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Moving your business to a new city can sound like a desirable prospect at first glance. There might be better opportunities, better living conditions, or perhaps the city may be more aligned with your political and social convictions.
However, the purpose of business is to make a profit in a way that does not detrimentally impact your stakeholders, staff and family. This is why relocating a business should be done with careful consideration and analysis for all the parties.
The further the distance that you are moving, the higher the costs. You should consider both the long-term and short-term financial impacts of relocating. Besides the financial, there are a few other necessary considerations you should take into account as well.
1. Tax consideration
When you decide on a city, county or country to move to, it is essential to assess the tax situation of your new location. The taxes in your chosen location can have a significant impact on the profitability of your business, and depending on where you are relocating from, that impact may be positive or negative.
Some businesses may receive tax credits for having an office in different locations, so if you plan to move a section of your business, you may need to confer with your CPA to see if you qualify for this.
When considering the tax impact of your relocation, it is wise to consult with a qualified CPA or CTS because the basic tax percentages may not tell the whole story. A CPA can help you identify hidden costs and develop a tax strategy to legally pay less tax by taking advantage of loopholes in the tax code.
2. Overhead costs
Also, you need to consider overhead costs; moving to a new location will have financial implications on your everyday operations. What is the cost of a lease or mortgage payments in your new location? What about utility payments, shipping and wages for new employees?
You need to do your research and have a comprehensive image of the estimated overhead total in the new location. Comparing this with the perceived benefit of moving might give you a clearer picture of whether it’s the right call to make.
3. Hidden costs
There are also a few possible hidden costs. The chances are that not all your employees will be willing to move; assuming you have a business that requires many employees, you might be taking up a considerable cost to rehire and retrain new employees.
The cost of rehiring and retraining staff is a hidden cost that may have more hidden costs attached to it. Your new staff will require an adjustment period, which may bring about below average performance and financial losses to the business. Entering a new location is not necessarily easy; training new staff makes it even more of a challenge. It’s far from impossible, but it is vital to take into account.
There might be other costs, like the cost of dilapidation and reinstating the office you are vacating. You should consider all of these.
4. Growth possibilities
Can your business grow in this new location? You should ask yourself this vital question even if your numbers add up and your projections look good.
To determine growth possibility, you have to look at your business’s long-term goals and visions and determine if your new location can sustain that growth.
For instance, if you intend to employ 40 new employees who need to be proficient in IT and software development in the next two years, you need to consider if your new location has a healthy population of tech enthusiasts and professionals.
If the local population cannot support your growth, you might have a problem. You also need to consider a few other location-based issues. Suppose your business relies on shipping out products a lot and you have a vision of drastically increasing your order volume. In that case, you need to discover the proficiency of the local shipping companies or the cost of using more expensive out-of-town companies.
I have never met a business that didn’t want to grow and expand in some way. The environment of the business is a crucial ingredient for growth.
5. Impact on customers
Many of today’s businesses have contact with their customers online and, therefore, theoretically, they can function from anywhere in the country. However, it is still a good idea for every business to consider the more significant effects of relocating on your customer base.
Perhaps a study of where your customer base is saturated might come in very handy in deciding where to move. As a rule of thumb, businesses should move closer to their customers and not away from them.
Having a presence where your customers are saturated can help you have more community impact and grow a base. If you are a business that relies heavily on one or a few customers, you need to study the impact of moving closer to or away from those customers before making a decision.
You need to factor in the financial implications as well before deciding. Does moving closer to the customer(s) decrease or increase your overhead? Will your shipping costs be affected as well as the cost to your customers?
The logistics of moving your business is probably the last consideration that you should have to make, but it is by no means of less importance. If you haven’t moved offices before, then chances are there are some steps that you might miss, and you need counsel from someone who has done it before.
Your new office will probably need a touch-up, and nothing says touch-up like new furniture. That’s a massive cost if you intend to change your furniture. However, you can cut it down by selling your current. Another option might be to refurbish your furniture. It often makes it look as good as new, for as low as 20% of the cost of a new one.
You also need to consider if moving some of the leased pieces of equipment violates the warranty and sort it out before you move them.
Relocating your business is both a risky and expensive venture. You need to make sure that you understand the financial implications of every step and factor them into your grand plan. You need to arrive at your new location in the best possible shape financially and otherwise to hit the ground running.
Ask the right questions, and you will most likely get the best results.