How to find the best location for your shop

The product can be changed. The price can be adjusted. The logo can be redone. The location can't: once you've signed the lease, you've chosen it for the next 3 to 5 years. That's why choosing badly can cost you far more than the premises themselves. The method you'll see here works the same in Madrid, Paris, Lisbon, Milan or Berlin: the figures for each area change, not the way you decide.

Why location is the most expensive decision

Location determines three things at once: how many people walk past, what kind of people they are, and what competition is already set up next door. And unlike the product or the team, you can't pivot: if in six months you see the area isn't what you thought, the only real way out is to close and start again.

That makes the location decision the most asymmetric one in the whole project: get it right and your business has the wind at its back for years; get it wrong and no amount of marketing effort will make up for it.

The 5 criteria that matter (score each one from 1 to 5)

Forget the generic "best neighbourhoods" rankings, which almost never fit your business. What you need is a simple rubric that you apply in the same way to every candidate location, whatever city it's in. These are the five criteria that genuinely change the decision:

1. Your target customer (1-5). Do the area's average income, age and education match the profile of the people who buy from you? If you sell speciality coffee to professionals aged 30-45, an area with low income and an ageing population scores 1.
2. Density of reachable people (1-5). How many residents matching your target profile live or work in your catchment area (10 minutes on foot or 15 by car). The more density, the higher the score.
3. Competition (1-5, inverted). How many direct competitors you have within 500 metres. 0 competitors in an area with footfall scores 5; 8 competitors in the same area scores 1.
4. Accessibility and visibility (1-5). Public transport stops within 5 minutes, parking, a pedestrian street or a visible corner. A dead-end street with no passing trade scores 1.
5. Cost relative to potential (1-5). The rent divided by your forecast sales. If paying for the premises eats up more than 12% of your estimated sales, it scores 1.

Add up the five points. Any location with less than 17 out of 25 has some serious problem. Anything above 21 is worth fighting for. And never compare from memory: put it in a table.

An illustrative example: three types of area

Let's take an illustrative case. You're opening a premium women's fashion shop and you compare three areas within the same European city. The figures that follow are round numbers and only serve to teach the method: when you actually apply it, take each data point from the official sources for the specific city.

• Established central area: imagine around 45,000 inhabitants, income well above the city average and a majority with higher education. Your customer lives there. But the commercial rent is among the highest and there are dozens of boutiques already open. Target customer: 5. Competition: 2. Cost: 2.
• Area in transformation: imagine around 30,000 inhabitants, income above the average, a young profile and a lively retail scene. Rents more affordable than in the established centre. Target customer: 4. Competition: 3. Cost: 4.
• Rapidly gentrifying neighbourhood: imagine around 23,000 inhabitants, income slightly above the average and still little direct competition in premium fashion. Target customer: 4. Competition: 4. Cost: 4.

The result from the table doesn't match what you'd say at a glance: in this example the gentrifying neighbourhood wins, not the established centre. That's the usefulness of the method. Remember that these figures are made up to illustrate; the real ones only come from each city's official sources.

3 mistakes that cost dearly

• Falling in love with one specific unit. If you look at a single option you're not choosing, you're justifying. Emotion is the worst adviser for a 3-to-5-year decision.
• Looking only at the shopfront. A pretty, commercial street doesn't guarantee that your customer walks past. What matters is who lives and works in the catchment area, not how nice the street looks.
• Looking only at the rent. A cheap unit in the wrong area ends up more expensive than a costly one in a good area. The useful metric is rent divided by forecast sales, not euros per month in the abstract.

The catchment area: what you really reach

More than the precise address of the premises, what defines your business is how many people you reach in a reasonable time. That's the catchment area, and it's measured better with an isochrone than with a circle: the real streets, the urban obstacles and the transport network completely change the reach.