Slicker Cities

Everyone's Doing It!

The answer is, about 2 million companies each year, according to John Kelley, vice president of Imagitas Inc. Kelley's company produces the "welcome to your new town" kits sent by the U.S. Postal Service to every individual that fills out a change-of-address card and recently introduced a similar package for businesses.

More than 70 percent of the firms that move have fewer than 10 employees, says Kelley. Although most don't attempt Aquatoy's bold interstate action--the vast majority moves within the same county--each shares the hunger for space to grow, Kelley says.

It's not a decision you should take lightly, however, especially if it involves moving to a new town. "It's a huge decision in a business's life," says Barbara Hampton, who helps strategize business moves for clients at Boston-based real estate specialist Spaulding & Slye Colliers. "You can either do it to impact your business positively or negatively. You can lose your business over this."

No wonder then that although the average individual moves every seven years, the average business moves only every 12 to 15 years, according to Steve Mumma, senior vice president at Atlas Van Lines.

Those firms that take Aquatoy's plunge tend to be in manufacturing or performing such back-office operations as call centers. (An Atlas Van Lines survey indicates that 62 percent of relocations involving firms with fewer than 500 employees were in manufacturing or processing.)

By contrast, small service firms tend to take advantage of out-of-area opportunities by opening branch offices. That's what Los Angeles Internet consultant company Genex Inc. did last year when it opened an office in Atlanta (No. 7 on this year's list).

Regardless of what kind of business you run, however, determining whether to stay in place or move to a new town is a two-step process that requires research.

Where You're At

The first step in evaluating whether a move or expansion would benefit your business is judging whether your current location is impeding your growth. Aquatoy faced problems that were fairly easy to identify: lack of labor and high real estate costs.

Of the two, labor is the more frequent cause of moves, says Daniel B. Amdur, president of MovingStation.com, an online relocation service for small businesses and individuals. "In the end, it's always an HR issue: access to quality labor," he says.

Still, lack of labor isn't the only thing that can hold a company back, says Bob Hess, who helps firms analyze relocation decisions as a partner with Deloitte & Touche LLP's Fantus corporate real estate solutions practice. "As it grows," he says, "a company can acquire customers that can't be well-served from its initial location."

That was the case for Genex, which chose Atlanta, in part, to service its customers on the East Coast. One of the firm's major clients--Security First Network Bank--is also in Atlanta.

In addition to proximity to your customers, everything from the taxes you pay to utility rates can increase your costs, putting you at a disadvantage against your competitors. Even availability of funding can be determined by your base of operations, experts say. Your firm may be cash-starved because you lack sufficient avenues of financing in your existing location, and you haven't been able to make enough road shows to visit far-flung venture capitalists nationwide.

For a complete listing of the top cities and profiles of our number-one hot spots, click here.

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This article was originally published in the October 2001 print edition of Entrepreneur with the headline: Slicker Cities.

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