Where to start your business – locational effect?

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BY F3FUNDIT

While we’ve seen monumental technological changes in society over the past two decades that have led to lower communication barriers globally, and have for the most part facilitated globalization thus making the world smaller, or as Thomas Friedman would call it, flat, these changes have not deceased the impact that businesses have locally.

It’s reasonable to think that a local establishment such as a bar or restaurant will draw most of its customers locally, but what about a high tech business, internet based, mobile, or clean tech? Since the markets for these types of businesses are clearly more international from the onset, the thought is that the customers too would be international from the onset. This is typically not the case, and for lack of a better term we’re calling it the locational effect.

Why this happens is exactly defined, however some general assumptions can give an insight.

  • Word of mouth & local network
  • Press coverage in local news
  • Ease of access to local clients

However, even internet startups that utilize a different language from the country in which they’re founded see this, which begs the question why? It could be a mix of the above assumptions but our thoughts are there’s more to it which we may explore in the future, but the overall reason for this post is not to deliberate on a topic which is in a way academic, it’s to give advice on where to start – physically.

What we mean by this is that with the level of mobility available to us, we should often think where to start, different industries are focused in different European markets, and each has it’s strengths and weaknesses, all the same, however, you also have to factor into your assessment what benefits and trade offs you’ll get. Is it worth leaving to open up shop someplace new if I’ll loose access to my network? The general answer is no, but if for example you’re running a web business for Polish migrants in the UK, a bad place to start and develop this would be say, oh Portugal, where as both Poland and the UK would be suitable and where the locational effect would help your business to grow. In any case, before we leave you, here are a few things to think about.

  • What is my trade off – what will I gain, what will I lose?
  • What kind of an impact can locational effect make on my enterprise?
  • Are there any cost savings towards moving starting elsewhere?
  • How quickly can we grow, and how big an effect will location play on this enterprise?

Think we missed anything? Let us know in the forums.

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