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  • Writer's pictureJason Huett

How Does Location Impact Marketing Budget Allocation?

Launching a new business is an exhilarating journey filled with learning experiences. While most first-time entrepreneurs tend to prioritize the technical aspects of their businesses, they quickly discover that other functions in the business, such as Operations, Marketing, Human Resources, and Customer Success, play an equally critical role in their success.


Real Estate Madison WI

Unfortunately, one of the most pivotal decisions that first-time entrepreneurs face— the choice of location — is often made when they have the least amount of experience under their belts.




The statistics are daunting, the Bureau of Labor Statistics reporting that:

  • 20% of small businesses fail in the first year,

  • 30% by year two

  • 50% by year five

  • 70% by year ten

Clearly, the stakes are high, and the importance of selecting the right location is mission critical.


In this article, we will delve into the relationship between location and marketing budget. We will explore the critical factors that entrepreneurs must consider when making this crucial decision, and we'll highlight statistics to shed light on the challenges and opportunities that lie ahead.


Understanding the Correlation Between Location and Marketing Budget:


CRE Madison WI Correlation

One of the most perplexing aspects of choosing the right location for your business is understanding the correlation between your location choice and your marketing budget. It may seem like an unlikely comparison, but it's a connection that can make or break your business. Let's unravel this relationship.


Rental Costs vs. Marketing Budget:

One of the most obvious considerations is the cost of rent, which can vary significantly depending on the location. Typically, higher rents are associated with better visibility, convenient geographic location, or upscale real estate spaces like Retail.


Conversely, rents tend to be more affordable in areas with lower visibility, foot traffic, or locations considered "off the beaten path," or for lower-end property categories such as Flex Space (part office, part warehouse). The question being asked is: "Does it make more sense to invest into a better location, or invest more heavily into marketing to drive traffic?"


The answer to this question is: "It depends." Here are a few factors to consider:

  1. Business type - a convenience store likely couldn't survive without a high-traffic location, whereas a luxury skincare business may be able to drive traffic regardless of location (within reason, of course). For businesses that depend upon foot traffic (e.g. fast food), location is paramount.

  2. Level of competition - all things being equal, do your competitors have a more convenient, cleaner, higher profile location than you? If so, there might not be much of a choice other than ensuring your location has the same. However, in industries with few competitors, there's less pressure to match location features.

  3. Owner skillset - by-in-large, Main Street entrepreneurs are limited with time. For this reason, most small business owners won't feel confident knowing they can depend on their marketing prowess to drive traffic. But, if you are an owner that has this skillset, finding a more affordable location with lower rent may be an operational advantage if you can drive marketing without paying for premium space.

  4. Long-term grow objectives - if your business requires more square footage as you grow, you'll want to be mindful of where your customer base lives and the Customer Experience you provide when moving from a smaller space to a larger one. It's always better to upgrade your location than to downgrade.


Conclusion:

In the high-stakes game of entrepreneurship, choosing the right location for your business is not a decision to be taken lightly. Your business's success hinges on striking the delicate balance between location and marketing budget.


By being aware of the correlation between these two factors and considering the challenges and opportunities they present, you can make a well-informed decision that propels your business toward success. Remember that every location tells a story, and the story you choose to tell could be the key to your entrepreneurial triumph.


To your success,


Jason Huett, CMO Licensed Real Estate Agent PS: Avoid common pitfalls of finding your first location - get help by getting in touch HERE.



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