Where Is the Best Location For Your Business?
Published state rankings and accolades are just a starting point in the location decision process; individual company needs are what really matter.
Dana Olson, President and CEO, Ecodev (September 2010)
We're all familiar with the handful of states that consistently come out on top when it comes to ranking those best for business. Whether it is taxation, work force quality, or a pro-business attitude, certain states continually stand out above others.
However, for any business looking to launch, relocate, or expand into a new area, knowing which states have won accolades is only a starting point. Every company needs to do its homework to determine the best state and the ideal community for its business.
This entails taking a close look at the operating activity and the needs of the company and analyzing key costs in different areas of the United States.
The process includes assessing a multitude of factors, from infrastructure and labor needs to tax scenarios and transportation and shipping/logistics costs - each factor plays a critical role in determining where to base operations.
Avoid Knee-Jerk Reactions
A company should not be too quick to locate in its home state or make a knee-jerk reaction based on others' rankings. Often many of the lists of so-called "best states for business" rely on limited criteria to determine rankings; a company needs to take a more holistic approach to find the best state to meet its needs and cost-reduction objectives.
For instance, a state that is recognized for lower taxes may still prove cost-prohibitive for the average company because of high property costs or the cost of qualified labor - the biggest expense for most companies. It all comes down to analyzing the business' operating model and assessing the full spectrum of key costs in different areas of the nation.
Of course, finding the best place to locate a business goes a step further than looking at state-level attributes; a company needs to find the ideal community that will support the growth of its business. The site selection process may start by looking at which states have "the best" business climates, but the decision-making process is further narrowed to consider how a particular community meets the critical needs of the business. Let's look at an example:
When Danfoss Turbocor Compressors, Inc. sought to relocate its operations from Montreal, Canada to the southeastern United States in 2006, it made sense to consider Florida for its location - but even more importantly, for its reputation as a state that invests in green businesses.
The manufacturer of oil-free compressors wanted a location that would be closer to the markets it serves and allow it to operate in the most cost-effective and efficient manner as possible. The company also sought close access to high-tech resources (vendors, etc.) and an ongoing source of highly qualified employees. Once Florida was on the table as an option for Danfoss, the search process continued to find the ideal community that would best serve the critical needs of the company.
One Florida community in particular, Tallahassee, stepped up in a number of ways that demonstrated it would be a good home base for Danfoss. To meet Danfoss' high-tech labor needs (i.e., a large number of engineers and skilled technicians), the community worked with Tallahassee Community College to create a special program for sheet metal operators that would aid Danfoss in training and recruitment. Tallahassee also built a facility to the company's specifications and leased it back to Danfoss at a subsidized rate. Lastly, beyond fulfilling Danfoss' need to be in the Southeast, the community provided attractive cash incentives that proved it would be a good partner for the long-term growth of the company.
When are state rankings and awards useful when a business is considering relocating?
It is only helpful if the criteria for the award or ranking is based on the key criteria for the company. More
- Dana Olson, President and CEO, Ecodev