Part 3

Developing the New Venture Business Plan

CHAPTER 9

The Location Plan

Longenecker Moore Petty Palich

2008 Cengage Learning.

All rights reserved.

PowerPoint Presentation by Charlie Cook

The University of West Alabama

Looking AHEAD
After you have read this chapter, you should be able to:

1. Describe the five key factors in locating a brick-andmortar startup.

2. Discuss the challenges of designing and equipping a
physical facility.
3. Understand both the attraction and the challenges of
creating a home-based startup.
4. Understand the potential benefits of locating a
startup on the Internet.

2008 Cengage Learning. All rights reserved.

92

Locating the Brick-and-Mortar Startup

Brick-and-Mortar Store
The traditional physical store from which businesses

have historically operated.

The Importance of the Location Decision

High cost of constructing a physical location.
Effect of poor location on eventual success of the

firm.
Type of business affects the importance of business
location to customers.

2008 Cengage Learning. All rights reserved.

93

9-1

Location Options for the Startup

2008 Cengage Learning. All rights reserved.

94

9-2

Five Key Factors in Determining a Good Business Location

2008 Cengage Learning. All rights reserved.

95

Key Factors in Selecting a Good

Location
Customer Accessibility
Customer convenience (high traffic)
Access by targeted customers (niche market)

Business Environment Conditions

Climate-related factors
Business environment factors
Presence

of established competitors

Regulations,
Tax

legal requirements and restrictions

structure, exemptions, and incentives

2008 Cengage Learning. All rights reserved.

96

Key Factors in Selecting a Good

Location
Availability of Resources
Nearness to raw materials
Availability of a suitable labor supply
Access to adequate and reliable transportation

Personal Preference of the Entrepreneur

Familiarity with home community environment
Support of entrepreneur by the community
Desire for a particular lifestyle
Contribution to the community

2008 Cengage Learning. All rights reserved.

97

Key Factors in Selecting a Good

Location
Site Availability and Costs
Difficulty of locating a good site
Business

incubator: shared space, services, and

management assistance for new businesses

Buying: large costs for and commitment required to

purchase site outright.

Advantages of leasing:
Avoids

a large cash outlay.

Allows

the owners to postpone

committing to the site before
the business becomes a success.

2008 Cengage Learning. All rights reserved.

98

Other Factors in Selecting a Location

Neighbor Mix
Whos next door?

Security and Safety

How safe is the

neighborhood?

Services

Past Tenants Fate

What happened to them?

The Life-cycle Stage of

the Area
Is the site in the embryonic,

mature, or declining stage?

Is there municipal trash

pickup?

2008 Cengage Learning. All rights reserved.

99

Designing and Equipping

the Physical Facilities
Design Requirement Challenges
Physical facilities should be of adequate size and

accommodation; not too large or too luxurious.

Considerations:
Age/condition
Heating/air
Lighting

of building

conditioning

Fire hazards

Entrances and exits

and restroom facilities

The ideal building meets the functional requirements

of the business and projects the appropriate image to

customers and the public at large.
2008 Cengage Learning. All rights reserved.

910

9-3

Small Business Owners Choose Buying over Leasing

Source: Richard Breeden, Small Businesses Favor Buying over Leasing, Wall Street Journal, February 24, 2004, p. B11.
2008 Cengage Learning. All rights reserved.

911

Equipping the Physical Facilities

Manufacturing Equipment
General purpose equipment
Serves

many functions in
the production system
Low purchase cost
Flexible production
Good resale value

Special-purpose equipment
Are

designed to serve specialized

functions in the production process
Low labor cost
High hourly output
Limited resale value

2008 Cengage Learning. All rights reserved.

912

Retail Store and Office Equipment

Retail

Office Equipment

Display racks

Computers

Sales counters

Fax machines

Cash registers/

Copiers and printers

POS systems

Telephone systems

Image

Filing cabinets

Luxury/utilitarian

customer furnishings
Lighting
Displays
Signage

2008 Cengage Learning. All rights reserved.

913

Locating the Startup in

the Entrepreneurs Home
Home-Based Business
A business that maintains its primary facility in the

residence of its owner

Attraction of a Home-Base Business

Low start-up and overhead costs
Convenience for family and lifestyle
Technology
Advances

in office equipment allow

home-based business to compete
with commercial sites.

2008 Cengage Learning. All rights reserved.

914

9-4

Entrepreneurs Reasons for Operating a Home-Based Business

Source: Home-Based Business: The Hidden Economy, The Small Business Advocate, Vol. 19,
No. 2 (Spring 2000), p. 6; and http://www.perfectsystem.co.uk, accessed June 20, 2007.
2008 Cengage Learning. All rights reserved.

915

Home-Based Businesses
Challenges
Business image of a home-based business
Professional

image is difficult to maintain in a home

environment.
Legal considerations
Local laws and zoning ordinances prohibit many
types of home-based businesses.
Family and business conflicts
The need to observe regular business hours and
establish spatial boundaries (specific work areas) to
avoid distractions.

2008 Cengage Learning. All rights reserved.

916

9-5

The Challenges of Home-Based Businesses

2008 Cengage Learning. All rights reserved.

917

Locating the Startup on the Internet

E-Commerce
The paperless exchange of business information via

the Internet.

Internet
A huge, loosely connected computer network that

links smaller networks all over the world.

World Wide Web (WWW)

A system of Internet servers

accessible with browsers,

which navigate via hypertext links.

2008 Cengage Learning. All rights reserved.

918

Benefits of E-Commerce to Small

Firms
Provides the opportunity to compete with larger
firms in larger markets.
Build better customer relationships through
better service.
Electronic Customer Relationship Marketing (eCRM)
An

electronically based system that emphasizes

customer relationships.

2008 Cengage Learning. All rights reserved.

919

E-Commerce Business Models

Business Model
A group of shared characteristics, behaviors, and

goals that a firm follows in a particular business

situation.

2008 Cengage Learning. All rights reserved.

920

9-6

E-Commerce Business Models

2008 Cengage Learning. All rights reserved.

921

Types of Customers Served

Business-to-Business (B2B) Model
A business model based on selling to business

customers electronically.

Business-to-Consumer (B2C) Model

A business model based on selling to final customers

electronically.

Auction Sites
Web-based businesses offering participants the

ability to list products for bidding.

2008 Cengage Learning. All rights reserved.

922

9-7

Selling Your Item on eBay

Step 1: Register as an eBay member, then click the Sell link at

the top of any page.
Step 2: Gather information and digital pictures for your item
description.
Step 3: Write your title and item description.
Step 4: Pre-pack your item to determine its shipping weight (but
dont seal it yet).
Step 5: Choose the methods of payment you will accept; PayPal is
the fastest and safest.

Source: http://www.eBayuniversity.com, accessed December 20, 2006.

2008 Cengage Learning. All rights reserved.

923

9-8

Top 10 Online Auction Sites

1.

eBay

2.

Ubid

3.

Bidz.com

4.

Yahoo auctions

5.

MSN auctions

6.

Amazon.com

7.

Auctionweiser

8.

Auction Addict

9.

Auction-warehouse

10. Auctonet.com

Source: http://www.auctions.nettop20.com, accessed December 2006.

2008 Cengage Learning. All rights reserved.

924

Degree of Online Presence

Content/Information-Based Model
A business model in which the Web site provides

information but not the ability to buy or sell products

and services.

Transaction-Based Model
A business model in which the Web site provides a

mechanism for buying or selling products or services.

24/7

E-Tailing: electronic retailing providing roundthe- clock access to products and services

2008 Cengage Learning. All rights reserved.

925

Key TERMS
brick-and-mortar store

business model

enterprise zones

business-to-business (B2B)
model

business incubator
general-purpose equipment
special-purpose equipment
home-based business
zoning ordinances
e-commerce
Electronic Customer
Relationship Marketing (eCRM)

2008 Cengage Learning. All rights reserved.

business-to-consumer (B2C)
model
24/7 e-tailing
auction sites
content/information-based
model
transaction-based model

926