If you are going to build a dam, look for a site that will allow you to retain the greatest volume of water with the smallest dam possible. Dams require a great deal of work to build and to maintain, and the smaller the dam, the better.
Avoid a site in a valley, relatively open and wide at the downstream end. At such a site you will have to build a large dam.
The ideal site for a reservoir is in a wide valley which narrows suddenly, with steep sides at the downstream end. The narrower the valley end, the smaller the dam will have to be.
Choose a site with good soil, which will hold water well. Avoid a sandy site. The place you choose should not have areas of sand that are too large to seal against water loss. If there are large sandy areas, it may be better to look for another site.
It is good to clear the site of vegetation before building a reservoir. If you plan to do this, avoid choosing a site with too many large trees, which may be difficult to remove.
You should choose a site where you can build a reservoir large enough to satisfy your total water requirements. It may be to your advantage to find more than one possible site and choose among them on the basis of:
Your water requirements;
How large a reservoir is possible at each site;
The topography, soil and vegetation present at each site. A site without a lot of vegetation to remove is always preferable.
The cost of the dam above would be more expensive than the one below.