Relocating a business can be difficult, but what are the perks of moving across state lines? The where and what you need to know.
As the American economy continues to climb out of the biggest recession in recent decades, small businesses and large corporations are looking for ways to trim expenses, acquire top talent and foster future sustainability.
According to the State of Small Business in America, 67% of small business owners feel optimistic about the economy and business prospects over the next six months. Because of this, SMB owners are slowly but surely reinvesting in their businesses, while maintaining the "saving for a rainy day" mentality.
So how can you prepare for future success while maximizing current opportunity? In many cases, the most logical answer is to uproot from their existing locations and move to more “business friendly” states.
The Business Moving Trend
The idea of moving a business from one state or city to another isn’t an innovative idea; however, it is one that has become more popular during the past decade. This has been fueled, in large part, by the recently ended recession.
As the American economy began to struggle in late 2007, so did businesses. In an effort to compensate for balance sheet deficiencies, small businesses and large corporations alike looked for ways to cut expenses and maximize profits. The answer for many was to find more favorable locations.
Even now, as the economy returns to full health and the dollar strengthens, businesses can’t get the bad taste of the economic collapse out of their mouths. However, a lot of research and effort goes into moving a business, and the grass isn’t always greener on the other side. Even so, there are some “sure bets” when it comes to relocating a business in 2015. Some of the most popular business destinations include South Florida, Utah, and North Carolina.
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Where Businesses are Moving
Miami is a popular destination for businesses with headquarters in large northeast or west coast cities like New York City and San Francisco. That’s because the median rate per square foot (for commercial office spaces) is somewhere around $32 – a stark difference between the $49 in New York City and $45 in San Francisco. But that’s not all. The cost of living is also much cheaper.
“When these people come here and they do the math, they say, ‘Oh my goodness, I have all this money that I don’t have to pay in income tax, and I can apply that to either home payment or other things,’” said Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors in Miami.
But it’s not just the warm weather of South Beach that attracts businesses. The state of Utah was named the Best State for Business in 2014. This is, in large part, due to the fact that Utah’s climate is pro-business. Energy costs are 26% below the national average, and the talent pool is incredible. And, with so many different tech and software companies in the area, businesses have access to plenty of nearby resources.
The same study that ranked Utah the best state for business also ranked North Carolina number three. This isn’t a surprise to the Tar Heel State, as it’s been a member of the top five each year that the study’s been conducted. This is a result of the state’s low labor costs, highly qualified employees, and small union workforce.
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Four Reasons for Moving Your Business Across State Lines
When you look at the reasons businesses are moving to South Florida, Utah, North Carolina, and other geographic locations, you notice some common trends and consistent logic. If you’re considering a move for your own business, it will likely be tied to one of these four driving factors:
- Lower taxes. The primary culprit is almost always taxes. Even something as small as a single percentage point can make a difference for a billion dollar corporation. In fact, Hertz, the largest airport rental car business in the world, recently moved to Estero, Florida from Bergen County, New Jersey for lower tax incentives (despite New Jersey offering somewhere between $40 and $70 million to stay). While you may not be offered anything to stay, you may be able to save money by moving if you’re currently in a state where income taxes are high.
- Lower cost of real estate. The second reason to consider a move is the lower cost of real estate. As mentioned, a move from New York City to Miami could save the average company somewhere around $17 per square foot. In a 10,000 square foot office building, that could amount to $170,000 per year in savings. Combine this with a lower tax rate, and you can see just how quickly the dollars add up.
- Better talent pool. A move may also be beneficial, in part, due to better access to human capital and talent. Many businesses find that local talent is diminishing and want to align themselves with better people. As is the case with Utah, certain states have better talent pools than others.
- Access to better amenities. The fourth major reason for moving a business across state lines is access to better amenities. For a business currently located in the Midwest, this may look like moving to the east coast to reduce the overall cost of exporting goods to international markets. For a food manufacturer in Arizona, it might mean moving to Texas, Nebraska, or Kansas for better access to agricultural resources.
As a business owner interested in profitability and long-term sustainability, it may be worth your time to consider relocating your business to a new city or state. However, it’s certainly not a decision to be taken lightly.