Quick Links: Return To Entrepreneur’s Resource Center

Choosing the Right Location for Your Business

OVERVIEW [top]

"Location, location, location" — You’ve probably heard this old mantra about what to look for in real estate before, but it may not mean what you think it means.

Yes, it still matters where you locate (or relocate) your business, but it matters for very different reasons today than it did even a decade ago.

In this Quick-Read you will find:

  • Factors you should consider when you decide to move, expand or relocate your business.
  • Factors to take into account when you evaluate a community.

SOLUTION [top]

Are you sure you need a new location?

Will expanding or rebuilding meet your needs as well as your present facilities, at much lower cost? Be sure to compare the costs and benefits of moving to the costs and benefits of improving your present work site or purchasing adjacent property.

If you are considering a new location because you need space, have you already implemented outsourcing, production re-engineering and a switch to just-in-time inventory management to streamline your operations? They can free up to 50% or more of your plant space for production.

What kind of business are you?

Unless you are a local retail business that must be near its customers, your business likely falls into one of three categories:

  • A resource-intensive company that ships in volume. Like many traditional manufacturing companies, you will want to locate near your resource base in an area with strong transportation options, such as deepwater ports and extensive rail networks or trucking firms.
  • A small firm creating knowledge-based products. Market access and the availability of natural resources are less important to your business. As long as the community you’re contemplating has the technology to support you, you can follow your heart and choose a location based on quality of life considerations.
  • A fast-growing, knowledge-based company that thrives on close proximity to other companies in your industry. You will need to cluster with other companies in technology centers, such as Silicon Valley or the Research Triangle.

So your first big question must be: "Can I be anywhere, or do I have special requirements (such as a dependence on natural resources or the need to cluster with other companies) that demand I locate in a certain region, or even a certain town?" Once you’ve answered this question, and narrowed your search to areas that meet your general criteria, you’ll want a clear demographic picture of your chosen regions or towns to determine which sites are best suited to your needs.

Taking an accurate picture

What are the critical components of your business? Priorities have changed. A decade ago, professional site selectors looked for cheap land, transportation and power. Now, the most important item on their checklists is the work force. What’s the quality, and how available is it?

Consider your own priorities. Is the cost of power important to you, or are you more interested in whether you can get a T-1 line for high-speed computer access? Here are some factors you should check to get started. If operation in a new location makes sense after considering these factors, get one of the books in the Resources section at the end of this Quick-Read, and follow its more detailed prescription to assure the best possible decisions.

  • Labor availability and cost. Will you have to pay top dollar to lure workers away from other companies, increasing your personnel costs and earning the other companies’ enmity? Consider your future labor needs, not just present ones.
  • Education. What higher education is available in the cities you chose? This will give you some idea of the quality of the local work force, and tell you whether you can plan to partner with institutions to train your workers.
  • Tax and fee structure. Some communities are friendlier to small business, while others favor large, industrial business. Check on both residential and business property tax rates. Find out about special fees and taxes. Some cities, for example, charge for a business license and apply a special fee to home-based businesses. Some states tax finished-product inventory and some tax cash receipts as well as profits. Some require significantly higher workers’ compensation payments.
  • Infrastructure costs. Towns even a few miles apart may have very different telecommunication costs. How much will it cost to have fiber cable laid if you need more broadband access than a T-1 line? Check with local Internet Service Providers to see if they provide broadband wireless service, and how much they charge for it.
  • Natural disaster risks. How likely are you to be affected by flood, forest fire, earthquake, hurricane, heat-wave brown-outs, and so on?
  • Small business resources. Some cities may work to recruit businesses in your industry, offering special services and incentives. Industry or business associations might also be interested in helping your company.

Where can you find all this information? If you know the town you’re interested in, contact the local economic development organization. Most are careful to keep inquiries confidential. They probably will have much of this information available on a Web site. If you know the state but not the town, start with the state economic development agency. Banks that deal with businesses are another good source of information on local business conditions, and they too keep inquiries confidential. Your best source, though, will be entrepreneurs. Ask the economic development agency for the names of companies like your own. Call them up, and ask them what it’s like to do business there. The Resources listing at the end of this Quick-Read provides leads to economic development organizations.

Walk around town. Sometimes you can learn a lot just asking questions in a downtown coffee shop.

Subscribe to newspapers from the cities you’re considering. You’ll learn a lot about local problems and attractive features. The want ads can supplement what you are told about the labor market.

Choosing the city is the first step. What about the location within the city? You’ll want to be close to employees, resources and services. Consider the amenities you’d like to have nearby to support your employees. If you’re running a startup company where everybody works long hours, your employees will thank you if there are restaurants, a dry cleaner, several banks, even day care, near your prospective site. Look carefully at what seems a good deal. Office space may be cheap because the only parking is blocks away, or because it’s situated over a hamburger joint where you’ll smell grilled onions all day.

Your employees will also appreciate a safe location with well-lighted streets and access to public transportation.

If you pick a city where rent is on the rise, try to negotiate a long lease, and look for space that will let you expand as you grow. Constantly moving your company from building to building is a giant expense and headache.

If you’re searching for light industrial or manufacturing space, many of the same criteria apply. In addition, though, think about how your company does business. Does your manufacturing process make noise or emit an odor? As urban areas expand, you don’t want to find yourself dealing with unhappy neighbors.

Preparing to move

Whether you’re locating for the first time, relocating or expanding, it’s imperative that you sit down with your financial advisers and discuss the move. If you think it will take a month, double your estimate. If you are moving a manufacturing operation, double it again, at least twice. It usually takes longer than you think to reach full productivity. You’ll need to do an honest assessment of your finances to ensure that you have a financial buffer around your downtime. It’s wise to schedule your move for your slowest time of the year, but if that’s winter, weather may make the move especially difficult.

REAL-LIFE EXAMPLE [top]

In 1997, after the temperature in Minnesota hovered at 40 below zero for three weeks, Rena Bennett-Dellwo and her husband Randy Dellwo thought about the property they’d bought out West in Bend, Oregon. Sure, it was for their retirement, but why wait?

"We don’t depend on the local economy. We can be anywhere, as long as we have access to air travel, courier delivery and truck service, and the Internet."

So that July, the couple moved RBD Enterprises to Bend. The company — which has six employees — repairs, upgrades and maintains surface analysis systems, similar to electron microscopes.

The move was not instantaneous. They spent weeks preparing: obtaining a site in Bend, informing customers (scientists from all over) and even flying two key employees to Bend to take a look.

Even with all their planning, problems occurred. The employees decided not to move, and all now work remotely for the company, five in Minnesota, one in North Dakota. Construction on RBD Enterprises’ new light industrial building in Bend was three weeks behind schedule when they arrived. But a relationship with a real estate agent paid off, and they found temporary quarters. Then UPS went on strike.

Bennett-Dellwo says now that even a few years earlier, she and her husband would not have been able to move their business to Bend. The technology to support them was just not there.

"It [the technology] changed everything," she said.

DO IT [top]

  1. Know that incentives for (re)locating can be found in different places for different-sized companies. Huge corporations can usually contact the secretary of state, whereas smaller firms would have better luck looking to chambers of commerce or local economic development organizations.
  2. Make a list of the things your company needs to thrive, and then prioritize them.
  3. Make a list of the things you want in a community for your personal and professional family based on the checklist from one of the books listed in the Resource section at the end of this Quick-Read. Make a list of communities that offer the amenities your lifestyle demands as well as the resources your company needs.
  4. Develop a list of questions for economic development agencies and local business executives.
  5. Be sure to communicate with your present local economic development organization about incentives for staying, and evaluate your present location alongside the other sites you consider.
  6. Develop a plan for how you will deal with your current employees and customers as you move.
    • Will you help spouses find jobs also?
    • Because everyone who moves with your company will need new housing, are local banks willing to work with flexible terms?
    • If many on your staff have school-age kids, can you schedule the move during summer vacation?

RESOURCES [top]

Books

Location, Location, Location: How to Select the Best Site for Your Business by Luigi Salvaneschi and Camille Akin (Oasis, 1996). Especially good on retail locations.

Site Selection for Growing Companies by George D. Hack (Quorum, 1999). Especially good on plant locations.

Articles and Web sites

Real Estate. Lawyers.com.

"Far Out," by William R. Pape, Inc., June 15, 1995. Discusses using the large time zone difference from Hawaii to his company’s advantage.

"Government Incentives Aren’t Just for Big Companies," by Ken Gepfert and James Peter Rubin, Wall Street Journal Interactive Edition, (n.d.).

"A Moving Experience," from the book 101 Great Ideas for Managing People (Inc., 1999). How iGo kept 24 out of 28 people, in spite of moving.

Small Business Survival Index (Small Business Survival Committee, annual). Click on the "Small Business Survival Index" icon and "SBS Index" to see annual ratings of states’ friendliness to business.

"Best Cities. The Lists," Inc. (December 2000): 42-72.

"The New Urban Chic," by Christopher Caggiano, Inc., May 01, 1999 Source: Inc. magazine – May 01, 1999. For inner-city CEOs, unconventional office space can mean much more than low rent or high ceilings.

Regional economic development organizations

Economic Development Directory (Philip O’Keefe Company, Montclair, N.J.)

Community Development (Yahoo!)

More can be found through search engines, such as altavista.com. Try typing "economic development statename directory" in the search-engine search blank.

Article Contributors

Writer: Kathy Watson

Related Articles...
The Quest for Quality

TQM may no longer be the flavor of the month, but it can still boost your productivity and profits.

Read More ...
Look Ma! No Wires!

Wireless technology brings more benefits to business.

Read More ...
Choosing and Hiring Tech Consultants

Hiring a tech consultant you can trust with your business can be a challenge. These tips can save time, reduce headaches and help you find the perfect match for your company’s needs.

Read More ...
Time Is Money: Jay Jaffe Saves Both

Virtual office reduces commuting by 500 hours and slices real-estate bill by $280,000 annually.

Read More ...
A Buyer’s Market for Rental Space

In a retail or service business, your rent is one of your major expenses. Better control of this expense can lead to more cash on hand for profits or investment back into your business. Several practical tips are presented to lower your leasing costs.

Read More ...