Relocating a Business: 6 Factors to Consider
January 22, 2019 by Aley Brown
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Relocating a business is something that should be done with careful consideration and analysis for all of the stakeholders that could be potentially impacted.
As a leader of your organization, the last thing you want to do is make a decision that could severely impact a stakeholder, or cause the business to suffer a financial loss.
That being said, the weight of this activity is what makes it such an important process for the people involved with making the decision.
But before we get into the nitty-gritty, let’s dissect what relocating a business actually entails.
Relocating a business can mean several different things. It can refer to moving an office from downtown to the suburbs. It can also mean that you move your office from one city to another, potentially across the country. Yet another example could be relocating a portion of your office to a different location, while still keeping ownership of the original location.
As you can see, when someone says “relocating a business” it can mean a plethora of different things. But it should never be taken lightly.
Relocating a business has financial impacts in both the short and long term. It is not a cheap endeavor to move the entire contents of an office. And the price only increases the further the distance from your original location.
As for long term costs, your new location has the possibility to increase or decrease your overhead costs by changing your leasing payments, utilities, and taxes. It can also impact the wages you pay your employees, the cost of shipping, and other secondary impacts.
So for all of these reasons, it is important to carefully assess all of the factors involved with relocating a business.
Now, let’s go over some of the biggest factors for you to consider:
Relocating a Business: The 6 Factors of Considerations
Cost
This is one of the most self explanatory considerations, but also one of the most complicated because of all the hidden or secondary costs involved with relocating a business.
First, you must consider the cost of moving from one location to another. The bigger the distance, the higher the potential cost for the move. For example, relocating a 3000 person office across country will be a lot more expensive than moving a 20 person office across town.
However, in both scenarios you would want to assess if the cost benefit outweighs the actual cost of making the move.
Next, you’ll want to consider how the overhead costs of your new location will impact your everyday operations. Things like your lease or mortgage payments, utilities, shipping, and wages could all be impacted.
For example, if you were to move a company from Kansas City to New York, the rent for your office space and the cost of wages would most certainly increase by a lot.
Next, you’ll want to think about the “hidden” costs of moving. These hidden costs could be different for every organization, so it is important for the people involved in the relocation decision to thoroughly assess any financial surprises that could show up as a result of the moving.
Building on the previous example, if you were to relocate from Kansas City to New York, would you be able to pay for the costs of all of your employees to relocate? That could be a pretty costly expense. More than likely you will also have to substantially increase their wages to meet the cost of living in New York.
And because going from Kansas City to New York is such a big move, many of your employees will not want to relocate. Depending on the attrition rate, your business might have to take on huge costs associated with hiring and then training new talent in New York to fill these openings.
Depending on the skill sets needed by your workers, and the pool of qualified candidates in New York, your company might also have to increase their spend on training over the long term as well. For example, there are ton of workers with farm science knowledge in Kansas, but probably fewer in New York.
Employee and Stakeholder Impact
People want to work for and with companies that make it easy for them to come to and be at their location. Think about the last time you went somewhere that had difficult parking. Wasn’t very fun, right?
Imagine having to do that everyday for work.
I don’t know about you, but I have been dissuaded from going to places just because the parking wasn’t ideal. Especially in the winter time when it means having to walk several blocks in the cold.
To deal with this your organization can build a parking lot, lease a lot, or reimburse for parking. But once again, this will impact the costs of your move and must be taken into account.
Next, the location should be in a spot that is easily accessible from a commuting perspective. No one wants to commute into an office for over 30 minutes, so make sure to take that into consideration when locating your office within a city.
If you have clients or customers who frequently fly in to visit your organization, it could also be important that your office is within a decent distance of the airport.
Taxes
When moving counties, states, or even countries it is important to assess the tax situation of your new location. Depending on where you are moving to, and your original location, taxes could have a huge impact on the profitability of your organization.
Some businesses also receive tax credits for having an office in different locations, so make sure to weigh those when thinking through the tax impacts of your relocation.
Customers
Your clients are the lifeline of your business’s financial health. So when relocating your business, you should consider the impact it will have to your customers.
This could be in the form of increased costs (due to the increase in overhead), or maybe a decrease in cost since you will be moving closer to a customer.
Some words of wisdom: if your business is overly reliant on one particular client, make sure you understand the risks associated with moving closer to that client for cost savings. If you were to ever lose that relationship in the future, it could then destroy your business, and the positive attributes that resulted from moving closer.
Growth Capabilities
When relocating your business, it is important to think about not only how the new location will impact your short term, but also over the long term.
For example, let’s say that your business is expanding like crazy and that you plan to double your employee size in the next 3 years.
Make sure that you assess if your new location has the labor pool to actually support that growth. If your growth will mostly be around general business professionals like developers, accountants, lawyers, and marketers, it might not be as much of a concern.
But, if you need to hire 50 more people with extensive backgrounds in Farm Science, you might want to conduct a study to determine if the local labor pool actually has the talent for that.
This doesn’t just apply to human capital. It can also apply to the need to grow your facility space, or even the capacity of local shipping companies.
Community Impact
The organizations that run a community are all interdependent. So when one business closes, or relocates, it impacts the entire organization.
Because of this, some would argue that it is a business’s ethical responsibility to assess and minimize the community impact associated with relocating a business.
For example, let’s say that your business is the biggest employer in a small town of 30,000 people.
If you relocate your business halfway across the country, the amount of jobs available in that community will substantially decline, resulting in a decrease in town population as people leave in search for employment. This will then impact small businesses in the area due to the decrease in patronage from people in the town.
Relocating a Business: The Final Say
The decision to relocate a business can have huge impacts, and should not be taken lightly by the leaders involved in conducting the relocation. It is important to consider all of the factors involved with relocating a business, and then make the best decision for all of the stakeholders involved.
Image Credit: Transport Executive
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