Business Location Analysis Example – Site Selection in Business Plan

Your business location analysis should take into account demographics, psychographics, census and other data. Use this location analysis example to gather and understand the data you need to make your site selection a success. Includes location analysis definition.
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.

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:

  1. Why here?
  2. 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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