Residential-based business as an alternative location-decision for the SMME's

Abstract

Home-based and residential-based businesses have become a very visible feature of some main road arteries into and out of suburbs of most big cities in South Africa. Previous residential zoned properties are being used to such an extent for business purposes that certain main routes into cities has virtually lost its residential character. Home-based businesses is not new to South Africa. Some 1,8 million people run some form of business from home. However, the purchase or rent of a residential property and then re-zoning it for business use in some specific areas seem to be a new phenomenon. Preliminary interviews with entrepreneurs and small business owners of these residential-based businesses would indicate that it is an alternative location to shopping centres/malls and office parks. They are often harassed by landlords and/or cannot afford the rentals charged or cannot comply with certain aspects of the lease agreement. The study is an exploratory research into this phenomenon and is supported by a proper literature study as well as an empirical study. The literature reviews the concepts of entrepreneurship and small, medium and micro enterprises (SMME's) as a starting point for this study. This sector is a vital contribution factor for any economy and one of the most important strategic decisions that must be made by these small business ventures is the location-decision. All the theories and factors of location in the literature reveals this important decision and the different types of location for SMME's are explored, with emphasize on the newest phenomenon, residential-based businesses. The empirical part of the study consisted of a questionnaire that was completed by means of personal interviews on a sample in the greater Pretoria Metropolitan region. The objective of this study was to find the reasons for this very visible development in suburbs and to investigate whether this is an effective alternative location for SMME's. The research findings indicated the reasons and advantages of residential-based businesses as well as the possible problems and disadvantages of this location-decision. The three factors identified as advantages of this location-decision are the location and growth advantages, the cost advantages and personal advantages. The three disadvantage factors are some personal disadvantages, local authorities' rules and regulations and some management disadvantages. Proper recommendations are being made on how to run and manage such a residential-based business and the paper will therefore not only be of value to entrepreneurs and SMME's wanting to make this important location-decision, but also to town planners at the city councils for future strategic planning.