Between relocation costs, potential employee attrition and the need to find new office space, there are numerous concerns when moving a business.
Over the past few months, dozens of job openings have hit the Kansas City search boards for one particular employer: the U.S. Department of Agriculture. Part of this is in preparation for the relocation of the USDA's Economic Research Service as well as its National Institute of Food and Agriculture.
For any organization, moving to a new location naturally results in hiring at least a few new employees. But the USDA's hiring spree is primarily due to a mass exodus of employees. More staff members than expected chose not to relocate from D.C. to Missouri, calling into question whether enough planning went into the organization's move.
The "start" date alone became a logistical nightmare. Initially, employees who accepted the offer to relocate were supposed to report for work in Missouri on Sept. 30. That quickly changed to Dec. 9 in some cases and March 30 in others, affecting not just the relocation date but the separation date for any team members who declined the move.
The USDA's transition isn't typical when it comes to relocating a business, but it serves as a cautionary tale. It's always wise to do your research to determine whether your company is ready to leap to a new locale. Is it better to tackle the transition in stages or one fell swoop? How will a new location affect team members? Do you have the funds available to make a move attractive to existing employees?
Local government agencies offered $26 million in incentives to lure the USDA to Kansas City, which can certainly offset some of the expenses associated with relocating workers. That's a course of action you too should consider when looking to move your company – but incentives shouldn't tempt you to take the relocation process lightly. A successful move takes careful planning to ensure logistics (human and otherwise) are handled.
Problems to come
When a business fails to map out its relocation efforts carefully, obstacles of all types pop up to make the transition more difficult. On the surface, the change in relocation (and separation) date seems like a small hiccup in a massive transition. But the USDA's original Voluntary Separation Incentives hinged on employees leaving by the last week of September, and a failure to make that happen could jeopardize the buyouts.
One of the more straightforward problems with relocating a business – or a government agency – is how it affects the lifestyles of team members. Issues with the local school system could make some workers take pause. If the local districts don't compare favorably to their existing options, expect attrition. You'll also need to consider the cost of living in both areas. If your wages don't afford employees the same lifestyle in the new location that they enjoy in your current setting, you can again expect attrition.
Another issue that many companies overlook is the earnings tax (also known as an e-tax), which amounts to 1% of an individual's earned income (salaries, wages, commissions, etc.). Kansas City, St. Louis, Newark and every county in Indiana levy their own income tax, though those rates fluctuate from 1.5% to 3.1%.
Any of these factors can create issues with employee retention and call your transition into question. You need to weigh every aspect that might cause problems with relocating a business before you commit to a move. Otherwise, you'll find yourself scrambling to staff up and do everything necessary to hit the ground running in your new home.
There are more than a few reasons for relocating a business to another city, county or state, but you'll want to first think through the decision and how it might affect your business or operations.
If you're committed to making a move, here are four business relocation tips.
1. Connect with local business organizations.
It's always wise to gather information on the business climate for your industry before relocating a business to another state. General questions are fine, but you'll also need to get into specifics.
If you're an agricultural company, for example, ask about state laws, policies and regulations affecting your industry. Figure out whether the area favors agriculture, and try to get a handle on how welcoming the business community is to new entrants. Should you need advice from local leaders, an open and engaged business community is essential.
2. Analyze the potential cost repercussions.
Cost is a factor in any operational decision, and moves are no exception. In fact, costs could be one of the main reasons for relocating a business. Just don't get too caught up in the potential tax benefits afforded to you by the new city or state's tax codes – choosing the ideal location for your business is a compromise between business expenses, target market and quality of life for employees.
Geographic information system, or GIS, technology allows for in-depth analyses of potential locations. By combining data trends on demographics, lifestyles, consumer spending and other factors, the software can provide insights on everything from customer accessibility to commute times. By showing you a location's upsides and downsides for both your business and employees, GIS can help you make more data-driven decisions.
You can also lean on a city's economic development office or a state's commerce department for valuable information. Both can provide facts on the local cost of living, average home prices, available housing stock, etc. Contacting either government agency gives you another opportunity to establish relationships in the business community and get in on the ground floor of new and ongoing initiatives.
3. Gauge the quality of future talent.
One of the main problems with relocating a business is the potential to lose some of your most valued team members. Even if you're able to offer a relocation bonus to team members who come along for the ride, some people will choose to stay behind. In case you encounter attrition, you'll want to target a potential home that has a substantial talent pool – in fact, a shortage of qualified workers is one of the primary reasons for relocating a business.
College towns can provide a wealth of new talent, but so can cities with strong trade schools, community college systems and other educational institutions. Depending on the city or state, you may qualify for training incentives should the relocation produce a net number of new jobs. These incentives, of course, help your bottom line. Again, a quick call to the city's economic development office or the state's commerce department can get you the information you need.
4. Weigh the values of renting, building and buying.
For many companies, renting a space is the most cost-effective option. You're looking at fewer upfront costs and may even be able to negotiate a buildout to meet your particular specifications. Beyond those benefits, rental spaces provide greater flexibility should your business grow or change direction.
But there are definite advantages to buying or building commercial space. New construction, for one, can bring in incentives if it produces new jobs or includes energy-efficient elements in its design. It also allows you to lock into a long-term mortgage with fixed costs, create a potential revenue stream by renting out a portion of the building, and write off your property taxes, mortgage interest, and other items come tax season.
Moving a business will always be complicated. There are so many moving parts to consider that it's easy to forget some important factors. Still, plenty of thoughtful planning can help you avoid many of the problems with relocating a business. It just takes a little preparation.