SPECIFIC CONCERNS BEFORE MAKING RELOCATION DECISIONS
Relocation is the action of transferring a company’s place of operation from one physical location to another. For businesses, the act of relocating is often fraught with uncertainty, since the margin for error in companies with modest financial resources is so small. Indeed, the quality (or lack thereof) of a business relocation can be pivotal in determining the financial success or failure of all sorts of business ventures in a wide spectrum of industries, including retail, service, wholesale, and manufacturing efforts.
Businesses look to relocate for many reasons. Some business owners turn to relocation as a last resort, a final effort to reverse the fortunes of a floundering business. These efforts rarely succeed, though the reasons vary from business to business. In many cases, the source (or sources) of the business’s financial difficulties lie in areas other than physical location. Inadequate capital, poor management, flawed marketing plans, wasteful production processes, lousy work habits, and a range of other maladies may be more directly responsible for a company’s anemic performance than its physical location.
Of course, some businesses struggle despite the presence of competent and hardworking management/ownership and sound business practices. In such cases, physical location might be a significant factor in the company’s disappointing performance, and relocation could go far toward turning the business’s financial fortunes around. But business experts note that relocation is generally an expensive process, and that businesses that are struggling financially may find it difficult to stay afloat during this transition period.
After all, companies that decide to relocate must absorb several financial blows simultaneously: 1) They have to pay for the expense of moving their people, office furniture, and equipment into their new facilities; 2) They have to pay for necessary changes to the new facility (these changes could range from relatively minor rewiring to extensive reshaping of the facility’s physical layout); 3) Before relocation, business owners and/or staff have to devote time to relocation research, negotiation, etc. that would otherwise be spent attending to money making tasks ; and 4) During relocation, many businesses have to basically stop conducting their business until they are situated in at their new place of business. This latter reality can cripple a fragile business, especially if the relocation process proves more problematic than anticipated (as it often is).
Of course, many successful businesses relocate as well, drawn by locales that feature high traffic, attractive physical attributes, proximity to needed transportation, advantageous financial terms, or, in some cases, a friendly community environment.
Location Needs of Various Businesses
Businesses will have different site needs that need to be considered when relocating, depending on their industry (retail, service, wholesale, or manufacturing), and their own financial and cultural factors. Whatever their areas of business, however, business owners need to make sure they take the time to adequately examine all facets of a move.
A well-organized site selection process should include, research, planning, developing the transaction structure, analyzing the proposal, documenting transaction, and negotiating for government incentives. When researching the merits and drawbacks of each potential relocation site, business owners should define each place by three primary measures: specific location attributes, physical attributes, and occupancy cost parameters.
Special location attributes might relate to transportation issues such as circulation patterns of surface streets and access to rail. Additional considerations would include corporate identity/image issues, attributes regarding alternative government jurisdictions and any special utility needs for the proposed use. Physical attributes address structure and layout as they relate to the form and function and include such onsite characteristics and topography, existing layout, ceiling heights and load bearing requirements. Goals with respect to occupancy costs will vary according to whether the firm plans to occupy on a fee ownership basis or as a tenant, but could include special tenant improvement allowances, an option to purchase, a cash incentive, or even an ownership position as a tenant.
Business consultants and business owners who have successfully undertaken relocation efforts urge managers and owners of enterprises to examine a long list of specific concerns before making any relocation decisions. A relocation based on knowledge, after all, is predicated on assumptions and hopes.
Following are some of the factors entrepreneurs should weigh in considering relocation.
- Determine if projected revenues will cover the cost of leasing or purchasing the site.
- Research whether ancillary costs associated with the relocation can be absorbed by the company.
- Honestly appraise the impact that relocation will have on the business’s cash flow and productivity.
- Determine whether it will be possible to secure lenders to help cover costs associated with moving into the new business site.
- Investigate whether the targeted site is located in an area that has restrictive ordinances that will unduly interfere with your company’s operations.
- Enlist the services of experts to determine if both the exterior and interior of the target building or facility are in good condition and adequately meet your business’s layout and image requirements.
- If refurbishment is necessary, find out how much it will cost and how long it will take.
- Determine whether neighbor businesses complement your company, or whether they might detract from your company’s image or its ability to attract its primary demographic audience.
- Gauge the attitudes of your workforce, and especially the feelings of key personnel, about relocation.
- If in an environment where you share maintenance, housekeeping, and other service costs with other companies, investigates whether the setup is a good one for your company.
- Check into the safety and security aspects of the facility.
- Determine whether the site will be able to accommodate your company if it needs to expand.
- Find out if competitors are located nearby. If so, try to determine how successful they are, and whether the region will be able to support your business and those of competitors.
- Gauge whether the site is customer friendly in terms of layout, parking, etc.
- Is the area immediately surrounding the building in a state of flux? Development of vacant buildings or lots, construction sites, and other landmarks can dramatically change the complexion of an area.
- Determine if leasehold improvements will need to be made.
- Research whether existing or proposed government regulations might have an impact on the value of the facility.
- Learn about the regulatory and tax climate of the area in which you are considering relocating.
- Determine whether suppliers of raw materials and other goods and services necessary to your operation will be readily available.
Business owners who take the time to inform themselves in these areas are far more likely to relocate successfully than those who do not attend to such issues.
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