The Difference Location Makes On Your Profit Margin

Many people know how important location is to real estate ventures but did you know that it can affect your profit margin as well? A business’ location can be an incredibly influential factor in how much a company can make. Here are the many ways that location can affect your profit margin.

Increasing Profit Margin

#1: Having a Retail Store Online

One way that you can increase your profit margin is to have an online location for customers to purchase your goods. The great thing about online retail is that it is highly visible. Additionally, when customers make an easy purchase with the help of online credit card processing system, like Fattmerhcant, they may share about their experience on their online accounts, leave feedback, etc.  These are all things that can improve your brand visibility and boost profits.

#2: Placement of Advertisements

The location of your advertisements also has a huge effect on who will learn about your business. For example, if you offer services for a company, one of your best places to advertise may be a turnpike that company employees and executives may pass on their way into a high business area. However, a retailer of a young adult clothing line may want to place their advertisements online, where a younger generation is more likely to see them.

#3: Existing in a High-Traffic Area

Having your business in a high-traffic area can also be very beneficial to sales. This is true for retail companies, as well as those that sell services. The reason that a high-traffic area can help companies that are selling a service is because customers may already be in the area and become curious about the business. This can lead to potential customers.

Decreasing Profit Margin

#1: Having a Retail Business in a Low Traffic Area

If customers cannot find your business, that is a problem. This is especially true if you are a retailer. When a retail business is in a low traffic area, there is a very small chance that customers are just going to see your store and walk in. This decreases your profit margin significantly, especially if you are a small business. Small businesses are not yet established for their goods or services, so it is unlikely that customers are going to go out of their way to try something new.

#2: Amount Paid in Taxes

Another thing that you must consider is how much you will pay out in taxes living in a specific area. You probably already know that you will have to pay federal and state taxes every year because of your business. However, did you also know that some cities have taxes? As you choose your location, be sure to consider what percentage you will have to pay out of your profit margin for local taxes. While there are a lot of other things to consider as you choose the location of your business, this should definitely be on your list.

#3: Choosing an Area with High Rent

Another thing that can negatively impact your profit margin is choosing an area with high rent for your business. Rent is often a large chunk of money that has to come out of your profits every single month. While choosing a high traffic area can increase sales, this often comes at a price. Before you decide that a busy location can benefit your business, be sure to consider how much you will be paying for rent as a result. If all of your increased profits from sales are going to be eaten up by the high rent that you must pay, then sometimes, a high traffic location is not worth it.

About the author: 

Lautaro Martinez is a small business owner and freelance writer who shares his tips and insights into cost effectively running a company. If you would like to learn more about Lautaro, you can check out his google+ profile.

Categories: Business