Understanding how people may search and choosing the correct key words is as important as setting the correct geographical location.
if you are a small company in a remote village then you want to maximise your presence in that area but you are unlikely to want to be getting enquiries about completing jobs hundreds of miles away.
equally if your company is in a specialised niche you do not want enquires that you would be unable to carry out.
Matt Cutts, Google Webmasters, uses an interesting interactive tool to highlight this. He describes a product without naming it and then asks each person in his audience to turn to the next and say what they would put into google to find the item.