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)
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Questions to Ask
Following in this line of reasoning, below is a list of sample questions to help guide the decision-making process when looking for a location at which to grow your company:
• What are the labor needs of the business? Since the cost of labor is the biggest expense for most companies, it is important to carefully assess labor needs to find the area that will provide the most cost-effective, qualified labor. What education and skill levels are required? Can employees' skill levels be matched in an area that may have had recent plant closures, resulting in a number of qualified employees available for work?
If there is a need for highly trained employees, it may make sense to identify an area with a nearby community college and develop a relationship to aid ongoing training and recruitment. It is also important to look at areas that are capable of recruiting into the community to avoid turnover issues. Finally, companies should seek out a location where they will be an employer of choice and an integral part of the community to ensure long-term success.
• Does proximity to clients or vendors matter? If the majority of a business' clients or key vendors are located in a particular region, it may make sense to locate the business in close proximity in order to reduce travel or shipping expenses or to provide better (in-person) customer service.
• Does the business need to be located near a port or rail system? With rising fuel costs, more companies are looking for ways to scale back transportation and shipping of products.
• How will the local tax situation impact the business? Even states that boast they are "no-tax" locations (e.g., no corporate income tax) do have taxes that will affect your business in one way or another. It is important for a business to know all the applicable taxes it will face, from franchise taxes to sales and use taxes.
• What are the business' property requirements? The cost of property varies dramatically depending on location. Costs to build a facility can range from $80 to $230 per square foot depending on where you build. Even if a company is leasing property, the original building costs are reflected in the lease rate. Therefore, companies should begin by outlining the amount and type of space required to operate the business.
• What is the quality of life in the area you are considering? Before locating a business, a company should ask if the area is recognized as a "nice place to live" beyond a good place to operate a business. Employee retention and future recruitment depend on offering a good quality of life.
Identifying the best place to locate a business is a major decision. The process may begin by taking a look at the "best states for business," but should ultimately take into consideration the diverse needs of the individual company. Location alone can determine if a company is profitable or not. There can be a cost differential of as much as 30 percent or more depending on where the business is located. Knowing what questions to ask and examining the full spectrum of operating costs will ensure that the company makes the right move to a community that is a good match. This will help both parties - community and company - to recoup their investments and maintain employment objectives for the long run.
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