How to Choose the Best Business Location and Scale

Understanding Optimal Business Location

Optimal Location: This refers to the location where the total production costs that vary depending on the geographic position are minimized.

Key Location Factors to Consider

• The forecast of market demand: You must perform a full scan and analyze the market, including:
  • The quality of your product and competitive offerings.
  • Your prices compared to the competition.
  • The interest of consumers in the product being offered.
  • An analysis of the population demographics.
• The job market: It is important that the workforce the company will use is located close by. The specific expertise of the workers is also a crucial factor.
• Transport and communication: The company must be located in an area with easy access to transport and communication networks to connect with other businesses. Commercial and service enterprises should be near the town, while industrial estates, airports, and similar facilities are typically located further out.
• Supplies: You should know the costs of essential supplies such as water, gas, and other utilities.
• The supply of raw materials: This includes securing reliable supplies from vendors, which is especially critical for certain industrial enterprises that require raw materials for production.
• Land cost, construction, and infrastructure: These expenses should be calculated carefully, as they differ significantly between the city and the suburbs (urban land is generally much more expensive than land in industrial estates).
• Legislation: Local laws and regulations must be analyzed, including planning regulations and subsidiary legislation.
• Financing, financial aid, and taxes: This depends on proximity to financial institutions (which is beneficial for easy access) as well as the availability of financial aid, such as government grants for young entrepreneurs.

Essential Scale Factors for Growth

• Market demand: This depends on the quantity of products or services the company aims to put on the market. It also seeks to satisfy consumer needs. This is the most important factor when determining both the location and the size of the company.
• New technologies: Productivity growth and competitiveness depend heavily on the application and understanding of modern technology trends.
• Future prospects: The potential customer base is a very important consideration when deciding where to locate the company and what its physical dimensions should be.
• The company's own business: The size of a company depends on its capacity. Production capacity varies greatly for each company depending on its specific sector.

Criteria for Measuring Company Size

• Number of employees:
  • Microenterprise: Less than 10 workers.
  • Small business: 10 to 50 workers and a turnover of up to 5M per year.
  • Medium business: Between 50 and 250 workers with a turnover of 5M to 10M per year.
  • Large business: More than 250 workers and a turnover of more than 10M per year.
• Sales volume: The total volume of business and revenue generated over a specific period of time.
• Own resources: Composed of financial contributions from members and company reserves.
• Total assets: The total resources allocated for the overall investment.
• Annual net benefits: The net profits remaining after deducting interest and taxes.