Location, Location, Location...

We all know that location is vital in real estate, but it is also important in business. In some areas, location is everything. I say this because I believe that in the Central Valley, location is absolutely vital to the success of a business. Perhaps I should clarify a bit... When I say location, I don't mean figuring out which street corner to put your store on. I'm talking a bit more about the business environment. I sincerely believe that here, in Visalia (and the surrounding area), knowing your environment is essential. Let me preface my thoughts by saying that I believe that the Central Valley has some of the most business savvy entrepreneurs that you'll find anywhere, bar none. The simple fact is these businesspeople absolutely must be good at analyzing the business environment in this area.
Case in point... I visited a bar/nightclub in downtown Visalia a few months ago and I had a pretty good time. It was a large wine bar that frequently hosted live music from outside the area. Just recently, said bar closed down due to lack of business. I immediately started wondering why the bar closed down, and I began to think of all of the things that could doom an establishment that has been succesful elsewhere (I have been in wine bars in other places that were extremely profitable). First of all, the actual bar was huge. There were plenty of tables and booths in the bar, but there was also a lot of open space. I'm going to guess that a building of that size commands quite a high amount of rent when compared to the hole in the wall down the street. This big bar immediately means that you're starting out with a high rent expense. Secondly, having a wide selection of wines means that you're going to have lots of expensive inventory sitting on a shelf waiting for someone to buy it. After all, how many people are going to buy a bottle of Opus One to share with friends. Even though not many people are going to pay that kind of money for a wine, you still have to have it on hand in case someone wants a bottle. This was an observation made by my Brother-In-Law Will, and I thought it was pretty sharp. Lastly, this place charged a cover charge every single time I went in. Sometimes the cover charge was $5, sometimes it was $20. While you might be able to get away with a $20 cover charge in San Francisco, it's not going to fly. People are going to walk. Less customers coupled with high expenses is a recipe for disaster.
While I applaud the entrepreneurial spirit of the owners, I think the business environment was bad for this sort of business. I think the population in this area is a huge factor. There are businesses in the big city that make their owners an excellent profit that would never ever be successful here. Could you imagine trying to open something like an oxygen bar here in Visalia? You would lose your shirt!
Its also my opinion that if you have a successful business in this area, you have to be even more diligent. With the lower numbers of population in this area, I think saturation is a huge worry to a successful business owner. If you own a business that is running well, you can't just open up a second location right across the street like you can in a big city (i.e. two starbucks stores across the street from each other in places like New York).
Also, whenever I hear of someone starting a business in this area, my first question is; "Who is your competition?" In the Central Valley, you and your competitors are fighting over a lower number of customers.
I'd love to start a business of some kind in the valley someday. I'm always looking for a good idea, but I always temper with my enthusiasm with the knowledge that if and when I do start a business, I'm going to have to be very good at analyzing the business environment that I am in.

FYI, I read an interesting article in Fortune about management strategies in a publicly traded company versus a company owned by private equity firms. Sounds like a good topic for tomorrow...