Does the location of a business matter?

Does the location of a business matter?

In the 90s a common term used in chat rooms was “IRL”, or in real life. There was a clear distinction between the digital world and the physical world. What you could do in each of those environments was drastically different and made commerce difficult. Online communication was possible with chat rooms, but accepting credit cards was nearly impossible. Even online shipping to nearby states or countries was cost-prohibitive.

Nowadays, with the advent of numerous technologies and innovations, things have dramatically for the better. Commerce is now on a global level for both consumer and business owners. Let’s take a look at some of the big barriers to commerce and how location matters to run an e-commerce business.

Accepting orders

Open for business

In a retail business, the number of potential customers you can serve is limited to how many can physically be in your premises, and if they can come to your premise at all.

If customers can’t walk into your business, they won’t be able to purchase. With an online sales channel, it’s totally possible to reach a global market on day one. We’ll go more into some specifics of shipping products globally later.


Due diligence

Renowned investor Warren Buffett may be based in Omaha, Nebraska but this hasn’t stopped him from investing globally. Buffett’s firm Berkshire Hathaway recently purchased 80% of an Israeli company for $4B USD, later buying the remaining 20%. When asked if he visited the company before purchasing the business, he said jokingly, “No I did not go to Israel, I hope it's there!” Whether Buffet sent someone else from his team to physically check out the business isn’t clear, but operating based on business metrics at a large scale is possible. There may be a business in the same city as you, but this shouldn’t limit your search. An in-person interview and hand-shake can be a great way to get familiar with a business history, but you can also learn just as much and speak to many more businesses with a video call or even just a phone call.

Every business deal requires a different level of due diligence and we’d advise doing as much research as possible on the business you are thinking of buying.

On Exchange, all transactions require multiple levels of approval from the buyer and seller and payment is held in Escrow to ensure a smooth transaction.


Business operations

Companies globally are increasingly realizing that they are limiting their talent pool themselves by only hiring employees that can work in the same office. Skype, Google Hangouts, Slack and other digital messaging tools make running a business with employees in different corners of the globe a competitive advantage. By having employees in different corners of the world, you can offer faster customer support, or be able to have someone in your business easily able to stay in contact with suppliers and business partners in different time zones.

This can help with customer support, around the clock order fulfilment, or just access to talent you can’t source locally.


Physically shipping products

Physically shipping products

If you’re selling physical products those products need to be shipped to customers wherever they are and shipping can be one of the biggest factors customers have when deciding to complete their order.

In terms of the actual work to fulfil orders, there is additional work to prepare your shipment if the order is being shipped internationally. If you’re shipping the same product multiple times, this can be automated with various apps to ease the preparation. Once you’ve shipped a product to a certain location before, the next time you ship it is as easy as just selecting another country in a drop-down box.

USPS Flat Rate Box

Free shipping is becoming less of a nice to have and more of something customers are requiring. Within Canada, Canada Post calculates shipping rates based on the location, volumetric weight and service type. If the majority of your customers Canada are based on the opposite of the country, you will have higher shipping costs and slightly longer delivery times. Carriers in other countries like USPS offer flat-rate services which are fixed price, regardless of the destination or weight.

Purchasing inventory from a business

Many businesses on Exchange offer their inventory for sale along with the business and if you’d like to take possession of the inventory you’ll need to pick up the inventory or arrange transporation. The product can be shipped domestically and fulfilled using a 3rd-Party Logistics provider (3PL), or to your own warehouse.

Assuming the inventory your purchasing is above the size you could ship via a parcel delivery service, here are some general prices of bulk shipping rates.

Container Shipping Cost Index

From July 2016 to July 2018, the index World Container Index, prepared by Drewry had a spot price ranging from $1100 to $1850 for a 40ft container, most recently at $1438.84. The index is based on 8 major freight routes to and from Europe, Asia and the USA. Compared to parcel shipping, the cost per pound is dramatically cheaper, but shipping by sea is not fast and can be 1-3 months, or more if your package is delayed.

There will be other expenses for transporting a container such as paperwork, duties, port fees and you’ll also be required to transport the container from the port of delivery to the final destination. 

Businesses for Sale by Location

So does the location of a business for sale matter? At the end of the day, it does have an impact on how you operate but can be both a competitive and advantage and disadvantage.

How much of either depends on the business, what type and size of products are being shipped and where customers are located. As you'll see from contacting businesses on Exchange, there are entrepreneurs who have a majority of their sales in countries they've never set foot in and customers are increasingly demanding new and unique products they can't find locally.

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