Why where you found your company hasn’t become entirely irrelevant

You can build an online store from home for free (Sweden’s Tictail creates customisable websites for would-be retailers free of charge). You can rent flexible office space like a gym membership (Club Workspace offers desks with WiFi access for £400 a month). And as 3D printers become more accessible, customisable manufacturing could take place in your shed, not a factory half-way across the world.

But is this the whole story? Peter Cohan, a management consultant, thinks location is more important than many assume.

First, consider the ability to attract talent. Much is made of clusters around universities like Cambridge (or indeed Stanford’s role in the development of Silicon Valley), with academic discoveries spun off to create viable companies. But on the flip side, university towns can be vibrant hubs of educated talent. London may have its own magnetism, but wages are lower outside the capital. Median weekly pay in Oxford East was £402 in 2012 according to the Office for National Statistics, and £472 in Cambridge. Londoners can command an average of £524.

Secondly, networks are important. Goldman Sachs’s 10,000 Small Businesses UK programme found that sustained business relationships lead to higher growth and increased profitability. While relationships can be formed without being tied to one location, they arguably last longer if regularly sustained by face-to-face meetings.

Finally, location targeting makes even online sales more effective. While you don’t need to be headquartered where you sell your products, research published in the Sloan Management Review last year found that online sales growth depends on targeting niche markets in a highly localised fashion. So although a garage startup can be just as viable as one founded elsewhere, location is not irrelevant.


Source: Tom Welsh, Business Features Editor at City A.M.