Did you know that choosing the right business location can double your returns in SMB acquisitions? Location plays a critical role in market access, costs, competition, and long-term success.
Create Your Buyer Profile & Get Verified For FreeDid you know that choosing the right business location can double your returns in SMB acquisitions? Location plays a critical role in market access, costs, competition, and long-term success. Here's what you'll learn in this guide:
Quick Tip: States with no income tax (e.g., Florida, Texas) often attract businesses due to lower operating costs. Use this guide to avoid costly mistakes and maximize your SMB acquisition success.
When choosing a business location, it's essential to analyze market trends, tax policies, and workforce availability.
Understanding the local market is crucial for predicting business performance. One useful tool is the Location Quotient (LQ), which measures how concentrated an industry is in a particular area compared to the national average [1]. Here's what LQ can reveal:
An LQ above 1.0 indicates a higher-than-average industry presence, pointing to strong local demand and well-established supply chains [1].
Another helpful metric is the Small Business Index (SBI), which evaluates 14 factors influencing small business success [2]. These include unemployment rates, retail sales figures, personal income, economic strength, and business bankruptcy trends.
After reviewing market conditions, the next step is to consider legal and tax factors. Amy Gerber, Executive Managing Director of the Business Incentives Practice at Cushman & Wakefield, emphasizes:
"Until the tax analysis is complete, a company will not understand the true cost of operating in a given jurisdiction, the difference in costs between jurisdictions, and the benefits economic development incentive programs represent." [3]
Tax policies can have a significant impact on profitability. For example, state tax burdens in 2022 varied widely [4]:
| State | Tax Burden (% of Net Product) |
|---|---|
| New York | 15.9% |
| Connecticut | 15.4% |
| Hawaii | 14.9% |
| California | 13.5% |
| Texas | 8.6% |
| Florida | 9.1% |
For manufacturers, four key taxes come into play [3]:
Some states, like Alaska, Florida, Nevada, South Dakota, Washington, and Wyoming, do not impose income tax [3]. This can influence business relocation trends. In fact, 24 of the 25 states with the highest tax burdens saw net out-migration in 2016 [4].
With 31% of U.S. workers now working remotely - a rise of 8% since early 2020 [5] - businesses face new challenges and opportunities in staffing.
Key factors to evaluate in the local labor market include:
Issi Romem, economist for the ADP Research Institute, highlights the benefits of remote work for both employees and employers:
"Employees who go remote can raise their standard of living overnight by moving to a city with less expensive housing and an overall lower cost of living... But our research found that employers can share in the geographic cost savings, too." [5]
Additionally, studies show hybrid workers are 1.7 times more likely to be fully engaged than those working on-site [5]. To better understand workforce potential, consider collaborating with local staffing agencies. These agencies can provide insights into skill availability, education levels, salary trends, and training resources [6].
The U.S. Census Bureau offers valuable tools for evaluating potential locations. Through data.census.gov, users can access a range of demographic and economic statistics essential for making informed decisions. Business owners can analyze details like population trends, income levels, industry concentrations, economic indicators, and housing data. Tools such as the Census Business Builder provide concise reports, while QuickFacts delivers instant statistics for cities and towns with populations over 5,000. Additionally, the Economic Census, conducted every five years, offers a detailed look at the U.S. business landscape across national, state, and local levels [7]. These resources serve as a starting point for more in-depth analysis with specialized software.
Location intelligence platforms help buyers and investors evaluate multiple factors at once. These tools often assess:
Major retailers showcase how effective these tools can be. For instance, Whole Foods bases location decisions on education levels in the area, while Walmart uses mobile advertising data to track customer travel patterns [8]. Dustin Ingle, CEO of Insulation Commandos, highlights the benefits of mapping software:
"Smappen is very user-friendly mapping software that checks all the boxes for franchise development, where you're building and managing territories. Its built-in data means you can also leverage it in marketing." [9]
These platforms directly support the location decision factors outlined earlier.
Clearly Acquired complements these tools by simplifying location research. The platform features over 3.2 million business listings across more than 50 industries [11]. Its advanced search options allow users to filter businesses by geographic criteria, access verified listings, analyze market demographics, connect with local brokers, and review financial data tied to specific locations. Processing around $6.5 million in business transactions monthly, Clearly Acquired demonstrates its practical utility [11].
The platform's Deal Hub feature further aids buyers by streamlining due diligence tasks, including secure data room access and automated NDA management [10]. As Clearly Acquired describes it:
"The Clearly Acquired Platform delivers powerful tools - advanced search, interactive dashboards, and messaging - to streamline acquisitions and empower users with clarity and efficiency." [10]
A SWOT analysis helps evaluate potential business locations by looking at both internal and external factors.
Assemble Your Analysis Team
Bring together a team that includes experts in operations, finance, and market research. Add local market specialists who have insight into the area's specific traits and challenges [12].
Evaluate Core Components
Use the SWOT framework to break down your analysis into these areas:
Document and Visualize Findings
Organize your findings using a quadrant chart to highlight key performance indicators [13]. For a more objective comparison, translate these qualitative insights into numerical scores.
After completing the SWOT analysis, use a scoring system to refine your evaluation. The Location Factor Rating Method assigns weighted scores to factors critical for success. Here's an example from a coffee shop chain:
| Factor | Weight | Evaluation Criteria |
|---|---|---|
| Population Density | 50% | Number of residents and workers within 1 mile |
| Public Transport Access | 30% | Proximity to transit stops and passenger volume |
| Local Purchasing Power | 20% | Household income and retail spending levels |
Adjust weights and criteria to fit your specific business needs, ensuring a thorough and tailored evaluation [14].
Site visits are essential to confirm the findings from your analysis. Don Fitzmartin, a Denver-based consultant, highlights the importance of this step:
"It's about doing due diligence before the lease is signed." [16]
During site visits, focus on these critical activities:
Managing multiple locations effectively goes beyond just setting them up - it’s about ensuring smooth operations and consistent quality across regions. Research highlights that strong collaboration is directly linked to faster business growth [19]. Below, we’ll explore strategies for managing remote teams, adapting to regional markets, and building strong local networks.
Managing remote teams successfully starts with clear communication and measurable goals. Studies reveal that 83% of employees are more productive working from home, leading to a 27% boost in overall company efficiency [21].
Key areas for structuring remote operations include:
| Management Area | Key Tools | Implementation Strategy |
|---|---|---|
| Communication | Video conferencing, team chat | Daily standups, weekly team meetings |
| Project Tracking | Cloud-based management software | Centralized dashboards, real-time updates |
| Performance Monitoring | KPI tracking software | Monthly reviews, data-driven feedback |
"You have to make information really easily attainable... especially when people are working distributed, because that's all they see" [22].
While remote management ensures internal efficiency, adapting to regional markets is crucial for refining your approach.
Adapting to different regional markets while maintaining a consistent brand identity is a balancing act. Research shows that 72.4% of consumers prefer products with information in their native language [19]. Here are some examples of companies tailoring their strategies to local markets:
"Understanding local personas allows us to create marketing that feels personal and relevant. It's about making every customer feel seen and understood" [20].
Strong local networks are a cornerstone of multi-location success. Here’s how to build and maintain them:
Develop Local Partnerships
Build relationships with local vendors, suppliers, and business organizations through chamber events and industry groups.
Engage with Communities
Participate in local events and initiatives to strengthen community ties.
"Incorporating region-specific keywords within our SEO efforts has proven vital for climbing search engine rankings and maximizing our online visibility in target locations. This is the kind of actionable insight that can pivot a local marketing strategy to success" [20].
Standardize Operations with Flexibility
Maintain consistent processes while allowing for local adjustments:
Additionally, robust financial systems and regular audits help ensure smooth operations across all locations [17].
Making smart location decisions has played a key role in the success of many small and medium-sized businesses. Here are a few stand-out examples:
Corkscrew Johnny's and Its Strategic Interstate Spot
When Jonathan Kerkian took over Corkscrew Johnny's in Richfield, Ohio, back in 2011, the store's location near a major interstate became a huge advantage. The spot attracted truckers, business travelers, and local residents alike. In late 2020, the business partnered with DoorDash to offer alcohol delivery, which brought impressive results:
| Metric | Outcome |
|---|---|
| DoorDash Integration | 30% of online alcohol sales |
| Profit Margin Growth | 15% increase since adopting the platform |
| Customer Base | Expanded to include delivery customers |
"DoorDash helps us add profit to the business. It's revenue we wouldn't have had otherwise."
- Jonathan Kerkian, Owner, Corkscrew Johnny's [24]
Bahama Buck's Regional Expansion
Blake Buchanan started with just one Bahama Buck's location in 1990. Today, the business has grown to 28 stores across Texas, Nevada, and New Mexico, with plans for many more stores in the works [25].
Paris Chevrolet’s Local Market Success
In April 2009, Jeff Jones acquired Lowry Chevrolet and rebranded it as Paris Chevrolet. By the end of that year, the dealership had set new sales records [23].
These examples show how location choices can directly influence a business's success.
From these stories, three key takeaways emerge about crafting a successful location strategy:
Market Entry Planning
Research shows that 80% of market entry attempts fail [26]. This highlights the need for thorough planning. For instance, while Kmart expanded quickly across metro areas, Walmart focused on refining its value and operations, leading to better long-term results [26].
Leverage Geographic Synergies
Thriving businesses often enter markets where customer demand, operational strengths, and distribution channels align well [26]. Choosing areas that naturally fit your business model can amplify growth opportunities.
Account for Geographic Challenges
Proximity to transportation hubs and other economic factors can significantly impact a company's success [27]. Evaluating these challenges before expanding can help reduce risks and improve sustainability.
These insights underline the importance of a thoughtful location strategy that balances potential opportunities with practical constraints.
Drawing from the detailed market, legal, and operational reviews outlined earlier, this section provides a final checklist and explores key trends that are reshaping how businesses approach location strategies.
When acquiring a new location, small and medium-sized businesses (SMBs) should prioritize critical factors. Use this evaluation framework to guide your decision-making:
| Evaluation Area | Key Considerations |
|---|---|
| Market Analysis | • Customer demographics and insights • Competition levels • Local economic trends |
| Infrastructure | • Accessibility and parking availability • Visibility for signage • Proximity to transportation |
| Financial | • Favorable lease terms • Economic incentives offered • Projected operating costs |
| Legal & Compliance | • Zoning laws • Environmental requirements • Necessary local business permits |
"You need to identify where those potential customers are, and what their patterns are."
Once you've confirmed the essential location criteria, it’s crucial to revisit your strategy to address market changes. Business needs and customer expectations are evolving rapidly. For example, 37% of SMB owners list inflation as their biggest challenge, while 50% struggle with staffing issues [29].
Digital Integration
Modern businesses rely heavily on digital tools. In fact, 70% of SMBs now purchase a mix of telecom and software solutions [29]. This means evaluating locations for both physical features and digital infrastructure is more important than ever.
Flexible Operations
SMBs increasingly prefer flexible, usage-based models and lease agreements that allow for cost efficiency and adaptability [29].
"The most important thing… to remember is that technology becomes part of the products you sell. This is a totally different way of looking at technology in a CPA firm. In a traditional firm, technology is a tool or piece of overhead. In today's 'new firm,' technology is a component of what we sell. It becomes part of the product."
- Accounting Today [28]
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