Commercial real estate brokers are fond of saying that the three most important factors in establishing a business are location, location, and location. While true for a few types of businesses -- such as a retail sandwich shop that depends on lunchtime walk-in trade -- for most, locating in a popular, high-cost area is a mistake. For example, if you design computer software, repair tile, import jewelry from Indonesia, or do any one of ten thousand other things that doesn't rely on foot traffic, your best bet is to search out convenient, low-cost, utilitarian surroundings. And even if yours is a business that many people will visit, consider the possibility that a reasonably priced, offbeat location may make more sense than a high-cost, trendy one. Think of it this way: Businesses that pay comparatively low rent have more money to spend on other important aspects of their businesses or can pass some of their savings along to their customers in the form of lower prices.

But no matter what location you choose, never purchase property or sign a lease without being absolutely sure that you will be permitted to operate your business there. If the rental space is in a shopping center or other retail complex, this involves first checking carefully with management, because many have contractual restrictions (for example, no more than two pizza restaurants in the Mayfair Mall). If your business will be located in a nonshopping center area -- especially an offbeat one -- you'll need be sure that you meet applicable zoning rules, which typically divide a municipality into residential, commercial, industrial, and mixed-use areas.

You'll also need to find out whether any other legal restrictions will affect your operations. For example, some cities limit the number of certain types of business -- such as fast food restaurants or coffee bars -- in certain areas, and others require that a business provide off-street parking, close early on weeknights, limit advertising signs, or meet other rules as a condition of getting a permit. Fortunately, many cities have business development offices, which help small-business owners understand and cope with restrictions.

Copyright 1999 Inc.