Incblog for Entrepreneurs

Covering entrepreneurship and business start up questions for non-residents and US citizens.


Oct 31 2013

Developing a Location Planning Strategy

by John Gordon | 20:10 GMT

For many businesses there are three keys to success: location, location location. How should a business find the best location? The very first step is to develop a location planning strategy. is to understand where you are and your key objectives. The location decision will need to reflect future operational requirements and business situation, if it is to be successful. Therefore, a clear definition of your business’ needs and priorities at the outset will provide the framework for both the evaluation of options and the location/site selection criteria. The business strategy will provide the path from where you are to where you want to end up. The choice of business location is different from choosing what state to incorporate in. Also, like the decision of which company type to use, and which state to incorporate in, the location decision can be changed later but will cost the company dearly in terms of lost time and needless expense.

If you are doing your location search, you will need to consider your goals, resources and priorities to form a strategy for entering the US market. If you are an entrepreneur, for example, and looking to found a tech startup, then you will consider your budget (probably very limited), what you want to get out of being in the US (access to venture capital, learn from other tech startups, feel the vibes from being a US tech startup), and your burn rate (months of cash left before being forced to shut down and head home).  On the other hand, for a mid-sized firm trading in fabrics, your budget is probably much higher, your priority is to be closer to your supply chain vendors and have good transport infrastructure available for shipping out finished products to your customers.

A shortcut to develop this strategy is to utilize the services of a location consultant. For a price, the consultant will lead the discussion in an objective way, helping the company’s managers or founders to be honest with themselves about where they are now, the resources that are available to them, and contribute their insights into setting priorities for the company. For example, a top priority for a company may be to seek out a locality with low state and local taxes. After an objective analysis of the company’s strategy, it may turn out that the company’s best move is to be close to its customer base, even after taking tax rates into consideration.

On the other hand, management might assume that it is better be to be in a prestigious location, only to have it turn out that this is not really relevant for a company in this industry, and that it is better to be a in a lower cost area with good infrastructure instead.

Location consultants provide a ready-made framework for creating a business location strategy. They will look at such factors as:

Cost Quality
Labor Labor skills
Real Estate/Property Labor flexibility
Utilities/Energy Connectivity
State and local taxes Infrastructure
Risk (political, crime, earthquake) Economic Incentives
Insurance Quality of Life
Climate (excessive heat/cold) Transportation

Many of these key drivers can be further broken down into subcategories, depending on your industry. For example, labor skills can be further broken down into the availability of specific language skills, technology skills, professional skills and management skills. As these key drivers are not evenly spread across the US, your business needs to know which ones are the most important for your success.

This step can be accomplished by the company’s management itself, or through the use of location consultants. While a consultant will cost more, a good consultant will be better able to provide an objective analysis of your industry and its fundamental needs, to guide management through the discussion and keep the discussion focused on the company’s objectives.

Once you have determined your priorities, and know in what order to arrange these priorities, you can then start the analysis by using available primary and secondary data sources, starting out with a “long list” of states or cities, and through robust and logical analysis identifying 3 to 5 cities that meet your criteria.



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