How to Choose the Best Location for Business : Industry Market Trends

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March 4, 2008

How to Choose the Best Location for Business

By David R. Butcher

Today's uninspiring economic climate may have companies looking for better conditions to conduct business. Here is a shortlist of decisive factors and questions to answer during the site selection process.

For various reasons, some companies may be looking for better conditions to conduct business. Some want to gain access to a specialized or less-costly workforce; others desire a better quality of life for their employees; and some simply need more space.

While there are dozens of factors that will determine a business owner's decision for site selection, the ultimate decision of which site will best fit a company's specific requirements must be the result of first considering the best place for the company to perform a specific function, according to Area Development Online:

Depending upon the actual business functions that will occur at a specific location, the appropriate weighting of the various attributes typically becomes an exercise of assembling all of the essential business factors and considering them in the context of meeting overall business goals.

Understanding the needs of your business is the first step in finding a location. Make a list of your business-specific needs. While there are numerous questions to ask when evaluating a suitable site, focusing on key drivers of future business success should remain the focus:

• Are the activities to occur here considered core to the company's ongoing business operations?
• Is this a new growth area or target market for future business?
• Are logistic attributes or people most important?
• How long does the company expect to operate here?
• Does the firm have other operations nearby that could be considered for consolidation with a potential new site?
• Is proximity to key resources, vendors or distribution channels a key requisite?

"The answers to these and other key business questions allow the development of an evaluation process that will capture and appropriately weigh and explore the various business and site elements that will impact the overall success of a particular location for a user," Area Development Online says.

"Due your due diligence," advises Entrepreneur.com.

Begin with a detailed market study on both location and facility. Then try to match the company's long-range business plans with detailed information about the potential location.

What are the key factors to success of the operations that will be conducted here? This short list, guided by DevelopmentAlliance.com's site selection checklist and a classic editorial from Certified Economic Developer Bob Cooper, includes some critical factors and questions to answer during the site selection process.

Operational Costs
What are the state, county and city tax structures and regulations? Are there business taxes? What are workers' compensation rates? What is the permit process and how long does it take? Is there enough land available for development? Is natural gas available and affordable? What are average electrical rates? If you have a building in mind, does the building need repairs? Do existing utilities meet your needs or will you have to do extra work? Is ventilation adequate?

Government Factors
What are the current tax rates and assessment methods? What about the availability of tax abatement and zoning sites? How about the cost and availability of building permits? Are there any other special regulations?

Incentives
Incentives can reduce the tax burden for locating or expanding a business. What incentives will the community offer your company? Does it offer industrial development bonds or urban development action grants? How about small-business loans? Will it provide access to venture capital organizations?

Labor Force
Can you find a sufficient number of qualified employees in the area? What's the average wage rate? What about work retention rates? What educational institutions are in the area, and how many? What is the graduation rate? Is the location convenient to where workers might live?

Transportation
Is the location accessible to transportation systems such as rail, air and interstate? Is the area served by public transportation? Is parking space (for workers and customers) available and adequate? Can suppliers in the region make deliveries conveniently at this location? Is air-cargo service available? What technical assistance programs are available for international trading?

Environmental Factors
Does your business involve chemicals or hazardous materials? What processes and regulations do the environmental agencies require? What natural resources are available? Is there enough clean water? How do the air quality and noise levels rate? Review environmental reports on location/lot candidates. If these don't already exist, ensure that appropriate studies are carried out before finalizing the purchase.

Quality of Life
What is the average home price? How much are property taxes? How does the school system rank? What hospitals and medical centers are located there? What is the crime rate?

There's an old saw in the field of facility planning to the effect that selecting a plant site is somewhat akin to selecting a wife: While it is possible to change later on, the change may be both expensive and unpleasant. Firms must approach this type of planning with the proper attitude, recognizing the importance of doing a thorough job and ensuring that decision-makers realize that the proper location can mean success or failure in a highly competitive field.

For some of the latest lists of the best states and cities (in the U.S.) for business and careers:

Milken Institute: 2007 Cost-of-Doing-Business Index

Best Places for Business and Careers

Best Cities for Business: Minnesota Nice

The Rest of the Top 10

2007 Top Cities for Business Attraction

2007 America's 50 Hottest Cities

Top Metros of 2007

Best Cities for Jobs In 2008

Best Places To Get Ahead

Resources

Site Selection Checklist
DevelopmentAlliance.com
International Economic Development Council and Conway Data, Inc.