sequential order. Each work cell performs all or most of the tasks necessary to complete a manufacturing order. There are usually five to 10 workers in a cell, and they are trained to be able to do any of the steps in the production process. The goal is to create a team environment wherein team members are involved in production from beginning to end.

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• Facility Location and Layout. Authored by : Linda Williams and Lumen Learning. License : CC BY: Attribution
• Practice Questions. Authored by : Robert Danielson. Provided by : Lumen Learning. License : CC BY: Attribution
• rover 200 framing line. Authored by : spencer cooper. Located at : https://www.flickr.com/photos/spenceyc/7481166880/ . License : CC BY-ND: Attribution-NoDerivatives
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Location, Location, Location: The Strategy of Place

• Many companies think of geographic strategy as a short-term checkers match rather than as a long-term chess game.
• Establishing new locations is resource intensive, so a wrong decision can sap the energy out of an organization and cause it to lose focus.

When companies thrive in their home base, temptation can be great to expand to new locations, either across town or around the world. The problem: Many companies think of location strategy as a short-term checkers match rather than as a long-term chess game.

“Many companies don't understand that what works in one location may not work somewhere else.”

"The decision to expand is sometimes driven by the wrong reasons," says Associate Professor Juan Alcácer, who teaches in the Strategy Unit at Harvard Business School. "In many cases companies are not thinking of the long-term consequences of what they are doing."

Such snap decisions can result in geo-mistakes that sap energy out of an organization and cause it to lose focus on what it was doing well in the first place.

Geographic expansion should provide access to a fresh market and to additional resources. But companies that take a strategic view also realize that the new territory should increase a firm's competitive advantage by complementing and adding value to its current business.

After all, the strategic value of a new location depends on three things, Alcácer says: the strength of available resources, such as nearby supporting industries; the company's ability to seek and retrieve knowledge in this setting; and its capability to do something better than competitors.

An example of a firm playing tactical checkers instead of strategic chess is one that decides to expand simply by finding the cheapest places to open up shop; Alcácer says it's a mistake to allow low costs to completely override other factors.

"You should not only think about whether there's a market there or cheaper labor," he says. "You also have to think about what your competitors are doing, whether it's the right time to enter or exit that location. Reducing your costs might not provide you with a competitive advantage at all."

Walmart has been a smart expander since it opened its first store in Rogers, Arkansas, in 1962. Sam Walton slowly branched his growing enterprise to other small rural towns, where the retailer was able to outmaneuver mom-and-pop competitors. The management team again waited until they had developed enough resources before going head-to-head in suburban areas against big-box retailers like Kmart.

Timing Is Critical

A crucial consideration for managers to get right early on is whether the business can afford to spend the required resources—especially when it means siphoning time and attention away from an existing successful business.

"When you open a new operation, it requires not only money but also the time and energy of managers to make sure it's going the right way, and that means you can't focus as much on the base business back home," Alcácer says.

In addition to making sure the resources are in place, corporate leaders must decide which strategic locations to target. Companies often blindly follow their rivals from city to city or country to country without analyzing whether that same situation is right for them. Many businesses that jumped on the China expansion bandwagon are now sorry they made that move, says Alcácer. "They are realizing that they were not well prepared for the market or that it wasn't the right market for them."

Alcácer advises companies to consider sending an advance team to live in a target locale to research the market and business models before expanding.

Another problem with following competitors: an increasing risk that those rivals will gain insight into your operations and even poach highly skilled workers. Sometimes it's best to avoid following the herd and seek out an original niche.

That was the road taken by animation studio Pixar, which established itself near the mudflats of Emeryville, across the bay from San Francisco. Pixar deliberately steered clear of LA, where the bulk of the movie industry resides. Alcácer says that when Disney bought Pixar in 2006, Pixar executives asked to remain based in Northern California because they didn't want the company's culture to be negatively affected by the culture in Southern California.

In some industries, however, executives believe they don't have much choice but to cozy near the competition, especially when they need to plug into unique knowledge that exists in certain areas. Biotech companies, for instance, often operate close to top-notch universities to interact with scientists and cutting-edge research that could potentially feed growth, even if their competitors are also on the same block. Detroit and Silicon Valley, likewise, provided valuable clusters of talent and suppliers where, Alcácer realized, "whenever you saw one firm, you saw the other ones."

In an effort to keep key information from spreading around town, firms operating in these types of highly competitive environments need to maintain strong internal linkages between units and create a culture of collaboration among workers across distances, according to the working paper Local R&D Strategies and Multi-Location Firms: The Role of Internal Linkages , by Alcácer and Minyuan Zhao of the University of Michigan's Ross School of Business. By internalizing its innovations better and faster than nearby competitors, a firm can gain lead-time and a stronger competitive product position in the market.

A company can also prevent pilfering of key information by cutting a project into pieces and shuffling the parts piecemeal to workers in different regions. Alcácer says this model can work like a "need-to-know" spy operation, in which certain information is assigned to specific employees, who are not privy to the whole picture.

Going Global

Expanding operations to another country brings a whole new set of complications, says Alcácer. For one, businesses that expand internationally need to adjust their offerings to a completely different market since each country has its own "knowledge profile."

"Companies often don't consider adapting products to the different markets," he says. "Successful companies that expand assume that by doing the exact same thing they are doing in the home market, they will be successful overseas. But many companies don't understand that what works in one location may not work somewhere else. We tend to believe that technology has made us homogeneous, but distance matters. Countries are different; consumers are different. People in India are different than the people in the United States."

Vodafone learned that lesson the hard way. The London-based telecommunications venture initially forayed into Japan on a learning expedition to better understand the country's sophisticated consumers, but was soon captivated by the established market. The exploratory mission quickly morphed into sell mode. Vodafone bought handsets used in Europe in bulk and tried to introduce them in Japan. Unfortunately, Japanese consumers were hooked on a completely different technology, forcing Vodafone to abandon ship after a few rocky years.

"Vodafone needed to study the Japanese handset," Alcácer says. "When you enter a market to provide a service or product and try to learn at the same time, these two [goals] can be conflicting. You can successfully do both at the same time, but you need to be conscious of the two activities."

Another consideration for an international expansion is that the resources required are greatly magnified, and success might only make matters worse in the short run. "When you start to expand overseas, you often see a negative effect on your operations back home. You are literally going through growing pains, and the more quickly you grow, the more likely you are to have problems."

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Strategic facility planning: an overview, the process and importance

Home » Insights » Consulting » Strategic facility planning: an overview, the process and importance

Growth is the objective for most businesses. And while you plan for that growth, you need to consider, among other factors, whether you have the space to expand your business. Strategic facility planning helps organizations set the strategic direction for all further planning activities.

What is Strategic Facility Planning?

Strategic facility planning (SFP) is a structured planning process that helps organizations align their short and long-term facility plans with their business plans. The SFP process typically includes the entire real estate (network or facility) portfolio, although it can also focus on a single aspect of the plan. It is a data-driven, defensible, high-level look at what facilities and strategic solutions are needed for an organization to achieve its business goals.

Strategic facility planning is the first phase of the overarching facility planning process.

The facility planning process includes three steps:

• Strategic facility planning (SFP): a two-to-ten-year plan that defines the facility needs, at a high level, for an organization to successfully achieve their business plan.
• Master or campus planning (MP): a physical plan that organizes a site or campus, the facility and infrastructure that is needed to implement the SFP.
• Tactical facility planning: the execution of the master plan with detailed programming and conceptual design solutions. Tactical planning also includes the day-to-day workspace planning that is needed for an organization to operate.

Many organizations use “master plan” as an all-encompassing term that groups together the strategic facility plan and master plan. But there are differences between the two and it’s important to recognize them as separate steps in the planning process.

The SFP process answers questions and identifies the facility requirements needed to meet your short and long-term goals. With the right people and data, the SFP process can quickly and accurately look at an organization’s facility demands, gaps, and help guide an organization toward a more efficient and cost-effective facility strategy to inform the development of a full master plan.

Translating the business plan to a facility plan

The first objective of strategic facility planning is to clearly define the facility implications of your business plan for both the near and long term.  For most SFPs a near-term planning horizon is 3-5 years, and the long term is 6-10+ years.

For some organizations, the business plan is simple. They want to grow by a certain percent per year with accompanying revenue, expenses, and profit goals. For others, the business plan also includes strategies to respond to changing markets or demographics, a change in its distribution network, the adoption of new technologies, or perhaps potential mergers and acquisitions. For a complex organization, the list of business drivers can be quite extensive.

Given that the cost of facilities is predictably the second largest expense line item for most organizations (payroll is the number one expense), it would serve any organization well to not only have a robust business plan but to also have a dynamic strategic facility plan to understand and predict its facility expenses as the business changes.

Kicking off the strategic facility plan process

The SFP kick-off meeting must focus on communicating the business goals, assumptions to be made, and questions that need to be answered.

The SFP process begins with a review of the business plan. Some of the most important points to discuss include goals for growth, pipeline of products that will trigger that growth, as well as any other business drivers, growth initiatives and/or operational changes that are envisioned for the planning horizon (typically 3-10 years). The goal is to get a comprehensive picture of the business and where you want to take it in as much detail as necessary to be able to lay out the facility implications.

Who is involved in this initial SFP meeting? C-suite executives and directors/managers that can speak to the organization’s current and future business and operations, and those empowered to make appropriate business, operations, and facility assumptions.

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downloadable strategic facility planning checklist for biopharma

Making assumptions

Once you have laid out your organization’s business and operational plans, the next step is to clearly define what assumptions are being made about the facilities and operations. For example, an organization with a large manufacturing operation may do all their quality control testing activities in-house. If the organization is planning to grow manufacturing, it stands to reason that the supporting testing operations may also need to grow, unless excess testing capacity currently exists (more on that later).

Alternatively, these types of testing services can be outsourced. So, what is the assumption for the future? Testing in-house or outsourced? Does a deeper study need to be triggered to compare the costs? During the kick-off meeting, develop a list of assumptions, determine if those assumptions need to be challenged, and identify potential follow-up actions. This will ultimately inform the strategic facility plan.

Here is the key – as the SFP is revisited annually (ideally), these assumptions may need to change. And that is OK. Having a comprehensive list of the assumptions at the forefront of the SFP deliverable is critical to understanding the SFP findings and recommendations, and it allows the SFP to evolve and change with changes to the business.

SFP answers strategic questions

Given that facilities are a major cost item on the expense side of the P&L, many organizations leverage the SFP process to answer strategic questions about their growth.

• For example, if an organization has an urgent need to add expand its product line to serve a new market sector, they may use the SFP process to help them answer the question, “What is the quickest, most cost-effective way to bring on new warehouse space?”  
• In the case of our manufacturing/testing example, the client may have limited lab capacity so the question to be answered might be, “ How much can we increase our manufacturing before we need new lab space?” typically followed by, “How much additional lab space is needed to support the 10-year manufacturing demand? ”
• With the rapid global spread of COVID-19, many organizations are now asking the question, “ How do I need to adjust my facilities for a pandemic?”

Identifying the facility demand for the entire portfolio

While organizations often focus on the revenue-producing part of their business and facilities (i.e., manufacturing), a good strategic facility plan should evaluate the entire real estate and space portfolio to identify the entire facility demand implicated by the business plan . To continue building on our example from above, an increase in manufacturing will likely trigger the need for additional warehouse space and even offices—beyond those additional testing labs.

Developing a baseline for SFP with data-driven analytics

While the SFP process identifies what facilities are needed for the organization to meet its goals and objectives of the business plan, this can only start with a comprehensive understanding of your current facilities’ capacity and utilization. Work with the day-to-day operational managers to understand how well the existing facilities are operating and where opportunities and limitations currently exist for adding capacity and/or increasing utilization. In other words, you need to know what you have before you can define what you need.

In the case where an organization is completely new and has no existing facilities, CRB leverages benchmarks from other similar facilities to make assumptions regarding space utilization, capacity, and facility demand. In a nutshell, the SFP process lays out the facility supply, facility demand, and facility gaps for the organization for the specified planning horizon.

Leverage the organization’s space management data

In addition to talking with managers and compiling operational data, leverage a space management tool for SFP to establish the facility supply (baseline). Most organizations that have more than 250,000 square feet of facility space have adopted (and are using for tactical space planning) an Integrative Workplace Management System or IWMS . If populated correctly, this database contains helpful information for every room in every building. Most importantly, this provides quick access to floor plans, square footage, and space utilization. With this database in hand, you can quickly assess your organization’s baseline supply for the SFP and add attributes and additional data points as needed for establishing the facility gaps.

Understanding utilization and capacity of existing facilities is key

The next step is to develop a deeper understanding of both the utilization and capacity of the existing facilities and develop planning metrics that capture this information. This is where SFP can help an organization develop the most appropriate approach given the nature of the space functions and the data available. Each space function will likely have a different strategy for establishing capacity, and corresponding metrics once the current utilization is understood. Lab capacity may be driven by samples, equipment, or even headcount. The capacity of a warehouse, on the other hand, will be driven by storage pallets; and offices will most likely be organized by headcount and/or seats.

The SFP must identify, for each space function, the existing utilization and capacity as well as future potential capacity if the utilization strategy is changed. Existing and future utilization may require a deeper dive into the operations to identify specific strategies to improve efficiency and increase capacity – thus addressing the facility demand and minimizing the gaps. For example, an existing manufacturing floor or warehouse may not be efficiently organized from an equipment layout and operational flow perspective. It is not uncommon for CRB to assist companies to “re-work” their production and warehouse spaces to increase capacity and defer spending capital on new facilities.

Identifying and communicating the facility gaps

Once you determine the baseline facility supply and forecast the facility demand, you can develop the gap analysis. The facility gap analysis gets the most attention in the SFP process because it provides the unmet facility demand data. With a robust data-driven SFP process, these gaps are very defensible, providing leverage to make strategic decisions about future growth and capital planning . However, these gaps are identified based on the many assumptions you’ve made about your organization’s business drivers and operations.

Gap Analysis Chart

Re-stacking strategies allowed the square footage of the warehouse to reduce from 33 percent of the total space portfolio to 11 percent.

Case in point: CRB provided a strategic facility plan for a growing biopharma client. Our team worked with the client’s leadership to translate projected manufacturing forecasts to space and facility demands. Three major demand drivers impacted the facility gap analysis:

• Production and equipment forecasts
• Supply chain pallet forecasts
• Head-count projections

Reducing the gap by optimizing warehouse space CRB determined that additional space was required to accommodate manufacturing growth. Being located adjacent to the warehouse created an opportunity to leverage an underutilized space for this growth. Re-stacking strategies allowed the square footage of the warehouse to reduce from 33 percent of the total space portfolio to 11 percent. This provided enough space for manufacturing to add the equipment needed to meet the five-year production forecasts.

Revisiting assumptions to minimize the gaps

When the facility gaps are large, you need to revisit the assumptions made about operations and utilization. In our testing lab example from above, the lab may currently operate from 8 am – 5 pm, five days a week. Because this is the current work culture, it was likely the assumption for the SFP analysis. But what happens if a second shift is added for lab testing? Or even a third shift? Assuming this is a doable strategy and aligns with the manufacturing schedule, it could potentially reduce the testing lab space demand considerably. In this case, the organization may also explore potential outsourcing of select lab tests to reduce in-house lab demand.

The most common assumptions to be re-visited to help minimize the facility/space gaps include the following:

• Outsourcing
• Headcount reduction/automation
• Operations improvements (more efficient equipment and/or space layout)
• Shared and multi-use spaces
• Shared instead of dedicated office seats

Developing strategic facility options and scenarios

The final step in the SFP process is to lay out all the credible strategic facility solutions to address the facility gaps. You may develop solutions to correspond to different operational assumptions. There may also be a series of options that align with various real estate opportunities. Clearly define each option, and identify the pros and cons. Additionally, develop and consider both capital and operational costs.

During this process we develop and consider both capital and operational costs.

Example heat map from a gene therapy client's SFP

Once all the quantitative data about each option is defined, it is important to add any qualitative criteria that would influence the viability and success of the strategic planning options. For example, a facility planning option may work great from a space layout perspective, but the implementation of it may significantly disrupt current operations, making that option very costly. Supply chain and regulatory impacts must also be considered as appropriate. Also, worth noting are impacts to employees. When considering real estate options, for example, employees can be significantly affected if a new facility on a campus is out of a comfortable walking range from their current workspace, or if a new real estate option extends their commute distance.

Once you have identified all the qualitative and qualitative evaluation criteria, you can score and weigh the options. A heat map is a valuable tool to leverage for evaluating and comparing strategic planning options and presenting them to executives and decision-makers.

The SFP process is a thoughtful, robust, and necessary step for any organization whose business is growing or changing in some fashion. Whether you are a manufacturer looking to expand into new markets, or a university looking to change the way students learn on a campus, SFP is a necessary first step in the facility planning process.

Are you ready to better understand your business implications for your facility? Our Consulting Team is here to help our clients with space utilization, reducing capital cost, and more.

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In the hospitality sector, hotels are usually found in popular tourist attractions. This is an example of which factor influences business location choices?

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_______  takes into account the population's average age, age composition, income, skill level, education level, occupation as well as regional governance. 

Your ideal business location should provide the least risk, low operational cost, big market presence and less competition. 

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For businesses, whether big or small, location is crucially important. Business location not only affects a company's costs and revenue as well as its ability to serve the customer. Getting the wrong location can have serious consequences for the business. In this article, you will learn what makes a good business location and how to set up a location strategy to ensure success.

Definition of business location

First, let's find out what a business location is and why it is important for a business.

Business location is defined as a place or structure occupied by a firm to run its operations. This includes any structure or establishment used in conducting a business.

Starbucks places its coffee houses in high-street, high-visibility locations in various settings, including downtown and suburban areas. You can also find Starbucks in office buildings, university campuses, and off-street highway locations. 1

A good business location aims to provide an advantage to your business by creating a balance among:

Operational costs (the daily costs incurred to run your business),

Potential revenue

Target customers.

Some examples of good business locations include the M4 corridor for tech companies, tourist attractions for hotel businesses, and the city centre for coffee shops.

Business location factors

Factors influencing the choice of a business location can be split into:

Supply factors

Demand factors

1. Supply factors

Supply factors examine the cost of running your business operations in a location. Some of these supply factors include:

Labour - The cost of employing labour to carry out the same task differs according to location. An excessive presence of labour in a particular location can increase the cost of employment, as opposed to a location with little available labour.

Land c ost - Due to rentals or outright purchases, land cost varies among different locations. The facilities provided after rentals/purchase or development can also affect land costs.

Non-financial factors - Non-financial factors like political stability, language, social amenities, and governmental support can influence the choice and cost of hiring a business location.

Energy c ost - The cost of energy varies among countries, types of business production and the number of employees hired. For example, the energy costs in the UK are different from those in Germany.

Transportation c ost - This includes the cost of transporting raw materials, stocks, finished products, and other necessary business input from/to a business location. It is necessary that a business location be close to its raw materials or services supply to reduce transportation costs. An example of this is the food processing industry, where business locations are usually close to the farm.

2. Demand factors

Demand factors affect services provided to your customers and your business revenue. These include:

Skilled labour - Businesses prefer locations where the right expertise can be found. An example is an M4 corridor in the UK which houses the majority of the UK technology sector.

Location suitability - Some businesses perform better in a certain environment. For example, in the hospitality sector, hotels are usually found in popular tourist attractions.

Customer ease - A business has to be located where its customers will have ease of access to its products or services. For example, a coffee shop creates ease through its location in the city centre.

Future expansion - A location that doesn’t provide the flexibility for future expansion might not provide a good business location. An example is a manufacturing business that has a lot of potential for growth and expansion. Choosing a larger venue in the beginning will give the business more flexibility to expand its facility later.

Importance of business location

Choosing the right business location is vital to business operations and success. Here are some key benefits of a good business location:

Attract and retain workers with the required skills and talent.

Provide a balance between business costs and business revenues.

Offer the necessary infrastructure for your business growth . These infrastructures include a good transport system, gas pipes, and road networks.

Position your business to fully benefit from government policies, grants, or loans.

Ensure the smooth running of your business operations.

Provide an ideal location to get enough traffic for your business or to keep your business confidential.

Business location strategy

A business location strategy is a plan used to find the best location for your business to reach its goals and objectives. A good business location strategy usually involves location analysis.

Business location analysis is a process wherein a business compares different locations' characteristics in order to select the most suitable location. Here is what is included in such an analysis:

1. Demographic analysis

This considers the population of a location. It takes into account the population's average age, age composition, income, skill level, education level, and occupation, as well as regional governance.

2. Location area analysis

This type of analysis considers the potential areas that will provide the most customers to your business. It also analyses the ease with which these customers can reach your business location.

3. Competition analysis

This examines the presence of competitors in the chosen business locations, especially in terms of strengths and weaknesses.

4. Traffic analysis

This analysis compares the number of people passing your different business locations during working hours. These include both automobile and foot traffic. The goal is to find a location that will provide your business with the greatest exposure.

5. Economics of location analysis

The analysis aims to reduce the cost of operations and investment for your business. Operational costs are those involved in the daily running of your business.

In conclusion, a good location is essential for the growth and success of your business. The ideal business location should provide the least risk, low operational costs, a big market presence, and less competition. It should also provide your business with advantages to help achieve your business goals.

Business location - Key takeaways

• A business location is defined as a place or structure occupied by a firm to run its operations. This includes any structure or establishment used in conducting a business.
• Business operational cost - the daily costs incurred to run your business

Target customers

Business location factors that influence the choice of a business location can be broadly grouped into:

A business location strategy is a plan used to find the best location for your business to reach its goals and objectives.

Business location analysis is a process wherein businesses compare different location characteristics in order to select the location best suited to your business.

1. Nithin Geereddy, Strategic Analysis Of Starbucks Corporation, Scholar Harvard Education, 2013.

2. Staff, 10 Reasons Why Location is Important in Business, rovva.com , 2022.

3. Staff, Factors to Consider When Choosing a Business Location , businesstown.com , 2022.

4. Matt D'Angelo, Tips on Choosing The Right Location for Your Business, businessnewsdaily.com , 2021.

5. Alex Saez, The Key Features of an E-Business, smallbusiness.chron.com , 2022.

Flashcards in Business Location 7

Which of these is/are correct 

A good business location strategy involves a lot of business location analysis 

Location Suitability

Balance business costs and business revenues

The cost of setting up and running your business in the different locations is analysed in the _______

economics of location analysis

location suitability

Demographic Analysis 

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Frequently Asked Questions about Business Location

What is a business location?

A business location is defined as a place or structure occupied by a firm to run its operations. This includes any structure or establishment used in conducting a business.  

Why is location important for a business?

Choosing the right business location is vital to business operations and success.  A good location helps to :

Attract and retain workers with the required skills and talent. 

Provide a balance between business costs and business revenues. 

Offer the necessary infrastructure for your business growth. These infrastructures include a good transport system, gas pipes, and road networks.  

Position your business to fully benefit from government policies, grants, or loans. 

Ensure the smooth running of your business operations. 

Provide an ideal location to get enough traffic for your business or to keep your business confidential. 

What is a good location for a business? 

A good business location aims to provide an advantage to your business by creating a balance of the following: 

What are factors to consider when locating a business? 

Business location factors that influence the choice of a business location can be broadly grouped into: 

Supply factors 

Demand factors 

The supply factors include labour, land cost, non-financial factors, energy cost, and transportation cost.

The demand factors include skilled labour, location sustainability, customer ease, and future expansion.

What are examples of good business location?

Starbucks places its coffee houses in high-street, high-visibility locations in various settings, including downtown and suburban areas. You can also find Starbucks in office buildings, university campuses, and off-street highway locations. 

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Facility planning: A strategic approach to a better office

By Kayla Giles

6 mins read

Facility planning is essential for the modern office, especially given the rapidly changing landscape of today’s workplace. With more and more companies embracing remote work , hybrid work , and more flexible working in general, they need strategic solutions that come from good facility planning in order to maintain structure and productivity. 

In this article, we explore why and how facility planning can help companies stay profitable and better support their workers. Even in the midst of new and changing realities on the ground. 

What is facility planning?

Facility planning is the systematic process that smart organizations use to ensure they have the facilities and related resources necessary to meet both their short and long term goals. Sometimes referred to as strategic facility planning, it’s the key decision-making that companies use to future-proof their workspaces. 

The reality is that simply following space management best practices isn’t always enough for your facility. Without good strategic planning and foresight, companies often stay stuck in problem-solving mode, instead of anticipating new problems before they arrive. 

On the other hand, when companies realistically assess their current and future space and facility needs, they can put themselves in a much better position to weather any new storms. 

In other words, facility planning is what helps companies take a proactive approach to their workplace strategy and real estate management , instead of a reactive one.  It’s about bringing business goals in line with facility goals. It’s also about ensuring both the business and its facilities are ready for the future. 

Who is responsible for facility planning?

The facility planning process is complex, requiring a high level of collaboration in the workplace .

That said, facility needs are typically handled by a facility manager (FM), or a facility management team. FMs make great planners, because they typically have both the data and resources at hand to make smart decisions for the office. And because keeping things running smoothly and anticipating needs is ultimately their main goal. 

FMs are responsible for all aspects of facility management, including ensuring employees have the tools and space they need to do their jobs properly.  As such, they are in the best position to understand facility goals. This is especially true when they collaborate with either an executive or growth team to stay up to speed on overarching business goals as well. 

Moreover, the roles and responsibilities of FMs have been evolving since the pandemic, so that they are more and more becoming leaders in their organizations—again, priming them to be in the best position to make good facility plans. 

This is also one of the main reasons why facility management services are usually best handled in-house—either by a dedicated FM, or by using facility management software to disperse these tasks among invested team members.  

What are the four steps in facilities planning?

No matter who manages facilities planning for your organization, this process works best when it follows the following four steps.

1. Understand your goals

As we’ve mentioned, facility planning is about bringing business goals in line with both current facilities and any planned expansions. So before any planning actually takes place, the planning task force needs to identify what demands are being placed on them from the business, coupled with the realities of their existing facility.

Thankfully, these two perspectives often dovetail. 

For example, cost-effective sustainability is quickly becoming a goal of virtually every business. 

Improving space utilization —which can dramatically cut back on the amount of corporate real estate needed—can therefore keep everyone happy. 

Remember, business drivers will vary from company to company. This ranges from responding to changing markets or demographics, adopting new information technology, preparing for potential mergers, or opening new offices or storefronts, just to name a few.

And of course, virtually every company is concerned with growth. 

Identifying which goals are most important now is the critical first step to planning. To make this process work, everyone on the facility planning team needs to understand the mission, vision, and company culture. 

FMs should therefore be given the tools and access they need to evaluate the entire real estate portfolio . Then, they can then understand how the business plan and other items coming down the pipeline will impact their space needs.

Only when they are armed with this critical data can they understand if current facilities will meet demand, or whether construction projects—or maybe just a better desk booking system—should be planned for the near future.

2. Analyze and set benchmarks

Of course, planning doesn’t stop with simply understanding your goals. You also need to understand how to actually make those goals a reality. 

To properly plan a facility, FMs need to leverage any and all existing data about the organization’s existing space management.

This isn’t just about knowing what your square footage is; it’s about figuring out how those square feet interact with staffing concerns and long term goals. 

Specifically, FM need three tools to strategically analyze their existing workspace and make plans for change:

• Comprehensive reports and analytics that provide actionable insights into the existing needs of employees and real-time use of existing space, including occupancy and portfolio reports
• Scenario planning software, which makes it easy to virtually test out the impacts of reconfigurations before having to manually implement them
• Stack plans , which provide a high-level picture of how space is currently being used

Of course, this assumes there is already an existing strategy in place to maximize the three basic elements of space management —effective space planning, effective office use, and effective space tracking. 

When these systems are in place, and the right data is being collected, FMs can use them to perform gap analysis and set benchmarks. This will guide future facility management in the best way possible. 

3. Start planning

Once FMs understand both their goals and their benchmarks, they can begin the actual work of creating their master plan. This is when the challenging work of translating a facility plan into a business plan happens. It will look different, depending on the business drivers for your organization. 

To plan properly, FMs should first document their primary objectives, and then conduct a risk assessment of any plans. This assessment should include cost analysis, which can be done using scenario reports. 

At this stage, FMs can also benefit immensely from move management software . They will also need to develop a method for both gaining approval and reporting on results. 

Especially if their plans will include new working policies (such as implementing flexible seating arrangements like hot desking or office neighborhoods ), they may also want to seek input from both human resources and the employees themselves. 

In fact, companies should look to include all stakeholders in all aspects of the strategic planning process. 

4. Start acting

The more FMs are able to maximize the first steps of facilities planning, the easier acting on their plan will be. 

This is also where the right tools become essential. The best way to implement any new changes to a workplace or facility is with the right facility management software. Ideally, this is one that can integrate with your company’s existing integrated workplace management system (IWMS).

Finally, remember that strategic facility planning isn’t a ‘one and done’ occurrence. 

This is an iterative process. Any plans will need to be assessed, adapted, and maybe even rewritten on an ongoing basis. This will include continually relying on real-time data and comparing it against financial reports and other benchmarks. This will provide a picture of what’s working and what isn’t. 

What is the importance of facilities planning? 

There is a rise in types of work environments , the growing reliance on the digital workspace , and greater competition. As a result, we can only expect facility planning to become more and more important. 

When managed properly with the right tools, companies can expect to see the following benefits from strategic facility planning:

• Cost savings and improved sustainability, usually in the form of requiring less office space
• Improved employee experience and engagement, derived from new working arrangements that make better use of office space and enhance the digital workspace as well—critically important now during the Great Resignation
• Greater efficiency, thanks to the thoughtful analysis of how resources can optimized

Better still, these new changes will likely benefit other departments, potentially improving all aspects of using an office. For example, when FMs bring in better wayfinding systems to support any of the hybrid work models we’re currently seeing, they’re actually making the office easier to navigate for anyone who walks through its doors. 

In other words, when organizations are planning their facility, they are actually planning to future-proof their facility.

What are the dangers of not having a plan? 

Like Benjamin Franklin famously said, if you fail to plan, you are planning to fail. Winging it is simply not an option. Especially when you’re managing something as complex as even a small company—let alone complete enterprise facility management . 

As the pandemic taught us, things don’t always go to plan. But the companies that had a system in place for making and implementing plans were the ones that were able to more quickly adjust to the new reality. Companies that have the right approach to facility planning will always be more nimble and resilient than those that fail to plan in the first place. 

OfficeSpace offers a software solution that makes facility planning easy. Reach out for a free demo. 

Photos: Thirdman , Sora Shimazaki , ANTONI SHKRABA production , Mikhail Nilov

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Home » Operations Management » Location Strategy in Operations Management

Location Strategy in Operations Management

The location of a plant or facility is the geographical positioning of an operation relative to the input resources and other operations or customers with which it interacts. Three main reasons are identified why a location strategy is required. The first reason is that a new company has been created and needs a facility to manufacture products or deliver a service to its customers. The second reason is that there is a decision to relocate an existing business due to a number of factors such as the need for larger premises or to be closer to a particular customer base. The third reason is relocate into new premises in order to expand operations.

Decisions with regards to where an organisation can locate its plant or facility are not taken often, however they still tend to be very important for the firm’s profitability and long-term survival. An organisation which chooses an inappropriate location for its premises could suffer from a number of factors, and would find it difficult and expensive to relocate. Location decisions tend to be taken more often for service operations than manufacturing facilities. Facilities for service related businesses are usually smaller in size, less costly, and are located in a location that is convenient and easily accessible to customers. When deciding where to locate a manufacturing facility different reasons apply, such as the cost of constructing a plant or factory. Although the most important factor for a service related business is access to customers, a set of different criteria are important for a manufacturing facility. These include the nature of the labor force, proximity to suppliers and other markets, distribution and transportation costs, the availability of energy and its cost, community infrastructure, government regulations and taxes, amongst others.

Factors Influencing Location Strategy Decisions

The facilities location problem is one of major importance in all types of business. It is important to notice the different problems that may arise whilst trying to choose a suitable location. Normally, the decision on siting proceeds in two stages: in the first, the general area is chosen; and then a detailed survey of that area is carried out to find suitable sites where the plant or facility could be located. However, the final decision as to where to locate a facility is made by taking into consideration more detailed requirements. The following are a number of factors which might influence the choice of location.

• Proximity to market: Organisations may wish to locate their facility close to their market, to be able to lower transportation costs , and most importantly, to be able to provide their customers with a better service. If the plant or facility is located close to the customer, the organisation would be in a better position to provide just-in-time delivery, to respond to fluctuations in demand and to react to field or service problems.
• Availability of labor and skills: A number of geographical areas have traditional skills but it is very difficult for an organisation to find a location which has the appropriate skilled and unskilled labor, both readily available and in the desired quantities. Even so, new skills can be tought, processes simplified and key personnel moved from one area to another.
• Availability of amenities: Organisations would prefer to locate their facilities in a location which provides good external amenities such as housing, shops, community services and communication systems.
• Availability of inputs: A location which is near main suppliers will help to reduce cost and allow staff to meet suppliers easily to discuss quality, technical or delivery problems, amongst others. It is also important that certain supplies which are expensive or difficult to procure by transport should be readily available in the locality.
• Availability of services: There are six main services which need to be considered whilst a location is being chosen namely; gas and electricity, water, drainage, disposal of waste and communications. An assessment must be made of the requirements for these, and a location which provides most or all of these services will be more attractive than another which does not.
• Room for expansion: Organisations should leave room for expansion within the chosen location unless long term forecast convey very accurately that the plant will never have to be altered or expanded. This is often not the case and thus adequate room for expansion should be allowed.
• Safety requirements: Certain production and manufacturing units may present potential hazards to the surrounding neighborhood. For example certain plants such as nuclear power stations and chemical factories should be located in remote areas.
• Site cost: The cost of the site is a very important factor, however it is necessary to prevent immediate benefit from jeopardizing the long-term plans of an organisation.
• Political, cultural and economic situation: It is also important to consider the political situation of potential locations. Even if other considerations demand a particular site, knowledge of the political, cultural and economic difficulties can assist in taking a number of decisions.
• Special grants, regional taxes and import/export barriers: It is often advantageous for an organisation to build its plant or facility in a location where the government and local authorities often offer special grants, low-interest loans, low rental or taxes and other grants.

Location Selection Techniques

The location selection process involves the identification of a suitable region/country, the identification of an appropriate area within that region and finally comparing and selecting a site from that area which is suitable for an organisation. The following are a number of analytical techniques from the several that have been developed to assist firms when choosing a location.

1. Weighted Score

The weighted scoring technique tries to take a range of considerations into account, including cost. This technique, which is also referred to as ‘factor rating’, consists of determining a list of factors that are relevant to the location decision. Each factor is then given a weighting that conveys its importance compared with the other factors. Each location is then scored on each factor and this score is multiplied by the factor value. The alternative with the highest score is then chosen.

2. Locational Break-Even Analysis

This technique makes use of cost-volume analysis to make an economic comparison of location alternatives. An organisation would have to identify the fixed and variable costs and graphing them for each location, thus determining which one provides the lowest cost. Locational break-even analysis may be carried out mathematically or graphically. The procedure for graphical cost-volume analysis is as follows:

• Determine the fixed and variable costs for each location.
• Plot the total cost (i.e. the fixed + the variable) lines for the location alternatives on the graph.
• Choose the location with the lowest total cost line at the expected production volume level.

Related posts:

• Role and Importance of Operations Management in an Organization
• Operations Management – Definition, Elements and Objectives
• Location Analysis in Logistics Management
• Differences Between Manufacturing and Service Operations
• Centralized Cash Management Operations of Multinational Corporations
• Postponement Strategy in Supply Chain Management
• Location Strategies for Retail Business
• 7 Things to Consider When Choosing a Location for Your Business
• The Stability Strategy in Management
• Talent Management Strategy

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• Production & Operations Management

Facility Location - Factors Influencing the Location

Facility Location is the right location for the manufacturing facility, it will have sufficient access to the customers, workers, transportation, etc. For commercial success, and competitive advantage following are the critical factors:

Overall objective of an organization is to satisfy and delight customers with its product and services. Therefore, for an organization it becomes important to have strategy formulated around its manufacturing unit. A manufacturing unit is the place where all inputs such as raw material, equipment, skilled labors, etc. come together and manufacture products for customers. One of the most critical factors determining the success of the manufacturing unit is the location.

Facility location determination is a business critical strategic decision. There are several factors, which determine the location of facility among them competition, cost and corresponding associated effects . Facility location is a scientific process utilizing various techniques.

Location Selection Factors

For a company which operates in a global environment; cost, available infrastructure, labor skill, government policies and environment are very important factors.

A right location provides adequate access to customers, skilled labors, transportation, etc. A right location ensures success of the organization in current global competitive environment.

Industrialization

A geographic area becomes a focal point for various facility locations based on many factors, parameters and issues. These factors are can be divided into primary factors and secondary factors.

A primary factor which leads to industrialization of a particular area for particular manufacturing of products is material, labor and presence of similar manufacturing facilities. Secondary factors are available of credit finance, communication infrastructure and insurance.

Errors in Location Selection

Facility location is critical for business continuity and success of the organization. So it is important to avoid mistakes while making selection for a location. Errors in selection can be divided into two broad categories behavioral and non-behavioral.

Location Strategy

The goal of an organization is customer delight for that it needs access to the customers at minimum possible cost. This is achieved by developing location strategy. Location strategy helps the company in determining product offering, market, demand forecast in different markets, best location to access customers and best manufacturing and service location.

Factors Influencing Facility Location

If the organization can configure the right location for the manufacturing facility, it will have sufficient access to the customers, workers, transportation, etc. For commercial success, and competitive advantage following are the critical factors:

Customer Proximity: Facility locations are selected closer to the customer as to reduce transportation cost and decrease time in reaching the customer.

Business Area: Presence of other similar manufacturing units around makes business area conducive for facility establishment.

Availability of Skill Labor: Education, experience and skill of available labor are another important, which determines facility location.

Free Trade Zone/Agreement: Free-trade zones promote the establishment of manufacturing facility by providing incentives in custom duties and levies. On another hand free trade agreement is among countries providing an incentive to establish business, in particular, country.

Suppliers: Continuous and quality supply of the raw materials is another critical factor in determining the location of manufacturing facility.

Environmental Policy: In current globalized world pollution, control is very important, therefore understanding of environmental policy for the facility location is another critical factor.

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Authorship/Referencing - About the Author(s)

The article is Written and Reviewed by Management Study Guide Content Team . MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider . To Know more, click on About Us . The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.

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How to use a Business Plan?

Business Plan Template

• Vinay Kevadia
• September 6, 2024

15 Min Read

If you’re entering the entrepreneurial world, you’ve likely been told to start with a business plan.

However, simply creating a business plan isn’t enough. The true powers of a business plan unravel when you use it actively to drive your business forward.

Whether you’re launching a business, securing funding, evaluating growth opportunities, or guiding your team— a business plan is more than just a document. It’s a versatile tool that can support almost every aspect of your business when used consistently.

Want to learn how?

Well, in this blog post, we’ll dive into more details about how to use a business plan . But before that.

Why is a business plan important?

A business plan is an important document, whether you use it for formal or internal use.

Here are a few reasons why this document is important:

• Gives you a roadmap to achieve your business goals.
• Offers a framework for making strategic decisions.
• Outlines the business goals and sets benchmarks for tracking business performance.
• Secures funding for your business by demonstrating financial sustainability.
• Helps overcome the challenges by developing mitigation strategies.
• Aligns the team members and stakeholders by facilitating clear communication.

Now, let’s understand the different use cases of a business plan to launch, grow, and fund your business.

How to use a business plan to start a business

A business plan is a quintessential document that can help you plan and launch your business. Whether you need to validate a business idea, establish your goals, or equip yourself with the understanding of a target market—a business plan helps with it all.

Here’s a more detailed overview of how a business plan can help start a business.

1. Validate your business idea

Before investing money in a business venture, you need to test the viability of your business idea.

You need answers to questions such as:

• Should I pursue this business venture?
• Who will be the target audience for my solution?
• How much sales will it make?
• What is the scope of scaling my business idea?
• How is my idea different from that of existing competitors?

A business plan can help you find answers to these critical questions.

Whether it’s the market, competitors, product offerings, expected sales, business objectives, or your finances—a business plan helps you assess each aspect of your business idea to test its overall feasibility.

Evaluating your business idea using a business plan forces you to address the gaps in your business idea.

This validation step ensures you don’t invest time and resources in an idea that may not succeed.

2. Establish business goals and mission

A business plan offers a strategic framework to transform vague business aspirations into concrete goals. It makes it easier for you to communicate what your business stands for and what it aims to achieve with a clearly defined mission statement.

A business plan helps you align the short-term goals of your business with its ultimate mission. It guides you in setting clear KPIs to help you track the progress and success of your goals.

With a well-defined mission, objectives, and value proposition, businesses tend to stay on their path.

3. Navigate market entry

Writing a business plan nudges you to understand the market space in which you will operate. It helps you determine your unique brand position and guides you to target the right set of people for your business.

A business plan details the exact steps of how you will introduce your business to the market. Whether it’s the position of your product, identifying your go-to-market strategy, strategizing the pricing, or securing the distribution channels—a business plan guides you to perfect your market launch.

To summarize, a business plan minimizes the risks associated with a new market by strategizing your market entry.

4. Plan the operations

A business plan turns your vision into an operational roadmap to help you optimize your business operations.

It helps you find answers to questions like these.

• What will be the SOP (standard operating procedure) of a business function, i.e., manufacturing, marketing, and hiring?
• Who would look after particular processes?
• How many people will you require to fulfill a task?
• Where will you perform the business activity?
• How will you ensure the quality of your services?

An operational plan outlines everything, helping you allocate the resources and establish clear workflows.

A business plan is further used to identify the gaps and bottlenecks in your operations. A regularly reviewed business plan accommodates the changing market conditions by introducing timely changes to your operations.

In short, an operational plan ensures that the business runs smoothly and is prepared to scale optimally.

5. Identify professional gaps

Even if you’re starting a business as a solopreneur, you will require the expertise of professionals to fulfill your business objectives. This is where a business plan can be of help.

Writing a business plan helps you identify the gaps in your current capacity. With this knowledge, you can determine the skills and people essential to execute your business strategy.

This can be an accountant, product developer, marketing specialist, legal head, or financial expert.

Once you identify a professional gap, a business plan can assist in onboarding the right type of people for your business. It offers you a detailed hiring and training plan to ensure everyone on the team remains aligned to a common goal.

6. Build strategic a. alliances

Entrepreneurs need to build relationships with suppliers, vendors, and other strategic partners early on to accelerate their market growth.

A business plan can help identify potential partners for your business. Besides, it can help you build valuable relationships with your potential partners by outlining the benefits and goals of the partnership for them.

When you approach someone for a partnership, they will have questions about growth, finances, business goals, and your outlook. Having a business plan handy will help you answer them confidently.

Moreover, a business plan will help evaluate the favorable terms of a strategic alliance. This knowledge can be used to guide the negotiations and get a contract that favors your business.

This excerpt by Jonathan Goldberg , the CEO of Kimberfire , demonstrates how they used a business plan to get a significant partner on board.

“ Kimberfire acquired a partnership with the World’s largest diamond manufacturer using a business plan. By clearly outlining our market strategy and growth projections we were able to demonstrate the value of a partnership that offered direct access to high-quality diamonds at competitive prices. This partnership not only bolstered our inventory but also allowed us to pass on significant savings to our customers, thereby enhancing our competitive edge.”

7. Forecast the capital requirement

Lastly, a business plan can help you understand capital requirements for your company. It helps determine the costs to start and run your business.

Such information guides you in evaluating your funding options.

By referring to your startup costs , you would know whether bootstrapping would be enough or if you would need loans and funding from investors.

These are just a few ways in which one can use a business plan to start a business. However, the use cases can be exhaustive depending on the details put into your plan.

How to use a business plan to secure funding

Most businesses may require funding from external sources to launch or grow their business.

Now, it doesn’t matter whether they secure funding through investors, banks, or grants. What’s important is that they have a business plan to prove the financial sustainability of their business.

Here’s how one can use a business plan to secure funding and convince investors:

8. Define funding needs

A business plan can help you determine the funding essential for your business. Moreover, it can also help evaluate the funding source that’s better suited for your business.

By building detailed projections for costs, expenses, sales, and cash flow, your plan helps determine the capital essential to launch or grow your business.

Additionally, a business plan can be used to justify your funding demands. A clear funding plan explains how you intend to use the investor’s money, i.e., buy new machinery, hire new staff, or expand the business operations.

This clarity demonstrates careful financial planning and builds investors’ confidence in your venture.

9. Manage fundings

Your funding plan already includes details about where you intend to use the money. However, you can now use it to create a detailed roadmap.

A well-planned business plan demonstrates how you should delegate the funding to different business departments. Additionally, it guides you in managing the secured funds efficiently by helping you set budgets, financial controls, and performance trackers.

This detailed approach assures investors that their funding is used responsibly and efficiently.

Further, as you update the plan, identify if your execution strategy requires change. If so, you can make the necessary changes and update the investors, keeping them in the loop. This will help them trust you more.

10. Support the loan application

A business plan is compulsory for everyone submitting an SBA loan application. Even private lending firms would require a business plan to make their funding decision.

A well-detailed business plan is sufficient to support your loan application. It demonstrates that you have conducted essential planning to make your business idea viable and sustainable.

A business plan answers all the questions that a lender might have to assess your creditworthiness and repayment capacity.

Questions such as:

• What will be the profitability of your business?
• What are the major cost drivers of your business?
• What will the debt-to-equity ratio be if you approach investors?
• How stable is your cash flow?
• What will the ROI and the payback period be?

Lenders can trust you more when they get essential answers backed with data.

That said, let’s understand how a business plan can drive enterprise growth.

How to use a business plan to grow your business

A business plan can be instrumental in testing different scenarios, evaluating growth opportunities, and making strategic decisions. All these help you grow your business and face the challenges efficiently.

Here’s how:

11. Guide strategic decisions

A business plan can help you make strategic decisions that align with your ultimate growth objectives.

Whether you want to launch a business at a new location, invest in new machinery, introduce a new product line, hire new employees, or onboard new technology—a business plan can help.

A business plan provides a framework to assess the risks, opportunities, and financial impact of a strategic decision on your business. It helps determine the right time to launch your growth initiative and demonstrates whether making a particular decision will be fruitful or not.

This way you won’t make a decision that can put you off your long-term goals.

12. Monitor business performance

Once you make a strategic decision, use your business plan to clarify the strategy and outline your execution plan.

A business plan can additionally assist in measuring business performance against set KPIs and performance benchmarks. Regularly evaluating these metrics allows you to identify areas that may need improvement or adjustments.

By using the business plan as a performance management tool, you can make data-driven adjustments to your approach and grow your business sustainability.

13. Adapt to market changes

A business plan isn’t set in stone. It’s a living document that adapts to changing market conditions.

It can be used to adapt your strategies based on new market data and shifts in customer preferences. Such regular updates help you remain competitive and agile in the face of changing market conditions.

Additionally, a business plan can help you develop a response to an emergency crisis.

A business plan accommodates all your strategies, milestones, metrics, tactics, and projections in one place. By using the plan as a performance dashboard, you can anticipate the changes and adjust the priorities to deal with the crisis.

Mark McShane offers a practical example of how he used a business plan to meet contingencies in his company, Cupid PR .

 “When we hit cash flow problems, we followed the financial contingency section of our plan to manage expenses and short-term funding. We were able to quickly implement the cost-saving strategies and secure a bridge loan to stabilize our finances without sacrificing growth. Business plan made it possible to respond to this challenge efficiently which gave us a 40% revenue increase the next year.”

14. Test different scenarios

A business plan can be used as a tool for scenario analysis.

As the regulatory, economic, and competitive landscape of a business evolves, you need to test and plan for different scenarios, like:

• Entry of a new competitor
• Regulatory changes
• Technological advancement
• Market demand shifts
• Natural disaster

Businesses can evaluate the financial and operational impact of these scenarios using a business plan. By using business plan forecasts as a base, they can prepare for various worst- and best-case scenarios.

Preparing for different scenarios helps you leverage the opportunities and mitigate the risks whenever they arise.

Those are quite a few ways in which a business plan can assist or facilitate growth. Entrepreneurs can find more ways to use a business plan depending on the depth that their plan covers.

How to use a business plan internally

One of the most essential uses of business plans is to guide your operations, management, and team toward the goal.

Here’s how.

15. Align team and stakeholders

A business plan is an excellent tool for aligning your team and stakeholders toward a common mission.

A well-crafted business plan documents the company’s goals, mission, KPIs, and milestones. With the basics clearly articulated, it gets easier to bring your internal team and stakeholders on the same page.

Now, you don’t need a detailed plan to convey your goals. A simple list of goals and how they contribute to your ultimate objectives is enough for internal use.

This quote from our conversation with Shawn Plummer , the CEO at the Annuity Expert , shows how he used a business plan to drive a 50% revenue increase in 2 years:

“By breaking down our growth strategy into clear, measurable goals, the business plan became more than just a document; it was a tool for uniting our team. Everyone, from marketing to operations, understood how their efforts related to our overall goals. This connection was critical to our success, resulting in a 50% revenue rise in just two years.”

16. Streamline business operations

A business plan can streamline business operations by outlining the standard operating procedures (SOPs) for different business processes. It’s further used to define the responsibilities, resource allocation, and hiring plans for your organization.

Remember, a well-crafted operations plan acts as a guidebook for your business. It details every process, responsibility, and resource essential for running a smooth operation. Referring to it can help increase efficiency, reduce waste, and enhance productivity.

Now if you’re writing a traditional plan, you’ll have a detailed section on business operations. However, if you’re writing a lean plan, we recommend building a separate internal operations plan to guide your business operations.

Simply list the business processes, create an outline, and use ChatGPT to write a business plan . Your internal use operations plan doesn’t need to follow a specific format or structure. It should just distill clarity.

17. Efficient performance reviews

A business plan outlines the KPIs and goals, offering you a benchmark to evaluate the individual performance of team members. These metrics can be used to track actual results and take appropriate actions.

A business plan helps foster the environment for continuous development by linking performance to strategic goals.

That’s a few definite ways to use business plans for internal growth and management. Internal business plans can follow any structure or format, as long as they get the task done.

How to keep your business plan relevant

As we discussed, a business plan is a living document that requires frequent updates and changes to maintain relevancy.

Ideally, one should update their business plan at least once a year to keep it useful. However, businesses in highly volatile or competitive markets should consider reviewing it quarterly.

A business plan must represent accurate market conditions. If that’s not the case, a review should incorporate new market trends into the strategy, adjust the operational realities, and revise the financials. This ensures that your plan remains relevant and realistic to help you achieve your business objectives.

Include your team members in the review process to ensure the strategies address their key concerns and align with the entire organization.

All in all, adopt a flexible planning approach to keep your plan relevant to the dynamic world.

By now, you have a thorough understanding of the different uses of a business plan. However, these use cases are only relevant if you have a realistic and actionable business plan offering a true overview of your business. Only then can you use a business plan to launch, grow, and fund your business.

Now, draft a quick business plan using the Upmetrics business planning app . Its AI planning features, business plan templates, financial forecasting assistance, and detailed guides will help you prepare a reliable business plan in no time.

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Frequently Asked Questions

What is the most common use of a business plan.

A business plan is most commonly used to secure investments from investors. Additionally, organizations use it to define strategic goals, guide business operations, and evaluate the company’s performance.

How do you use a business plan for a small business?

A business plan offers crucial help to small businesses in the following ways:

• Idea validation
• Navigating market entry
• Planning business operations
• Building strategic alliances
• Forecasting the capital requirements

How do I use a business plan to attract investors?

A business plan can be used to prove the financial sustainability of a business idea. Investors can evaluate whether their investment would offer enough ROI, profitability, and growth by referring to your in-depth business plan. When they see that you’re well-prepared to face real market situations, they feel convinced of your ability to run a business.

How often should a business plan be updated?

Ideally, you should update a business plan at least once a year. However, businesses operating in dynamic, competitive markets need more frequent reviews. This can be monthly or quarterly.

Why is it important to review a business plan over time?

A business plan offers a roadmap to achieve your business objectives. But, if not updated often, your plan won’t reflect the current market. This will make your plan irrelevant and distant from your goals. To avoid such situations, it’s important to review your plan regularly.

About the Author

Vinay Kevadiya

Vinay Kevadiya is the founder and CEO of Upmetrics, the #1 business planning software. His ultimate goal with Upmetrics is to revolutionize how entrepreneurs create, manage, and execute their business plans. He enjoys sharing his insights on business planning and other relevant topics through his articles and blog posts. Read more

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