Location, Location, Location: Real estate’s role in the success of a business

A business can fail for a countless number of reasons.

And some locations utilized by local businesses just can’t seem to hold on to a tenant for very long.

In some cases, poor management directly correlates with failure. In other situations, it’s the location. John John of RE/MAX Boone Realty has seen success with business owners who know the key elements of a new business and how it works: cash flow, business streams, how you’re going to hire people and so forth.

John uses a simple comparison: Let’s say, oh, the coffee market. Folgers does great but doesn’t sell actual coffee like Starbuck’s does, he says. Green Mountain sells the Keurig system K-Cups, which is a totally different model. “At the same time, they want you to drink a cup of coffee from them one way or another,” John says.

In any business there’s always room for the best person in that industry, John says. “If I see someone who’s really striving to take charge of an industry and take care of their customers, you can see they’re on the right track.”

One aspect of business success, no matter the location, seems to be preparation. An experienced business owner will know how many parking spots he or she needs, the desired traffic count and the space necessary to sustain the operation.

But it’s not a black-and-white issue. Can a location really be “cursed” in that the location itself is the problem? Or is it almost always the leadership? Well, John says it varies.

Although some businesses may prioritize advertising so people come to them, others might count on having a visible, decorated storefront and spend their money on that instead, he says.

Many businesses the CBT has researched within Columbia are restaurants. As we spoke with real estate experts, we found a handful of essential factors in addition to location: sufficient capital, operator experience, full commitment to business planning and, finally, macro factors.

Although the restaurant operator plays an integral part in its success, the economic landscape of the time may be an unavoidable macroeconomic factor. Some restaurants may simply be ahead of their time conceptually, and others, still, may suffer through a recession.

The National Restaurant Association and other restaurant organizations have long loathed the false statements spread about high restaurant failure rates, however.

Restaurantowner.com recounts the 2003 statement by chef Rocco DiSpirito that haunted countless restaurants. On his television program viewed by millions, DiSpirito said 90 percent of new restaurants fail in their first year, an extremely false figure that has been repeated over the years. Others place the failure rate closer to 25 percent, not far from the average small businesses.

The National Restaurant Association projects Missouri restaurant sales to bring in about $9.1 million in 2013, but it’s difficult to quantify the experience of an ever-changing and complicated industry. Each experience seems to be completely different.