Relocation is the action of transferring a company's place of operation from one physical location to another. For small 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.
Small businesses look to relocate for many different 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 small 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 small 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 can 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 on attending to money-making tasks; and 4) During relocation, many businesses have to basically stop conducting their business until they are situated in 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.
In recent years, business observers have pointed to a general trend in business relocations away from major metropolitan areas and toward small- and medium-sized communities. Certainly, some companies are limited in their relocation options by customer demographics and other factors, but many firms—especially those established by entrepreneurs—have forsaken large cities for smaller towns. Indeed, desires for quieter lifestyles away from pollution, crime, and other attributes often associated with large cities, coupled with the advances that have made telecommuting a reality, have led many entrepreneurs to relocate to more rural locations.
But although such settings have many positive aspects in terms of so-called "quality of life" considerations, entrepreneurs and other small business owners still need to weigh the potential drawbacks of making such a move on their livelihoods. As Brian Steinberg observed in Entrepreneur, "hurdles litter the track. [Entrepreneurs] must absorb the shock of adjusting to rural culture, navigate the difficulties of keeping family together, and discover new business practices necessitated by an out-of-the-way location."
Steinberg went on to describe several obstacles that small business owners may face when trying to make a successful relocation to a small-town setting. "The struggle to find employees constitutes one concern for rural entrepreneurs; getting along with the neighbors is yet another," he noted. "While the added tax dollars and employment opportunities a new company provides a small town are quite welcome, the success a firm might bring can also have some undesirable effects. A successful company may supersede existing firms in importance and influence, taking away employees and even driving up home prices. Towns sometimes offer economic incentives to lure new business owners—money local companies might view as ill-spent."
In addition, some entrepreneurs find that smaller communities do not provide the same level of services that can be found in larger cities. These inconveniences, noted Steinberg, can range from troublesome ones like unreliable electric service (perhaps necessitating the purchase of backup generators), lack of overnight delivery services (Federal Express, etc.), and an absence of local access numbers for Internet service (which can force businesses to pay exorbitant long-distance telephone costs to access the Internet), to downright crippling ones, like a dearth of qualified workers. "Preparation is the key to a successful move to the hinterlands," concluded Steinberg. "Location, available work force, proximity to transportation, local attitudes, and culture shock are all factors to consider."
LOCATION NEEDS OF VARIOUS BUSINESS TYPES
Small 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 area of business, however, small business owners need to make sure that 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 the transaction, and negotiating for government incentives," wrote John R. Frazier in Los Angeles Business Journal.
When researching the merits and drawbacks of each potential relocation site, Frazier urged business owners to define each place by three primary measurements: specific location attributes, physical attributes, and occupancy cost parameters. "Specific 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, attitudes regarding alternative government jurisdictions and any special utility needs for the proposed use," he wrote. "Physical attributes address structure and layout as they relate to form and function and include such on-site characteristics as 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, moving allowances, an option to purchase, a cash incentive, or even an ownership position as a tenant."
Business consultants and small business owners who have successfully undertaken relocation efforts urge managers and owners of small enterprises to examine a long list of specific concerns before making any relocation decisions. A relocation based on knowledge, after all, is far more likely to succeed than one that is predicated on assumptions and hopes. Following are some of the factors entrepreneurs should weigh in considering a relocation:
1. Determine if projected revenues will cover the cost of leasing or purchasing the site.
2. Research whether ancillary costs associated with the relocation can be absorbed by the company.
3. Honestly appraise the impact that relocation will have on the business's cash flow and productivity.
4. Determine whether it will be possible to secure lenders to help cover costs associated with moving into the new business site.
5. Investigate whether the targeted site is located in an area that has restrictive ordinances that will unduly interfere with your company's operations
6. 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.
7. If refurbishment is necessary, find out how much it will cost and how long it will take.
8. 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.
9. Gauge the attitudes of your workforce—and especially the feelings of key personnel—about relocation
10. If in an environment where you share maintenance, housekeeping, and other service costs with other companies, investigate whether the set-up is a good one for your company.
11. Check into the safety and security aspects of the facility.
12. Determine whether the site will be able to accommodate your company if it needs to expand.
13. 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.
14. Gauge whether the site is customer-friendly in terms of layout, parking, etc.
15. 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.
16. Determine if leasehold improvements will need to be made.
17. Research whether existing or proposed government regulations might have an impact on the value of the facility.
18. Learn about the regulatory and tax climate of the area in which you are considering relocating.
19. Determine whether suppliers of raw materials and other goods and services necessary to your operation will be readily available.
Small 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.