Blog articles

04 January 2023

How to Startup: The optimal location for your business


by German Design Museum Foundation

Not all locations are equal! The first point to consider when selecting a location for your business is the product you want to manufacture or the service you want to offer. Do you need a showroom, offices, manufacturing facilities, research facilities or do you want to start in a business incubator?

  1. Find the right location

    Most people starting a business select a location based on factors which although they appear to be convenient for the founder (e.g. near their home, in an area they are familiar with or close to a partner’s place of work) ignore more important factors for the success of the start-up (e.g. transport links, the competition, costs).

    A founder who initially pauses to consider the fundamental attributes of a good location increases the chances of success of his start-up.

  2. Who can help when looking for a location?

  • Real estate brokers/estate agents
    Classic points of contact when looking for a location.
  • Business incubators and technology centres
    Office space specially designed for new businesses can be found in all parts of Germany. There are also many possibilities for innovative businesses.
  • Data-bases
    A variety of different data-bases can help in your search for business premises.
  • New flexible office concepts such as temporary office space. Whether you just want a phone or a fully serviced office, a range of flexible office concepts are available. (1)

Location assessment

The location
Every person starting a business should conduct a location assessment for himself. General information from specialist periodicals, data-bases, trade associations and federal and state statistical offices can be used as the first step.

However, in every case the information you obtain in this way should be supplemented by your own “on the spot” investigation. Face to face or phone conversations with potential customers, suppliers, future competitors, local promotional associations, town/city local government bodies and chambers of commerce and industry can all make valuable contributions.

And, depending on the type of business, watching the pedestrian flows in a neighbourhood can help. Only about 10% of retail customers normally walk for more than 10 minutes to make a purchase. Drivers avoid trips that take more than 30 minutes.

Important points when selecting a location

  1. Requirements
    What are the target groups addressed by your start-up? How can you assess what they need? Registration Offices can provide you with information on the demographics. You can sometimes get some leads from the range of competitors. Statistical Offices have some interesting information on household structures.

  2. Purchasing power
    The Statistical Yearbook of the Federal Republic of Germany contains information on local purchasing power. However, attractive offerings in neighbouring areas can lead to an outflow of purchasing power.

    The Gesellschaft für Konsumgüterforschung (Company for Consumer Goods Research) in Nuremberg undertakes extensive investigations which can be obtained in return for payment of a fee. Nielsen Market Research based in Frankfurt am Main issues what they call a “purchasing power map” which also provides information on how much customers in Germany spend, what they spend it on and where they spend it.

  1. The competitive situation
    Which competitors are already in the market? What is their product range and how is it priced? How do competitors go about their promotional campaigns?

  2. The site
    Given the high level of customer mobility, the traffic situation must be properly considered. Parking space is extremely important for private car drivers. How well is the site served by local public transport?

    A high footfall as in town centre sites, pedestrianised zones and arcades is certainly advantageous. However, given the continuously increasing level of retail and office rentals, serious consideration should be given to whether a prime location is really necessary.

    The proximity of business in other sectors with a high footfall such as doctors’ practices or banks points towards looking for a cheaper site. Are there any businesses with complementary products in the neighbourhood so that you can benefit from synergy effects?

    A manufacturing business needs a well-developed transport infrastructure. The level of Trade Tax depends on the local authority’s assessment rate. A comparison with areas with otherwise similar general conditions can be worthwhile.

  1. Business premises
    You must have approval for premises to be used for business purposes as shops, offices, workshops or warehouses. The relevant town hall or building authority will provide you with information on which uses are permitted. The premises must comply with building regulations and the Business Premises Regulation (Betriebsstätten-Verordnung), (for example a rest room for staff). To obtain more information you should contact trade associations and the Government Office for Occupational Safety and Safety Technology (Amt für Arbeitsschutz und Sicherheitstechnik).

    If you are running a business from a flat or house, you must also obtain permission from the landlord and the joint tenants. Normally there are no problems in this respect if you are using the premises for your work as a sales representative or for office services, provided that it does not involve a lot of people visiting you. However, extensive use could be considered as misuse of residential premises and therefore prohibited. In cases of doubt the Housing Agency (Amt für Wohnungswesen) can help with information. (2)


Where do you want to work?

Your place of work
The nature of your place of work also plays an important part in all considerations of where your business is located. Finding suitable premises depends on whether you can or want to pay rent for additional space, whether you work with other people, or want customers to visit you. The options include:

Home office
The usual solution of most self-employed independent professionals is to work where they live.

The advantage: a home office costs nothing as its costs are included in the rent of the flat or house. There are also no commuting costs to be paid.

Disadvantage: you don’t meet other people socially. And your work is always there, especially if your home is small.

Office/workshop or studio
If you don’t want to work at home, you can rent your own office or studio.

Advantage: the place where you spend your working time and leisure time are in different places.

Disadvantage: you have additional costs. There is also the question of social isolation if the office or studio is used by no-one else.

Shared office / studio
Anyone wanting to avoid working at home or alone can move into a shared office or studio or establish a shared office with other independent professionals.

Advantage: the rental and office infrastructure costs are shared. A further plus is the social contact with other people when you are working. Orders, collaborations or joint start-ups can result from the shared working space.

Disadvantage: privacy is lost and there is sometimes pressure to adapt to shared decisions.

Business incubators
An office in a business incubator (or technology centre, if appropriate) is also a possibility for independent creative professionals who need a desk where they can work and who value a professional environment and useful contacts.

Advantage: the offices are generally new and modern with a perfect office infrastructure including a secretarial service. Other useful services are often available such as consultancy services and training events. The rental is usually lower than in the open commercial rental market.

Disadvantage: the facilities are only available for a limited period and generally only available to start-ups or businesses that are just a few years old.

Creative centres / creative quarters
Creative centres or creative quarters are often previously empty business parks or industrial buildings made available by town or city councils and often renovated and fitted out by creatives themselves for the purpose of creating production and experimental areas or exhibitions space.

Advantage: this is where creatives, usually long-term tenants, are to be found so they can work in close contact with and benefit from each other. The rental is usually lower than in the open commercial rental market.

Disadvantage: The professionalism of “self-administered” creative centres or quarters often leaves a lot to be desired (for example the availability or cleanliness of shared studios, workshops, dark rooms etc. as well as the purchase of materials used by all the occupants).

Coworking Spaces
They are primarily involved in the provision of workspace for independent creative professionals who need to rent a desk plus normal office infrastructure along with Internet access by the hour, day, month or long term and where they can work. The facilities vary from provider to provider and range from former factories with desks, WLAN and shared a coffee machine to offices of different sizes in multi-storey buildings complete with a café, canteen, quiet rooms and conference rooms as well as training programmes.

Advantage: co-workers can immediately acquire a professional office address with Internet facilities and an email address. A further plus is the social contact with other people when you are working. Orders, collaborations or joint start-ups can result from the shared working space.

Disadvantage: anyone worried that they can lose ideas or customers when chatting is unable to benefit from coworking. Sometimes the working conditions in an open-plan office are poor because of the noise level.


Check-list: shared office or workspace
The shared use of studio or office premises has many advantages. Nevertheless, you should check on the following points to avoid conflict as far as possible:

  • Does everyone involved pay a share of the rent deposit which the head tenant has to deposit with the landlord?

  • How are the shared costs for the communal use of the rooms, telecommunications, rent, utility charges and cleaning allocated?

  • Into which account are the costs paid?

  • Who keeps track of the money paid into and paid out of the account?

  • Are certain items of equipment (e.g. copiers, fax machines, software, lighting) purchased jointly?

  • Are the purchase costs of these allocated? (For tax reasons not recommended for one-off purchases). Or does the purchaser receive a pre-defined monthly sum for their use?

  • Should reserves for regularly recurring purchases (e.g. office supplies) and repairs be formed?

  • What notice periods must be given to all parties involved? (3)







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