Taking over a retail business: how to analyse the location?
Introduction
The location of a retail business often determines its success or failure. A good location generates natural traffic, attracts the target clientele and justifies operating costs. A poor location, even with a solid concept, can doom the business.
When taking over a retail business, analysing the location is not limited to a quick visit to the premises. It requires a methodical evaluation of footfall, accessibility, the surrounding commercial area and constraints related to the lease. These elements directly impact potential turnover and the sustainability of the business.
This guide accompanies you step by step in analysing a commercial location. You will discover how to concretely measure the attractiveness of an area, identify warning signs and verify the legal and financial aspects related to the premises. Whether you are considering taking over a shop, a restaurant or a hair salon, these criteria apply to all local businesses.
A rigorous analysis of the location allows you to negotiate the acquisition price with full knowledge and anticipate necessary investments. It constitutes an essential step in your due diligence before any purchase decision.
📌 Summary (TL;DR)
The location of a retail business directly influences its profitability. Before taking over a business, analyse footfall, accessibility, local competition and commercial lease conditions. Verify financial indicators related to the premises (rent, charges, works) and carry out field visits at different times. This methodical evaluation allows you to validate the real potential of the location and negotiate with full knowledge.
📚 Table of contents
Geographical criteria of the location
The geographical analysis of a retail business begins with accessibility. Check the proximity of public transport (bus stops, train stations, trams) and the availability of parking spaces. In Switzerland, pedestrianised city centres offer high visibility but limit car access.
Evaluate the visibility from the street: a business set back or in the basement requires more marketing effort. Population density within a 500-metre radius directly influences potential traffic.
The demographic profile of the neighbourhood must match your offering. An upmarket business works better in affluent residential areas, whilst a local business thrives in dense, mixed neighbourhoods. Consult municipal data to understand the local composition.
Measuring footfall and customer traffic
Count the passages at different times: peak hours (12pm-2pm, 5pm-7pm), quiet mornings, weekends. Note variations according to market days or local events. This concrete measurement reveals the real potential of footfall.
Ask the seller for historical attendance and conversion data (visitors vs buyers). Verify these figures by observing yourself over several days. Automatic counting tools exist, but direct observation remains reliable.
Seasonality strongly impacts retail: ski resorts in winter, tourist areas in summer. Analyse monthly turnover variations to anticipate quiet periods. To evaluate customer loyalty, consult our guide on evaluating clientele.
Analysing competition and the commercial area
Map direct competitors within a 300-500 metre radius. Too much competition dilutes the market, but total absence may signal a lack of demand. Identify anchor businesses such as Migros, Coop or Manor that attract traffic from which you benefit.
The cluster effect works well for certain sectors: several restaurants create an attractive commercial area. Evaluate complementarity: a bakery thrives near a post office, a florist near a wine merchant.
Observe the neighbourhood dynamics: new businesses, renovation works, or conversely empty shop windows and dilapidated signs. Speak to neighbouring shopkeepers to understand trends. A declining area will impact your takeover in the medium term, even if current figures seem correct.
Evaluating the commercial lease and its constraints
The commercial lease determines the viability of your takeover. Check the remaining duration: a lease of less than 3 years creates uncertainty. Examine renewal clauses and early termination conditions.
Compare the current rent to local market prices for similar premises. An overvalued rent erodes your margins. Identify additional charges (heating, maintenance, taxes) and activity restrictions that could limit your development.
Clauses specific to Swiss law (indexation, landlord's right of pre-emption) require particular attention. To explore this critical step further, consult our complete guide on negotiating a commercial lease.
Financial indicators related to location
The rent/turnover ratio constitutes a key indicator for retail. Aim for 8-12% maximum: a rent of CHF 3,000/month requires a minimum turnover of CHF 25,000-30,000/month. Beyond that, profitability becomes difficult.
Calculate the customer acquisition cost according to location: a premium location reduces marketing needs, whilst a secondary area requires more investment in communication. Project different attendance scenarios (optimistic, realistic, pessimistic) to test the model's robustness.
The location directly influences the company's valuation. To obtain a precise estimate based on these parameters, use our free valuation tool which incorporates the specificities of the Swiss market.
Field verifications and due diligence
Visit the business at different times: morning, midday, evening, weekend. Each time slot reveals different information about traffic and atmosphere. Observe the general condition of the building and neighbouring infrastructure.
Speak to shopkeepers in the neighbourhood: they know about upcoming urban planning projects (works, new transport lines, demolitions). Consult the municipal master plan to anticipate changes that will impact the area.
Verify the operating authorisations required according to your activity (opening hours, alcohol sales, terrace). Some municipalities impose strict restrictions. For this complex phase, call upon local experts via our partner network: lawyers, fiduciaries and advisers specialising in business takeovers.
Location remains the determining factor in taking over a retail business. A rigorous analysis of footfall, the commercial area, competition and the commercial lease allows you to evaluate the real potential of the business. Financial indicators related to location, turnover per m², rent relative to turnover, neighbourhood evolution, must be verified on the ground, not only on paper.
Complete due diligence includes visits at different times, discussions with neighbouring shopkeepers and an analysis of ongoing urban planning projects. These concrete verifications often reveal elements invisible in financial documents.
Are you looking for a retail business to take over? Browse the businesses available on Leez and filter by sector and canton. Need support to evaluate a location or negotiate a lease? Our network of experts can direct you to the right specialists.
