The impact of location on business

According to Keystone, London is “ideal for headquarters and central offices,” and this is partially because London attracts a fair amount of executive talent, and partially because of the prestige that the city offers.

For example, there is a ring designing company called 77 Diamonds, and they enable you to pick almost every aspect of the ring you buy, especially when it comes to the quality of the diamonds you place in the ring. In essence, you can design your own ring, but a good ring and a good diamond will cost you thousands.

Given that you are spending thousands, would you be so willing to part with your cash if their head office was in a small and rundown town? When you are investing a lot of money, the fact that the company has its headquarters in London lends the company some prestige, and it is easier to trust the company because you assume it must be doing well if it can afford to operate in London. There is sort of a cognitive dissonance at play in that people find it easier to buy from a salesperson if that salesperson looks successful, even though that salesperson’s success has no effect on the quality of the thing being sold.

How does location equal mistrust?

As an example, take a disadvantaged town such as Rotherham. It is a town with an entrenched council that is draining town funds with a very high pension plan for council members, and extortionate business fees that has led to most businesses fleeing the town so that the local populace must travel to Sheffield or Doncaster to find good work. Add to that the scandal that Rotherham has endured, and here you have a town with a reputation issue. If you were setting up a good and trustworthy company, would you risk setting it up in Rotherham?

There are some companies that do very well in Rotherham, such as betting shops, pawn shops, and supermarkets, but would you set up a technology company, jewellery manufacturer, or any tertiary business in an area with a negative reputation?

Even if you decided to put your multi-million pound company’s headquarters in Rotherham because you were born there, people are going to have a harder time trusting your company. One may worry that any business located in that area is either a fly-by-night company, or that the company is one with very little prestige?

How does a location equal trust?

What does a London location say about a company? If setting up in a town with a negative reputation suggests that a company has little prestige, then setting up in a place like London may suggest the opposite.

Most people know how expensive it is to set up in London, so one may assume that a company is doing well if it can afford to have offices in London, which means the company must be doing something right.

Most people understand that the best talent flocks to places like London, Edinburgh, Cardiff, and Manchester. They may worry that your staff are unproductive or of a low quality if you set up in a small town. There are even major cities that may make customers think twice. For example, Manchester has a far worse crime rate than Leeds, but Leeds still has a terrible reputation for crime, so setting up something such as an investment firm in Leeds may be a bad idea.

Does a London location mean more productive staff?

If you have offices in a major city, then you have access to a wider pool of talent, which is always going to help productivity because you can pick the most productive workers. If you set up in a big city, especially in London, then you have to pay higher wages, which means you have to be more selective and have to pick the best staff that your budget can afford.

Location doesn’t guarantee success

Rotherham has been mentioned in a bad light, but the Tesco in their town centre has sales figures that beat most of the Tesco stores east of Peterborough and up towards the coasts of Hull. People protested its building, and yet people are now fighting to get jobs in there. There are parts of London where a Tesco would be deserted, so do not make the mistake of thinking that location guarantees success. However, the more your customers are spending, the more valuable a London location becomes. The same is true if people have to take advice from you that may change their lives or business. A location may not guarantee success, but there are times when a location may guarantee failure, so choose wisely.

By Ella Hendrix, freelance writer, who covers topics on business trends, geeky projects and start-up marketing