Felipe E. Oliveira, the 35-year-old founder of Percival Beer Co. (PBC), wants to open a brewery in Boston's Dorchester neighborhood--just blocks from his childhood home, where his mother still lives, the Boston Globe reported. While there are logistical advantages to the prospective location, the main reason the site appeals to Oliveira is personal. He cares about the neighborhood.
That's not something you hear founders say every day. On the list of reasons founders typically provide for picking a location, caring about the neighborhood often ranks behind rental costs, transportation logistics, visibility to customers, and appeal to employees.
All of which is to say: There are several factors that determine why a location is ideal for a certain business. And while many of them are directly related to dollars and cents, emotions also play a part. Here, inspired by Oliveira's quest, is a checklist of seven questions to consider when choosing a location.
1. Is the location a match for my company's values and branding?
For Oliveira, the Dorchester neighborhood is a strong match for the branding of his beers. For example, a beer called Dot Ale 1630 ("Dot" is a local nickname for Dorchester) boasts a "stern, yet subtle hop profile," according to the PBC site. That hop profile is designed to reflect the tough-love traits of Dorchester residents, who "are are welcoming, yet possess a rigid attitude."
2. Does the location give me the ability to expand?
"If you're going to do fulfillment on a growing operation, you're going to need more space," Quiet Logistics CEO Bruce Welty told my colleague Jill Krasny. Quiet Logistics is an order fulfillment company that handles inventory and distribution for Zara and Bonobos. "Every building has a theoretical limit on its space and it's really disruptive when you change locations," Welty added.
3. Will great employees want to work in this location? In their academic paper, "The Social Attachment to Place," Michael S. Dahl of Aalborg University and Olav Sorenson of the Yale School of Management found that proximity to family and friends was a more important factor than wages when it came to prospective employees considering a new job. The upshot of their findings, which Inc covered a few years ago, is that employers generally need to offer substantial pay increases to persuade recruits to forsake their proximity to social attachments.
The takeaway: Don't expect key employees to move for you, unless you're prepared to pay for it. Your best bet is to locate where there's already an ample supply of the talent you need.
4. Will this location imperil my ability to raise capital? Like it or not, many venture capitalists prefer funding companies that they are physically close to. Scott A. Jones, who is both a veteran entrepreneur and venture capitalist, would know. He has bootstrapped startups in Boston, Silicon Valley, and currently in Carmel, Indiana. While he believes you can launch a great company anywhere, he admits that his midwest location hasn't been ideal for raising private capital:
"I remember being on a private capital raise 'road show' a few years ago. I put my idea in front of more than 50 potential funding partners. At least half of them overtly raised the issue of our Midwest location. Some wanted me to move the company. Others just groused about the prospect of the multi-day flying trek that it would take for them to attend board meetings."
Is it a reason to never locate in the midwest? Of course not. There are plenty of advantages, in Jones' view. But raising venture capital is not one of them.
5. Are there other businesses drawing customers to this location? Call this the "hitch your wagon to others" factor. The idea here is straightforward: Make sure your business isn't shouldering the entire burden of bringing consumers to a particular neighborhood. Ideally, you'll locate near a place where there are already customers in abundance: a supermarket, a Target, a stadium. Robb Mandelbaum's superb primer on picking a location has more details about the "hitch your wagon" concept.
6. Does the location make my brand more visible? In his recent book Location Is (Still) Everything, Wharton professor David Bell argues that geography plays a major role in brand preferences.
Here's how it works: At your yoga studio, you might see an attractive reusable bag from Lululemon Athletica. On your morning train, you might see a passenger wearing some cool-looking headphones by Beats Electronics. The next thing you know, you're familiar with two consumer brands--all because you happened to find yourself in the same location as the products or the products' well-designed packaging.
For entrepreneurs, the lesson is simple: Place your products and packaging in settings with maximum visibility. By locating your business in the right place--where your target customers can easily see your products and packaging--you'll reap the marketing benefits of maximum visibility. This is why brands like Warby Parker and Birchbox believe in physical locations that support and complement their robust e-commerce channels, Bell argues.
7. Is the location worth the cost of rent? This is the most obvious component of the location checklist. It comes with a comparably obvious cliche: You sometimes get what you pay for.
Three years ago, Jon Dahl, cofounder and CEO of Zencoder, moved his company and family to San Francisco from Minneapolis. The main benefit has been the networking opportunities. For example, his office landlord turned out to be a cloud expert who became a key advisor to Zencoder. That sort of thing seems to happen all the time in the Bay Area. And yet, the cost of living is astromonical. Single-family homes average $775,000 in price, according to Inc. columnist Christina Desmarais.
Dahl's story encapsulates the classic cost-benefit tradeoffs in picking a location. The larger point is a simple reminder: Think of your rent not only as a straight-line cost for commercial space, but also as a potentially worthwhile price to pay for privileged marketing and visibility.