How to choose where to open a business

In any major European city, the rent on premises along a good high street is one of the biggest fixed costs you'll ever take on. And if you pick the wrong area you don't just lose one month's rent: you lose the upfront investment, the two years it'll take you to wind the place down, and the mental energy of building something in the wrong spot. Choosing the area is the most expensive decision you'll make, and almost always the one you spend the least time studying.

Why location changes everything

A good product in a bad area sells little. An ordinary product in the right area can do very well. Location sets three things you can't change afterwards: how many people pass by, what spending power they have, and how much competition shares your customer.

You can drop the price, redo the shop window and extend the opening hours. The location you can't: once you've signed the lease it's fixed for 5 or 10 years. That's why the only moment to get it wrong without it hurting is before you sign, not after.

The 5 steps, in order

1. Define who you're aiming at (in one sentence)

Before you look at any maps, write down on paper who your customer is: age, rough income, habits, what they're looking for and how much they can pay. If it won't fit in a sentence, you're not clear on it.

• Example: "Women and men aged 30-45, with a household income of €35,000-55,000, who value organic and local."
• Counter-example: "Anyone who walks past the door." That means you don't know who you're selling to; any area will look reasonable.

2. Study the demographics of each candidate

How many people live in the area, what the average age is, what the income is, what kind of household. This data comes from official sources and lets you compare one area against another on consistent terms. The trick isn't to look at the figure in the abstract, but always to compare it with the average for its own city: a candidate below the urban average is a less dense or less affluent area, and that changes the product you can sell there.

3. Analyse the competition sensibly

Locate the businesses similar to yours. Plenty of competition can mean saturation or a living market. What matters is to measure it per resident: 5 cafés in an area of 50,000 people is barely anything, 5 in an area of 8,000 is suffocating. Full detail in how to analyse the competition.

And don't forget indirect competition: those who meet the same need in another way (vending machines, bakeries with coffee, petrol stations…).

4. Check the real accessibility

How many people can you reach within a 10-minute walk? Is there parking? Is there public transport nearby? Is there a dual carriageway or a river blocking the way? Reach on foot, by bike or by car is measured with isochrones: the real area you reach within X minutes. Premises hard up against a ring road or an urban expressway can have half the catchment area of their twin two streets further in.

5. Compare and score against the same criteria

Put two or three candidates side by side, not from memory. Each with its own numbers: population, income, competition per resident, reach within 10 minutes. You decide with a clear rationale and you can justify the decision to a partner, a spouse or a franchisor. Deciding by eye between four areas in a notebook is deciding at random.

A hypothetical example: a children's eco-products shop

To see how the pieces fit together, let's take a made-up case: you open a children's shop selling eco-friendly toys and clothes, average basket €35-60, in a mid-sized European city. You put three candidates side by side. The figures that follow are illustrative, deliberately round, purely to show the reasoning; the real ones you'd pull from your city's official sources.

• Established central area: imagine income 40% above the city average, high density and a large population with higher education. Spending power, education profile and density to sustain a mid-to-high basket. The catch: the commercial rent is also among the priciest (prime area).
• Neighbourhood in transition: income somewhat above the average, young professional families gradually arriving, rents still reasonable. With one caveat: lower density and sales you have to build month by month.
• Residential outskirts: income around the city average, there are families but the spending power doesn't match the basket. The margin is tight: if you cut prices you give it up; if you keep them, you sell less volume.

None is "the best" in the abstract. The good one depends on how much money you can put down as rent and how many months of staying power you have in the bank if sales are slow to come. The data doesn't choose for you: it puts the question in the right place.

Mistakes that cost years of rent

• Choosing because "the premises look nice". Anyone can refit the premises; the area can't be refitted. You fall for what's visible and forget what matters.
• Looking only at the rent. Cheap premises are usually cheap for a reason: few people pass by, low income around, a fast road cutting off the way through. Paying €800 in a dead area is more expensive than €1,800 in a lively one if the sales don't come.
• Ignoring the competition already in place. "I didn't look because I thought it was an area with no competition" almost always means there was no demand either. Competition confirms there's a market; its absence almost never does.
• Not looking at who really lives nearby. You assume the neighbourhood "is" like your customer when in reality it's 20 years older or earns half as much. Without numbers, the feeling is always optimistic.
• Deciding alone, without comparing candidates. An area in isolation always looks acceptable to you. Only when you put it next to two others do you see the differences.

Checklist before you sign (use it on signing day)

If you can't answer these questions with data, don't sign:

• How many people live in my catchment area (10-minute walk)?
• What's the average income? Does it fit my prices?
• How many direct competitors are there per 1,000 residents?
• Have I checked the indirect competition?
• How many people do I reach within 10 minutes? Are there urban barriers?
• How does this area score against 2 other candidates on the same criteria?
• What's the total cost of the lease (month + deposit + VAT + fit-out + key money)?
• How many months can I hold out if I sell half of what I forecast?

How much does it cost to do it well, and how long does it take?

• By hand (DIY): €0, 15-25 hours per candidate. You mix the open data from your country's statistics institute, the population register, Google Maps and field observation. It works if you have 1-2 candidates and plenty of patience. The downside: comparing several areas by hand takes a whole week.
• Geomarketing consultancy: €1,500-4,000 per area, 3-6 weeks. They give you a defensible report (useful for a bank or a partner) but it's dated and expensive to repeat.
• A tool like POINOVA: €0 to get started with the population, income and isochrone of each area; with Pro you add the competition and compare the candidates side by side. 10-20 minutes per candidate, and if you drop one and another comes up, you run it again at no extra cost.