When planning a business, almost nothing is more important than selecting the best location – even today.

“With an increasingly digitized economy, one may falsely assume that locations do not matter anymore … restaurants, health-care facilities, manufacturing plants, theme parks, gardening stores, auto service centers, spas, karate studios and many more types of businesses will continue to have a physical location,” wrote Chethan Srikant, a Cal State Fullerton assistant professor of management.

Chethan, who earned his Ph.D. in general management at the Ivey School of Business at The University of Western Ontario, looks at how businesses can make socially aware location choices – taking into account factors such as educational level, racial diversity and lifestyles – in his 2021 article “Making socially aware location choices” in the journal Industrial Management.

What to Consider When Choosing Your Business’ Location

According to Chethan, both basic and social parameters need to be accounted for when choosing a business location.

Basic parameters include critical resource constraints, which are the essential challenges and factors that must be kept in mind for any business to succeed. These constraints include any limitations of basic needs, such as food, oil or water; the value chain, such as logistics, marketing and sales; government regulations; and disruptions that might occur because of climate change or natural hazards, such as storms or earthquakes.

“Businesses will be able to take advantage of the market and economic conditions if they consider locations that provide the most significant advantage in terms of these four basic parameters,” says Chethan.

Social parameters are the demographics and psychographics. This has to do with the makeup of the community where the business is located. Think educational levels, ethnic breakdown, lifestyle choices and income levels.

Together, the four basic parameters and the community attributes are what businesses need to consider when picking a location. And if the community attributes are broader, then the business must discover what specific factors are to be included by engaging with the community and understanding its particular needs.

Some members of the community may become customers but many more will impact the business in multiple direct and indirect ways. They can turn up at local council meetings and express opposition or force zoning changes that are detrimental to the business. They can create social media pages that negatively reflect on the business or they may physically protest in front of the business. Those negative sentiments can linger on.

“In short, there is no one list of most important things but rather a starting point, and as the project progresses, the business must be ready to revise and re-evaluate its list,” says Chethan. “I’m using the term ‘project’ here to indicate the whole process from conceptualization to the operational startup of that business in that particular location. It could be a massive undertaking, such as a new refinery or a new Subway restaurant location. Businesses don’t suddenly appear out of thin air.”

How to Connect with the Community

So, you want to start a business and engage with the community to tap into the social parameters of location choices. How can you do so?

Authenticity is key, says Chethan. That means truly believing your product or service is what the community needs. And not just being in it for the money or prestige.

Chethan envisions the process that might occur with a major startup, such as a large factory, warehouse or office complex arriving in a small community.

“During the town hall meetings or a sit-down with a local reporter or other forms of interactions with the community members, the real sentiments of a business executive will become evident sooner or later,” says Chethan.

“The business must want to be part of the community and not just be there to exploit an economic opportunity. It is all about the attitude of business executives, especially in today’s hyper-sensitive social media-driven age. Those with exploitative tendencies will get weeded out in the long run.”

Chethan looks to his decade in Canada for examples.

“During my decade long stay in Canada, I came to admire and love so many things about that country. Tim Hortons, a fast food restaurant chain with over 4,800 locations worldwide, is not just a coffee shop in Canada. It is an institution and more importantly a center of activity in many smaller communities. That didn’t happen overnight but with concerted effort to engage and customize to every community’s need. You can always tell the colors of a local hockey team by looking at the sprinkles on the donut at the local Tim Hortons!,” says Chethan.

“The Toronto Raptors, the only Canadian NBA team, also carries a similar weight among Canadians, especially around Toronto. In particular, the Raptors were extremely cognizant of the diversity of the community. They had a local Chinese language broadcast of the games and many people of Chinese origin in Toronto are die hard Raptors fans. One of their super-fans is a Sikh entrepreneur, Nav Bhatia, who enjoys almost the same status as world-famous rapper Drake amongst Raptor’s fans, and became one of the first fans to be inducted into the Naismith Memorial Basketball Hall of Fame. Again, this was not done with the push of a button, but rather it was an ongoing effort to truly understand and engage with multiple parts of the community that created this connection.”

Planning Ahead Before Putting Down Roots

In suggesting a model for holistic community engagement, Chethan posits a five-step process, beginning with evaluating basic parameters, then initial community consultations, followed by community-centric project design, then community engagement and, finally, entry vs. exit decisions.

But how can an entrepreneur practically plan ahead for these steps before opening shop and spending their hard-earned money?

“The most important thing you need to plan is the time and effort required. This cannot be approached as a checklist to complete in a somewhat routine manner,” says Chethan. “If a company goes in with a well-laid-out plan, where everything is detailed to the minutest practical step, it is more than likely to become counter-productive. They can assess the first step – basic parameters – but after that, they need to be prepared for surprises, twists and turns, and potential dead ends.”

Says Chethan, while planning is good, too much planning can be problematic. It is always important to start engaging with the community you serve before getting too far into the process. That might include connecting with the vendors who will supply you with goods, meeting with the chamber of commerce or connecting with local media (in the case of a larger startup).

In some instances, even determining what constitutes the local community can be extremely challenging. Take Fullerton and Huntington Beach as two local examples. A significant part of Fullerton’s identity is educational institutions including CSUF, Fullerton College and Troy High School. Many are commuter institutions, meaning students don’t reside locally but can travel from cities that are sometimes a couple of hours away. This creates a moving and constantly changing population. However, the population remains fairly stable over a period of year or so. In Huntington Beach, on the other hand, the community means very different things between an April weekend and a November weekday due to non-local people visiting the beach and the surrounding businesses, typically on weekends during warmer parts of the year. These dynamics are not captured in census data. You can only know this through a lived-experience.

“I don’t think they should do too much planning before starting community consultations. That’s why I suggest community-centric project design as the third step after the community consultation. Typically, companies design the project, and then they start talking to the community.”