10 Best Reasons Why Location is Important for a Business

10 Best Reasons Why Location is Important for a Business


Location is important for businesses because it can determine how they function. How a company functions can potentially determine its success.

The location also influences many decisions that a business might make as well. I previously wrote on location independent business ideas which might make you understand today’s topic comprehensively.

Many factors play into where businesses are located, from convenience to availability of resources and even tax rates; however, these are not all the factors that come into play with a location for businesses. For this post, we will only focus on 10 reasons why location is important for a business.

Reasons why location is important for a business

1. Proximity to clients/customers

Proximity to clients is a factor in location because it can determine how the company can interact with its customers. Companies that are far away from customers may not be able to provide the same level of customer service as companies that are near their customers.

In extreme cases, companies in the same area may have to compete for customers. So one of the reasons why location is important when starting a business is because the company that is close to its customers can use this opportunity to start a monopoly. In a nutshell, location helps you find customers.

2. Distribution network

Without a good distribution network, businesses may not be able to reach their clients or customers.

Distribution networks are vital to the overall success of a business. In most cases, companies rely on distribution networks to get their products or services to their clients. This is another reason why location is important in business planning.

3. Customer service

Customer service is one of the most important aspects of any business. This is a factor in location because it can determine how well a business can provide customer service to its customers.

Customer service is crucial to operating a business that is successful and growing. So one of the crucial reasons why location is important when starting a business is because if a business does not provide customer service, it will most likely struggle to succeed.

4. Accessibility of resources

Businesses often need certain resources in order to function or be successful. These resources should be accessible. Accessibility can vary greatly depending on the type of business.

For example, a local flower shop would have easy access to resources, whereas a large multinational will not have the same range of resources available to them in the same geographical area.

5. Market research

Market research is a factor in location because it can determine how well companies can compete with other companies. Market research is important when deciding what products or services to offer and how to offer them.

If a company does not do market research, it may not be able to compete. This can make it very difficult for companies to be successful because they would either fail or just receive low-quality products and services. Location can help you avoid competition as well.

6. Cost of building materials

Building materials are another reason why location is important in business because they can determine how well construction companies can function. Building things and being productive is what construction companies thrive on.

Without reasonable costs for building materials, construction companies would not be able to be as productive as possible. The costs of building materials determine what a construction company can build and how much it costs to build it.

7. Transport costs

Transport costs are another factor why location is important for a small business. We intentionally mention small businesses because they need to save funds for long distances and costs like this play into transporting goods or people from one place to another.

Transport costs will determine how long it would take for a product or person to get from one place to another. If the transport is too long, the company may either have to slow down or decide to reduce the price of their products or services. Location can affect your ability to get finance for trips.

8. Taxation

Taxation is a factor in location because it can determine the type of business a company will open. If a business does not pay enough taxes, it may not be able to operate as effectively as possible, which could potentially result in less money coming into the government.

If the government does not get enough taxes, then the government would have to either make up for the loss or go into debt. Either way, it is not a good scenario for the economy.

9. Local labor

Local labor is a factor in location because it can determine how businesses will operate. If local labor is not able to be highly productive, the company may not be able to operate as effectively and efficiently.

If there is an abundance of local labor, it can help a company to operate more efficiently as well.

10. Relocation costs

Relocation costs are a factor in location because they determine how easy it will be for companies to move around and change their locations.

Relocation costs can determine how easy it would be for a company to move because they can also affect the amount of money the company will spend on relocating.

Business location strategy

A business location strategy is an organized plan for selecting the location for starting a business to achieve its goals and objectives. It aids in customer analysis, market segmentation, localization, and business branding at large.

In order to be successful in any business, it is important to have a good business location strategy. Establishing a good business location strategy is essential if you want to find the best place to start your business and keep it going for many years to come.

If you’re picking a location for your business, you’ll want to think about things like accessibility to roads, utilities, and training centers. You’ll also want to think about startup costs and growth potential. Local and surrounding population demographics should be taken into account as well.

Tips For choosing a business location

The following are some pointers to consider when deciding on a location for your business

Research the local area

Do some online research to learn about the demographics, economy, and infrastructure of the region you are considering.

Consider the cost of Operation

The cost of doing business is an important consideration to keep in mind. Make sure you understand the costs associated with setting up a shop in the region, including rent, utilities, and taxes.

Location growth curve

Consider the potential for growth in the area. Some areas develop faster than others. Although many factors determine if an area will grow quickly, factors like closeness to the road, factories, and markets, among others.


Businesses use location as a way to determine where they should open their business or the type of business to open. It is important to stress again that one of the reasons why location is important when starting a business is because it can determine how well a company can flourish or struggle. Location will affect all parts of a company’s business and help to direct its future.

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