Businesses commonly cite five main reasons for changinglocations. These are labor and work force issues, the desire toreach new markets, the need to upgrade facilities or equipment, thedesire to lower costs or increase cash flow, and considerationsabout quality of life. For different businesses and at differenttimes, certain concerns are more important than others. But justabout all moves can be attributed to some combination of theseissues.
Chief among current reasons for business relocation is the needfor a suitable work force. The shortage of workers in someoccupations, especially those requiring technical expertise, isacute. For firms that need specialized employees, it may be wellworth it to relocate to an area where they can easily find thesekinds of employees.
Another reason to consider moving is when a company finds itselfin outmoded or undersized facilities. Some businesses start in asmall facility, such as the founder’s garage, and then move tobigger quarters in the same city. Later, the business outgrows thatlocation or begins to find fault with its facilities, services,utilities, infrastructure or other features. Cost is a concern inany business decision, and a move can cure–or create–many costissues. For starters, the cost of living varies widely amongcities. In Little Rock, Arkansas, for example, the cost of livingis 13 percent below the national average. At the other end of thespectrum, New York City’s costs are more than twice the U.S.average. Theoretically, a move from Manhattan to Little Rock couldyield significant savings.
But costs involve more than living expenses and differences ingeographic costs have leveled out in recent years. Companies oftenfind themselves forced to compromise between staying close totarget markets and choosing the lowest-cost facility. That’s onereason for the exodus of employees from central cities to nearbysuburbs, which, according to the U.S. Census Bureau, resulted in 3million people leaving the cities, while the suburbs gained 2.8million in one recent year.
Depending on circumstances, you may have other financial issuesto consider. Large companies seeking to build semiconductorfactories or auto plants, for instance, often land well-publicizedtax concessions worth billions of dollars.
An entrepreneur may be able to tap a cash flow windfall byselling a building or land that has appreciated in value, thenpurchasing or renting lower-cost space.
An even more intangible issue is quality of life. Companiesevaluating relocation often look at recreational opportunities,education facilities, crime rates, health care, climate, and otherfactors when evaluating a city’s quality of life. That’s anotherreason deteriorating inner cities are losing businesses, ascompanies seek an improved quality of life elsewhere.
While moving carries risks, a move can be one of the best thingsyou ever do for your business. There are no guarantees inrelocation, and as many things can go wrong with a move as can goright. Common mistakes include rushing the decision, focusing toonarrowly on a few costs, failing to use available economicdevelopment services, ignoring quality-of-life factors, missingimportant environmental or regulatory concerns, and, believe it ornot, failing to plan for future expansion. These mistakes can beboiled down to hurrying too much and trying to do a move toocheaply.
An entrepreneur must figure in the cost of businessinterruption. Almost inevitably, a business’s productivity will bereduced for a period of days or even weeks after a move. And that’snot all. You may also have some loss of goodwill, especially ifyou’ve been in that location for many years.
