Business location in Germany

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Business location in Germany

Business location in Germany

Most founders need to choose the right location for their business in Germany. Depending on the type of business, choosing the right location impacts your project’s success significantly. To understand the importance of this, suppose you want to ship your products to customers by truck. You will incur high transportation costs if your business is far from the highway. Also, getting your product to the customer takes a long time. As a result, you will not be able to present an attractive competitive offer to your target audience.

However, do not worry. You can choose a suitable location for your business by following some essential rules and completing a questionnaire. In this article from Wise Business Group, we will review the crucial points regarding the choice of business location in Germany.

Choosing a business location in Germany

Before buying or renting a commercial property in Germany, you should pay attention to three significant points:

Location, location, and location again.

Of course, other factors are also important here, but their influence will be revealed only in an appropriate location. Therefore, business location analysis is very important for founders. On the other hand, once you establish your business in a particular place, it is impossible to change it effortlessly. Changing your business location doesn’t just mean you must re-enter your address with all the details on letterheads, business cards, and websites. Most importantly, you must notify all relevant authorities, institutions, customers, and suppliers of this address change. You must also add moving costs to these items. Hence, choosing the wrong location for your business can be costly for you in many ways.

Choosing a location based on the business idea in Germany

Your business idea determines how important is choosing the right location in Germany. By answering the following question, you will find out it.

Do you need customers to come to you, or do you conduct your main activity over the phone or online?

Also, you should check whether you need a considerable investment to start your business in the chosen property. In particular, accurate location searches are crucial for retail and hospitality businesses in Germany. Otherwise, there is a possibility that you will have to pay for an ill-considered decision with poor performance or even early bankruptcy of your business. This risk exists for all business ideas that depend on the presence of customers.

The importance of location based on business

You should also be careful in choosing the right location if you spend high costs for the initial investment in the facility, and there are long-term rental agreements so that it is possible to compensate for the prepaid expenses as soon as possible. Considering the above, we can say that it is also necessary for doctors, pharmacists, and educational facilities providers to choose a suitable location.

Other business owners who must ensure to invest in a convenient location are manufacturers and wholesalers who need high storage capacities. Connection to highways, railways, or waterways plays a significant role here. Generally, all founders should identify the optimal location for their business in Germany.

The importance of location analysis in Germany

As a rule of thumb, you can keep in mind that:

The more costly relocation is, the more vital location analysis is when establishing a business.

Your negligence in this situation can endanger the success of your business or even your livelihood.

What are the criteria for choosing a suitable location in Germany?

The main criteria for choosing a suitable location can be diverse according to the type of business. In general, to select the location of your business in Germany, you should pay attention to the following points:

  • Amount of demand
  • Competitors market
  • Quality of business location
  • Trade tax costs
  • Transport connections
  • Requirements set by the authorities
  • Labor availability
  • Financing opportunities
  • Image
  • Working and living conditions in the desired location

As a founder, your responsibility is to assess the importance of each of the above criteria for your business in Germany. To this end, you can assign a score of one to ten to each criterion. A score of one is assigned to unimportant, and a score of ten is assigned to noteworthy criteria. As a result, you will be able to compare different locations quickly. However, you should note that the precise determination of the criteria is much more important than the quick location analysis.

Criteria for choosing a location

Are you familiar with co-criteria? Co-criteria are criteria that must be met in all locations. In other words, if one of these criteria is not met in the location under review, that place will be removed from the list of options. You can provide the real estate agent with a list of your desired criteria so that they can offer you suitable properties based on it. Also, our consultants at Wise Business Group can help you determine the exact criteria for choosing the location of your business and choose the right commercial property based on that.

Can customers easily access your store in Germany?

Another question that you should ask yourself when choosing a location is how important is the proximity of customers to your business in Germany? It can be crucial at some times and trivial at other times. If your business depends on the presence of customers, location plays a prominent role in your success, as it defines your catchment area. Statistics show that most customers are unwilling to drive or walk for more than ten minutes to reach a store.

 Our suggestion in this regard is to get an overview that shows whether your target group lives, works, or shops in the catchment area. For this purpose, you can take the help of various information providers who are familiar with location analysis. In other words, you can purchase data that provides, for example, information about purchasing power and more in your chosen location.

How much competition is in the chosen location in Germany?

Along with considering the expected sales in the selected catchment area, you should also consider the level of competition in the target market. You can estimate your market share if you know your competitors. Keep in mind that large and reputable competitors often have more customers. For example, suppose you have three competitors and are the fourth member of the set. In this case, you should be able to take 25% of the sales amount. Now, if one of your three competitors is a large and well-known brand, you might be able to share only 50% of the total sales with the other two competitors. In this case, your expected share of total sales will be only one-sixth. Your positioning strategy is a beneficial byproduct of this type of analysis. If you monitor your competitors well, you can provide a unique selling offer and thus increase your competitiveness.

Is it possible to create strategic collaborations in one location?

Strategic collaborations can increase sales significantly. If you complement your portfolio properly with complementary products and services in the chosen location, you will have more success. For example, if you are a physiotherapist, you can develop meaningful partnerships with an orthopedic practice near your business establishment.

Another criterion that you should not neglect when choosing the location of your business in Germany is the proximity to high-traffic places such as supermarkets, educational institutions, sports facilities, medical and treatment centers, or the subway. If many people drive beside your shop in Germany every day, they will be aware of the products or services you offer.

Clusters can also be actual sales boosters. Business development agencies have been established in various regions of Germany to promote synergy potential. They usually sponsor programs that different companies offer to collaborate and implement projects. If you are interested in this topic, you should look for technology or startup centers in your desired area. These centers will often strengthen cooperation between companies.

Examining the conditions of the selected location in Germany

Of course, in addition to the mentioned items, you can check other details to choose a suitable location. The fact that other self-employed people you know don’t care much about standard positioning analytics shouldn’t discourage you. Anyone who does not adequately consider the issue of choosing a business location in Germany will miss a noteworthy opportunity.

Is the selected location too expensive?

When choosing the right place to start your business in Germany, you should also answer the following questions:

  • Do the costs of the selected property match your budget?
  • If the costs of the chosen property exceed your budget, do you have savings you can tap into?
  • Can you sublet parts of your business premises?
  • Can you add other business partners to your enterprise in the desired location?
  • Can you host events at the location to generate an additional source of income?

Another advice is not to accept the long-term rent you can’t afford from day one. Rentals in Germany are usually long-term. Therefore, you should set aside a budget over the months to pay for the rental costs. If the notice periods are unfavorable and six or twelve months long, which is common in the business sector, they can hurt you financially.

An overview of choosing a business location in Germany

  • Choosing the right location can significantly impact the success of your business in Germany,  specifically if the considered business depends on the presence of customers.
  • If you do not do a proper location analysis before establishing your business in Germany, you may have to pay for it by moving the location, poor performance, or even bankruptcy of your business.
  • When choosing the right location for your business in Germany, you should pay attention to demand, competition, tax costs, transport connections, related requirements, labor availability, financing opportunities, and working and living conditions there.
  • If the cost of the chosen property is more than your budget, you can cover it using your savings or compensate for it by earning money from methods such as subletting, adding business partners, or holding events.

Choosing the right location for setting up a business in Germany

Our consultants at Wise Business Group are ready to provide you with comprehensive services in market research, location analysis, strategy development, and setting up and registering a company in Germany. You can choose the most optimal location to establish your business in Germany by participating in our consultation sessions.

In addition, our team can introduce you to various financing methods for buying or renting commercial real estate in Germany. For more information, you can contact us via email or WhatsApp.

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