• Free for qualified executives and consultants to industry

  • Receive quarterly issues of Area Development Magazine and special market report and directory issues


A Step-by-Step Guide to Choosing the Right Site

A five-phase process can take your company from defining the key attributes for its success to picking the optimal PLACE and site to do business.

Nov 07
(page 2 of 2)
Phase 2: Make an initial screening of locations that meet your requirements. Rate communities in a specific geographic area on each key requirement: labor attributes, cost structure, operating environment, etc. Use a scale of 1-10 for each element. List the top four or five candidates and analyze their benefits based on such variables as number of customers overall and average distances to customers and expected delivery time. Use the results of this and Phase 1 to narrow your list of possible locations. This usually takes one to two weeks.

Step by step:
• Gather estimates for agreed upon "subjective" criteria outlined in the first strategy meeting for each location.
• Narrow the list to a manageable number of locations.

Phase 3: Create a "qualitative-cost matrix" for each location on your list, showing the trade-offs. If, for example, the matrix shows "City 4" rates 20 percent lower for quality (of labor force, operating environment, etc.) than "City 5," but that "City 4" costs 10 percent more, you now have a clear idea of the trade-offs between the two cities. You use this matrix to create a shorter list of locations. This process takes about two weeks.

Step by step:
• Put ratings into the matrix for all finalist locations.
• Add the results of the site location model on supply-chain costs.

Phase 4: Conduct field visits to the remaining locations on your list. Assess them for potential site-building operations, incentive possibilities, the labor market, and supply-chain infrastructure and costs. This is the first time you should be in contact with the local economic development offices. Distribute requests for proposals for construction or leasing and analyze the proposals you receive. Present your analysis and recommendations to senior management. This process takes two to three weeks.

Step by step:
• Develop a request for proposal that outlines the requirements of your site as it relates to building purpose, size, ceiling height, sprinklers, special requirements for power, refrigeration, rail access, etc. so everyone is working off of the same data.
• Travel to multiple site locations for meetings with local brokers, developers, and economic development groups.
• Return and recap the results of your meetings.
• Meet with the team to narrow down the list to the final two or three locations identified for specific negotiations on incentives.

Phase 5: This phase prioritizes and finalizes the negotiation process relative to the final two or three locations. This ensures the preservation of viable alternatives to utilize during the negotiation process. There has to be some level of competition to ensure the maximum level of incentives for your project. There is a little "poker playing" here, i.e., you may know where the "best" site is already, but you never reveal this to the economic development groups or they will lose interest in negotiating incentives.

After the final incentive packages are presented, the location team meets to make the final choice based on all the components - operational costs, supply-chain costs, qualitative elements, and economic incentives. While the negotiations are being conducted with the economic development groups, you are also negotiating with landlords for leases and/or purchase of a site. Again, you should develop a letter of intent to give to the two or three finalist sites. You always need a backup in case you cannot come to terms with a specific landlord or owner on your first-choice location. Once you have your lease or land purchase agreement in hand, you go back to the winning economic development group to sign up for your incentives.

Step by step:
• Negotiate with landlords and/or owners for specific site locations.
• Request "final offers" from the top candidates' economic development groups.
• Get formal approval from your winning economic development group for your incentive package.

This five-phase process should take your company from defining for itself the key business success attributes, through translation to location attributes and the vetting of potential markets and locations against these, yielding an optimal place and site to do business. Attributes and their weightings vary across business types, but this replicable analytical process will provide a consistent roadmap and discipline to ensure a successful outcome.

Follow Area Development