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.
Census Bureau, resulted in 3 million people leaving the cities, while the suburbs gained 2. 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.
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.
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. 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. 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.
Toggle navigation Business 2 Community. Twitter Facebook LinkedIn Flipboard 2. Overall Lower Cost of Doing Business One of the most common reasons why businesses relocate is to lower their operation costs.
Another City Offers a Better Quality of Life The happiness of employees matters significantly because it impacts productivity. The Business Needs to Upgrade Its Facilities Startups tend to start small and move up to larger, better-equipped facilities. Twitter Tweet. Facebook Share. Stay Connected Join over , of your peers and receive our weekly newsletter which features the top trends, news and expert analysis to help keep you ahead of the curve.
Get the best of B2C in your inbox: Subscribe to our newsletter Sign up. Your subscription was successful. Popular Articles. Discuss This Article. Show Comments 2. Add a Comment. Sign up for our weekly newsletter. Thanks for adding to the conversation! Our comments are moderated. This can necessitate employee hires and other expenses, so should really only be undertaken by companies already assured of their need for space.
However, be forewarned: Retail location movement can cause a disorienting change for customers and many will often not survive the transition. Just as retail locations can lose business in a move, they can be significantly benefitted by a change of location that brings them closer to customers. Clustering together with other shops of a similar price point or target audience can increase traffic. However, this can be a gamble as the costs of moving are often high, due to physical goods transport and productivity loss.
There will be a period for any business, particularly manufacturing businesses, of productivity loss that must be accounted for as equipment must be set up and routines re-established.
A potential fire sale should be examined and weighed against outright moving costs. If the gamble pays off, this reason to move can be the best one on the list. A failing or struggling company can be revitalized and even begin to thrive based on this single maneuver alone.
Opposite to increasing sales is the need to decrease costs.
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