How to choose the best location for your start-up business

6th July 2021

When you are setting up a small business, finding the right location for your new business’ ‘home’ can be a time-consuming and costly process.

While the factors that determine what will be the best location for your business will vary depending on the type of business you are starting and the sector you work in, there are some basic fundamentals to understand when it comes to finding the perfect location.

“Every business is different, so it’s important that you know what matters in the context of your new business priorities when it comes to deciding on the location and type of premises you are looking for,” said Martin Hoffman, BOQ Business Head of Corporate, Victoria and Western Australia.

Before you start the search

Before you even start looking for your new business location, there are a few things you should have ready:

• Decide if you want to buy or lease. Commercial property differs to residential agreements, so it’s also worth seeking legal and financial advice on what you can afford.
• Have a budget – whether you are planning to buy business premises or lease a space, it’s important you know how much you can afford. This should be taken into consideration when you are writing a business plan and operational budget for your new business.
• Get your finances in order. To apply for a small business loan or sign a commercial property lease, you’ll need to demonstrate you can afford to make payments on the property you want to rent or buy.
• Have a clear picture of what you are looking for. A checklist of ‘must have and nice-to-have’ will also help you narrow the search. And make sure you consider the future needs of your business.

How much should your rent be?

Commercial rents in Australia can be high, particularly in inner city areas. It is important that you undertake your own research to help you understand the market, and to ensure that you don’t end up paying unnecessarily premium prices. Some landlords provide incentives and rent-free periods at the beginning of a lease to attract new tenants, so as a start-up make sure you negotiate for the best deal possible.

Tip: Make sure you have enough cash on hand to be able to pay the security deposit (which is usually the first one or two months’ rent as a cash bond, bank guarantee or third-party guarantee) and cover your rent while your start-up business grows, bearing in mind that it might take months for your sales to take off.

Fit out, furnishings and equipment costs

Fitting-out new business premises can be a big expense – both financially and in terms of your time. It’s important that you understand all of the expenses you will have to pay to get your premises ready to trade. Make sure you negotiate these costs and agree to them in writing before you sign the lease. Shopping centres usually require a standard construction for fit outs, so make sure you ask for the tenancy fit-out statement or guide to check if you can afford the fit-out required.

As a tenant, you can expect to be responsible for the costs of installing fixtures and fittings (such as walls, flooring, joinery, lighting, air-conditioning, kitchenette, desks and shelving). It’s also worth pointing out that when you move out, you’ll likely be expected to ‘make good’ and remove the fit out. This can also be a big expense, so it is worth factoring this into the design of your fit-out.

And don’t forget that furnishings, equipment and machinery costs also need to be factored into your overall budget.

Tip: Try to negotiate a rent-free period with your landlord while you are fitting-out the premises.

Don’t forget about operating costs

Bear in mind that the purchase price of the property you buy or the amount you will pay in rent is only part of your occupancy costs. You’ll also need to factor in running costs including:

• Business insurance (including coverage for your property)
• Utilities (i.e. electricity, water, gas, phone and internet, waste disposal)
• Local council rates (if you own the premises)
• Equipment maintenance and leasing fees
• Interest repayments on any business bank loans
• Common area maintenance fees (if you are in a shared space).

Tips for finding the right location

Whether you are looking for retail premises, a warehouse, manufacturing plant or storage facility, commercial offices, a co-working space, temporary premises (such as a pop-up), consider the following in terms of location:

• Is the cost of buying or leasing affordable?
• Is it visible and accessible? Can your customers find you? Is there sufficient foot traffic (if you rely on drop-in customers for sales)? Is there easy access to parking and transport?
• Is it close to an available workforce and attractive to potential employees?
• Are your suppliers or distributors nearby? Or is it easy for them to deliver to you?
• Is the area known for the products or services you provide? Are there any complementary or competing businesses in the area?
• Is the area a growing business hub that can support your future business growth plans? Find out about future or planned development, zoning restrictions, rates and business activity from the local council.

Starting a business from home

Even if you are starting a business from home and don’t need to find a location per se, there are still factors to take into account, such as:

• Where will you be able to work without distraction? Do you need to convert space to create a home office – and if so, do you have the funding you need? If you plan to claim your home office as a small business write off for tax purposes, it will need to be a space that is used exclusively and regularly to run your business.
• Do you have storage space for inventory, supplies, records and/or equipment? Will it need to be climate controlled?
• Do you need additional power and technology (e.g. power outlets, a second phone line, modems etc)
• Do you have the necessary business insurance policies including professional indemnity and public liability, particularly if you expect to have customers, staff or suppliers come to your home?
• If required, make sure you obtain the necessary local government / council approvals for ‘home based businesses’ well in advance of your proposed launch date as the approval process can be lengthy.

Get advice

Talk to your accountant or solicitor for advice on whether you should buy or lease business premises and your business equipment, including the tax implications of each option. It’s also important to seek financial and legal advice before signing any contract to avoid making costly mistakes.

Resources:

The Australian Government’s business.gov.au website offers valuable information for small business owners including a guide to starting a business and details about government support, services, grants and loans.

The Australian Securities and Investments Commission (ASIC) website includes information on how to conduct an Australian business name search and register your business name.

The Australian Government Business Registration Service (BRS) combines several business and tax registrations in one place, making it even easier to start a business.

Australian State and Territory Governments also offer advice and support for small business owners through the following:

• ACT: ACT Government’s Access Canberra, www.accesscanberra.act.gov.au/s/business
• NSW: Office of Small Business Commissioner, www.smallbusiness.nsw.gov.au
• VIC: Victorian Small Business Commission, www.vsbc.vic.gov.au
• QLD: Queensland Government’s Business Queensland, www.business.qld.gov.au
• SA: South Australia Small Business Commissioner, www.sasbc.gov.au
• NT: Northern Territory Government Department of Industry, Tourism and Trade, www.industry.nt.gov.au
• WA: Small Business Development Corporation, www.smallbusiness.wa.gov.au

Contact us to find out more about how BOQ Business can support your small business