Relocate Your Business
Running out of space? In an area that's
headed downhill? Need an upgrade?
It might be time to move your business
to another location.
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By Mark Henricks
December 01, 2005
ENTREPENEUR MAGAZINE
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Every year, the grass on the other side of the fence looks greener to many entrepreneurs, and a change of place looks like the most promising path to growth. So they pull up stakes and move to a new place, where they hope to find better odds for business success than they had in their previous location. They're in good company. The U.S. Census Bureau reports that approximately 40 million Americans relocate each year, and the U.S. Postal Service processes about 38 million change-of-address forms annually. Although no one keeps a similar count of business moves, given the multitude of valid business reasons for making a move, almost any entrepreneur will, at some time, consider relocating as a way to expand.
Why Location Matters
Businesses commonly cite five main reasons for moving, according to Sharon K. Ward, an economic development consultant in Allentown, Pennsylvania. These are labor and work force issues, the desire to reach new markets, the need to upgrade facilities or equipment, the desire to lower costs or increase cash flow, and considerations about quality of life. For different businesses and at different times, certain concerns are more important than others, Ward notes. But just about all moves can be attributed to some combination of these issues.
Chief among current reasons for relocation is the need for a suitable work force. You may have a shortage of qualified workers for some occupations, especially those requiring technical expertise. For firms that need specialized employees, it may be well worth it to relocate to an area where you can easily find these kinds of employees.
When a company finds itself in outmoded or undersized facilities, that's another reason to look at moving. Most businesses start in a small facility, such as the founder's garage, and then move to bigger quarters in the same city, says L. Clinton Hoch, director of location advisory services for DCG Corplan Consulting, a site selection consultancy in West Orange, New Jersey. Later, the business outgrows that location or begins to find fault with its facilities, services, utilities, infrastructure or other features. "Usually only after [a business owner] goes through those stages is he or she ready to make a move out of the original area," says Hoch.
Cost Issues
Cost is a concern in any business decision, and a move can cure--or create--many cost issues. For starters, the cost of living varies widely among cities. In Little Rock, Arkansas, for example, the cost of living is 13 percent below the national average. At the other end of the spectrum, New York City's costs are more than twice the U.S. average. Theoretically, a move from Manhattan to Little Rock could yield significant savings.
But costs involve more than living expenses, cautions Hoch, and differences in geographic costs have leveled out in recent years. Companies often find themselves forced to compromise between staying close to target markets and choosing the lowest-cost facility. That's one reason for the exodus of employees from central cities to nearby suburbs, which, according to the U.S. Census Bureau, resulted in 3 million people leaving the cities, while the suburbs gained 2.8 million in one recent year.
Depending on circumstances, you may have other financial issues to consider. Large companies seeking to build semiconductor factories or auto plants, for instance, often land well-publicized tax concessions worth billions of dollars. Economic development consultant Sharon Ward, a former research and marketing director for the Committee for Economic Growth, a private organization that markets the Wilkes-Barre area of Pennsylvania to businesses, points out that small companies rarely receive such perks because incentives are based on the number of jobs the business will create. However, an entrepreneur may be able to tap a cash flow windfall by selling a building or land that has appreciated in value, then purchasing or renting lower-cost space.
An even more intangible issue is quality of life. Companies evaluating relocation often look at recreational opportunities, education facilities, crime rates, health care, climate and other factors when evaluating a city's quality of life. That's another reason deteriorating inner cities are losing businesses, as companies seek an improved quality of life elsewhere. "Maybe it's an unhealthy or unsafe area to live in," notes Ward. "Or it may be hard to recruit workers because of [the location]."
Relocation Results
While moving carries risks, a move can be one of the best things you ever do for your business. When you move or expand to a new location, the odds are stacked in your favor, according to relocation expert Luigi Salvaneschi, who has overseen the selection of new sites for thousands of retail establishments. "Because you have been in business for some time," he says, "you are fully aware of all the problems your current location has. If you have poor traffic and know that's the problem, you look for a new location that has good traffic."
But there are no guarantees in relocation, and as many things can go wrong with a move as can go right. Ward cites a study of readers of Area Development magazine that identified a number of common mistakes. They included rushing the decision, focusing too narrowly on a few costs, failing to use available economic development services, ignoring quality-of-life factors, missing important environmental or regulatory concerns, and, believe it or not, failing to plan for future expansion. These mistakes can be boiled down to hurrying too much and trying to do a move too cheaply.
Part of the problem is the complexity of these two issues. There's no set time for how long it should take to move, Ward says, and sometimes you don't have a choice. "I've worked with companies that made a decision in three or four months because they didn't have a choice," she says. Others might expend two or three years in the process, with no better results.
Unfamiliar factors complicate cost calculations, adds Salvaneschi. For instance, an entrepreneur must figure in the cost of business interruption. Almost inevitably, a business's productivity will be reduced for a period of days or even weeks after a move. And that's not all. "You may also have some loss of goodwill," he says. "Especially if you've been in that location for many years, you're going to lose some loyal customers."
Moving is one way to obtain room to expand, but it's not the only one. You may be able to expand by taking in adjoining space, increasing productivity of existing employees and facilities, or by splitting up your facilities in separate locations.
Absorbing adjoining space is probably the most convenient and inexpensive way to add room for more employees and equipment. You save on moving costs, interruption is minimal, and your old customers won't have trouble finding you because you will be in the same place. When you're picking your original location, in fact, it's not a bad idea to consider the availability of adjacent expansion room as one of your criteria. If space next to your current operation becomes vacant at a time when you are considering expanding, you may want to let the owner of the property know you may require more room soon. You may be able to take out an option on the space that will preserve your flexibility.
You may be able to grow your business without moving if you can increase the productivity of your current operation. You can generate more production without adding staff by training your employees to work more efficiently. You can also replace slower machines with faster models, or make alterations to existing equipment to increase output.
Another way to grow without moving your whole company is to split your operation into more than one location. A company that manufactures and sells from a single location can move its warehousing and manufacturing to another facility while leaving its sales outlet in the same place so customers won't have to find it in a new spot. Although the logistics of working from more than one location can be tricky, it's one way to have some of the benefits of moving without all the drawbacks.
Lease Options
One of the classic business decisions involves balancing the tradeoffs between buying real estate to quarter your business and renting or leasing the space. While each situation offers nuances to consider, the basic difference is that buying requires more upfront capital investment but provides security and the opportunity for capital appreciation. It costs less to get into leased space--and it's easier to get out, too--but monthly payments may be higher, and you may have to find a new place to do business when your lease is up.
One option open is to make a personal purchase of property and then lease it to your business. The business gets to deduct the lease payment, while you receive added income.
If you don't want to take on a long-term mortgage to buy office space, consider a lease with an option to own. Terms of this arrangement will allow you to buy the property for a preset sum at the end of the lease. You will be able to lock in a price now and save the expenses of having to move someplace new when you're ready to buy.
Making the Move
Although deciding to move is tough, it's nothing compared to actually making the move. That starts with writing detailed specifications about what your new location must offer. If your main reason for moving is to tap a better labor market, don't get distracted by a favorable lease offered by a prospective landlord or incentives dangled before you by an economic development agency. "You would not want to move to find a well-qualified work force only to find that it's worse in your new location," says Ward.
You'll also need accurate and complete information about the new location before you can commit to moving there. Reference publications such as The Statistical Abstract of the United States and magazines such as American Demographics are good places to start. You can also subscribe for a month or two to newspapers in the cities you're considering (or read them online) to get a general feel for local circumstances.
Be specific when gathering information from Chambers of Commerce, utility companies, economic development agencies, real estate brokers, employment agencies, other small-business owners, and so on. Don't ask general questions like "Is there a good supply of affordable office buildings?" Instead, ask "How many 10,000-square-foot blocks of vacant Class-A downtown office space exist, and what are the going terms and prices?"
You should also visit all sites on the short list of your targets. "I have a saying: You walk it; you drive it; you fly it," says relocation expert Salvaneschi. Only by walking and driving around a location from various angles can you get a feel for traffic patterns. Aerial views from small planes or helicopters can help you grasp the dynamics of a particular retail zone, he adds.
Making the move itself is another challenge in making the relocation work. It's important to decide what equipment, fixtures, records and other items to actually move. It might be better to dispose of inventory at fire-sale prices rather than pay to haul it across the country.
Once you have decided where, when, what and who you'll move, assign someone to be in charge of the relocation. He or she will be very busy with tasks from soliciting bids from movers to keeping employees informed about the plans.
In business, as in your personal life, not every move works out. But by looking closely at their reasons for moving and making sure the chosen spot addresses their needs, entrepreneurs increase the odds that the grass really will be greener and that what appears to be a better city for their business will turn out to be the best.
I don't quite know how to take this latest bit of news. It appears that one of my favorite foils has had an epiphany of sorts. Well, let's not go THAT far Laz old bean! At least he is attempting to more intelligently describe his agency's relative failure to succesfully attract new and vital business into the Fall River. The fact that it appears to be targeted at the Fall River School system is understandable, given the situation, yet regrettable at the same time.
Yes, it seems the mountian is finally coming to Laz. Ken Fiola, executive Vice President of the Fall River Office of Economic Development, aka FROED, was recently quoted on WSAR, 666 on your radio dial, that a contributing reason FROED has been unable to attract new business to Fall River, and I assume that means high-tech and clean energy business, is because of the woeful state of education coming from our homegrown school system and the likewise state of uneducation within our adult workforce.
Now I have no idea if he's been reading this very blog since it's inception but that is one constant message I have made quite clear from the outset. Ladies and gentlemen, this idea that a trained and educated workforce and great schools is needed to attract new businesses to a community in the current times is not at all new or radical. This concept has been taught at planning departments and business schools at universities all over the world for decades, and certainly for full effect as man started to develop transistors, then micro chips and computers.
Come on folks, every real estate agent since the end of WWII has made this information part of their sales mantra. So no one in Fall River who can read, write or watch a television news program can claim to be unaware or surprised by this fact. To claim not to understand this basic concept is to reveal a shocking lack of understanding of how the modern
WORLD works. I highlight the word "
WORLD" because we are all, from Moscow to Madrid, now living under the carrots and sticks of one economic system.
It's a simple fact. Those places with the highest levels of education, with great math and sciense skills and attainment levels, are the areas where new, productive and wealth building business and industries will grow. Mathematics and science has for more than a decade been the primary means of communication worldwide because it's the most common and objective language we share! Only within the old familiar geographical boundries man created centuries ago does it still require "old fashioned" verbal and written language skills to go about your daily lives.
Not to recognize the reality of modern life and the basic talents in which we are increasingly lagging behind the world is pure folly. There is no workable past, there is only moving forward so we can compete. To do this we must better educate our children and ourselves. Everything else is like a child in tantrum mode stamping their feet in resistance and frustration.
Folks, get over it and learn. If we don't, we'll never catch up. We'll rapidly and ignominiously sink to has been status in comparison to those societies that have taken this reality to heart and are succeeding far beyond anything we could have let ourselves imagine even 20 years ago! Did you ever think China would have the ability to out produce us, out think us and out finance us in your lifetimes? Or India? Or Indonesia? Or Eastern Europe? Unless we radically change the way we think and put into place the societal structures and values necessary to compete and exceed our competitors we will never again hand to our children a life better than the one we received from our parents. And ultimately, isn't that what it's all about?
All this is not meant to say we should not treasure our history, or in this case, Fall River's history, or it's intrinsic beauty. On the contrary, better education will allow us to appreciate even more the benefits of living in an area with a slightly slower pace of life, where you can actually breath and enjoy what surrounds you at the end of the day. However, without bettering our education, both for our children and ourselves, this will slip away as those with education and talent follow good jobs elsewhere, and the standard of living in Fall River continues to spiral downward.
I don't have mixed feelings about Ken Fiola speaking the truth. It's about time he did and make the community face reality, that new clean industry based well paying jobs, even manufacturing jobs, are not coming here anytime soon. Rail against the tempest heading our way all you like. It will still come and those who struggle against it most will be among the first casualties. Times have changed. We are now the Native American population riding horses as the railroad expands and takes away our plains and our buffalo. Surely we can battle the changing times valiantly but in the end we'll be overrun by the new, the better, the more powerful. This is inevitable. But it doesn't have to be anything but a positive change if we take control and make decisions now!
Our education system in Fall River is poor and will remain so until more resources are made available. But we must make the decision to do so and commit to education excellence as much as we do to arresting every drug crazed violent criminal in the City. In terms of attracting new industry to Fall River they go hand in hand. To not recognize this will be Fall River's downfall.
And to Ken Fiola and FROED, while it is true that poor education attainment levels in Fall River is the primary impediment to attracting new industry, to basically blame the schools for your agency's failure is both cowardly and wrong. It's nothing more than what the City has come to expect from FROED...gross incompetence, lack of intergrity and injecting cynicism where hope is needed.
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A local cattle show.
What utter hypocracy. I understand if people are angry about the country's economic situation. But these cretins lack the mental acuity to correctly assess blame for their financial state. It was the Republicans under Bush who increased the deficit for 8 straight years. At the same time they loosened all controls on banks and other financial institutions put in place by a Democratic Congress and FDR during the Great Depression, regulations that would have stopped "credit default swaps" and the use of "derivatives" which almost lead to the collapse of the Western World's economies. It was the Bush White House that started the huge "too Big to Fail" bailouts. Yet these idiots are so uneducated, so easily led by the likes of Glenn Beck and Sean Hannity of Fox News and Rush Limbaugh's hate filled rantings, they happily become the army of derision for anything done by a Democratic Congress or the first African-American President in the country's history. "Gimme back my country" indeed.
Look, just take a gander of the pics I include above and you'll get a fast idea of just how sick and sorry these teabagging zealots are. What they are doing and saying is both dangerous and ominous. For all their talk of freedom they are the ones trying to intimidate others from exercising their rights under the law. They should be ashamed for letting the Republicans use them to a particular political end by joining them in support of tactics like the big lie (anyone remember DEATH PANELS?) violent intimidation (remember the teabaggers wearing GUNS outside Health Care Reform information sessions?) and endless amounts of hate speech. It's probably only a matter of time until someone else is shot and killed, just like the deranged white supremisist who shot an African American guard at the Holocost Museam in Washington, DC many months ago. The nutjobs will be crawling out of the woodworks. You listen to Michelle Bachman (above) , a notorious "walnut headed" Repblican member of the House of Representatives who routinely employs the "big lie" and "hate speech" and you tell me that it hasn't been this way for a long while already!
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