Do your business premises need to be where they are now? Is your client-base shifting? Have rents increased beyond your means or are new markets developing in other locations? If so, it may be time to consider relocating your business.
Relocating a business can be a complex task. First and foremost, can the business maintain its viability if you decide to move? Secondly, would relocating only serve as a bandaid measure to an already failing business? In many cases, if you choose carefully, your business will benefit from the rejuvenation of a new location.
Whatever the individual circumstances, making the decision to relocate must be done with foresight and planning.
There are various reasons for a small business owner deciding to relocate his/her business. Business may be spiralling downwards, however the owner believes business is suffering purely because of location rather than management issues or the product/service itself. Rather than selling, relocating may be a viable option.
Other reasons to relocate may include:
- Deterioration of an area: the location may have been financially successful when the business started, however, socioeconomic factors have caused a spending slump which has been impacting on business.
- Business growth: the business may have grown beyond its capacity in its current location. Relocating may be the answer. There may also be significant market growth in another area that had yet to experience a boom when the business was originally set up.
- Increasing rents: small business owners often find rent and overheads a drain on finances. Relocating may help alleviate these expenses.
- Changes in the direction of a business: the business may have been set up with an original task/product/service in mind but has changed direction over the years, creating location and premises problems.
- Personal circumstances: an owner's circumstances can have an impact on viability. An owner may need to relocate as a result of personal matters.
- Product availability: it may be prudent for a business to relocate to an area/region where access to product components, ingredients, etc will make operating the business more streamlined.
- Labour needs cannot be met.
- Shifting client base: to keep in touch with clients the business may need to relocate to stay competitive.
- Change in access to local supply chain networks: depending on the type of industry in which the business operates, there may be concerns regarding the current location when it comes to gaining access to supplies, etc.
- Change of amenities: a business may have chosen a particular site because of its high visibility, however over the years changes to the area's amenities may have had a negative impact on the premises. Maybe a business has downsized and finds the current premises too large.
Assessing your needs
The decision to relocate has to be made with specific regard to the future of the business. It needs precise planning and research, the groundwork needs to be impeccable and the owner needs to be sure that relocating is the answer for his/her business future.
Just as when you entered the start-up phase, you will have to go back to the drawing board and conduct your market research to pinpoint potential new locations.
Of course you may already have an alternative location in mind. You could have highlighted a particular area where your business would slot in well or where there is a demand. Even if this is the case, planning a business relocation should not be rushed.
You will need to assess the location for a number of factors, including:
- The possible appeal of your business
- Your potential customers
- Economic base
- Your competitors
- The type of market that exists for you
- The size of the market
- The realistic pricing which can be achieved
- The characteristics of potential customers/clients
- Current and future market trends.
- Assess potential relocation areas
When looking, consider the following:
- The opening of new shopping areas
- Branches of large commercial and industrial companies setting up in the area
- Good schools and other services
- Well maintained businesses and residential properties
- Good transport facilities
- Building activity accompanied by a minimal number of vacant business premises.
- Necessity for high school students and university graduates to leave the area to find suitable employment.
- Inability of residents to find local jobs
- Declining sales and industrial production
- Apathetic attitudes of local business owners and other residents.
The Australian Bureau of Statistics provides a specialised service called 4-Site which provides demographic information for specific locations. These reports are specially compiled upon request. For more information about the 4-Site service, visit the ABS at www.abs.gov.au or e-mail: firstname.lastname@example.org
You also need to consider what impact relocating would have on your current customers. Would they be willing to travel to you? If you are in the service industry and you need to be present at your customers/client's premises to carry out your business, will it still be financially viable for you to do so?
When thinking about relocating your business:
- Ask your customers/clients whether they would be willing to travel to use your services/product
- Develop a specific brief that outlines your business' needs when it comes to premises and location
- As part of this brief, include reasons the current premises or location are now unsuitable
- List what you would like your business to achieve through its relocation, for instance, improved profits, streamlined operations, increased customer base, etc
- Speak to businesses in the area to gain an insight into the current economic situation
- If possible, speak to business owners who have relocated to see how they handled the situation and how their businesses faired
- Assess key issues you will need to consider if leaving the current business premises. For instance, the lease arrangements, utilities, assess the cost of relocating, what you will do with superfluous stock (if applicable), etc.
You should aim for at lease six months of planning before making any major decision. Make sure you do not do anything without having put in the necessary groundwork.
If you find premises in the right location, but it needs renovation, organise the pricings/quotes for work before making any decision on relocating. This way you will know, before you make a decision, what the financial outlay will be.
Sometimes relocating a business may be a result of personal circumstances. It may also mean the business is relocating to a regional area or another city. In this case, you will also need to consider the impact on your family and housing arrangements.
Where to get information
It is important to make use of all the agencies which can provide helpful information regarding demographics and economic factors of a particular area. The type of information you will need will depend on the size and nature of your business.
For example, the New South Wales Department of State and Regional Development (DSRD) can give practical assistance to international and interstate businesses planning to relocate or expand into Sydney and NSW. For medium-to-large businesses, the investment division offers many forms of support and assistance.
The DSRD provides information to help businesses prepare feasibility studies and business plans. For example, it can provide information on the size of markets in your industry in NSW, Australia and the surrounding region and data on business costs. It can also help you find the best site for your business in Sydney and NSW. For more information, visit the DSRD at www.srd.nsw.gov.au or www.smallbiz.nsw.gov.au.
Julie operated a women's retail clothing store in a medium-sized mall in the centre of town and her sales benefited from mall traffic. However, she found the lease costs exorbitant and decided to move out to a shopfront on one of the main streets. She assumed that business would stay constant as her new location was only blocks away from her old one. The lease for her new location was just over $300 less than the rate she had been paying.
But business did not stay constant. Julie's clients didn't follow her to her new location and profits fell. She tried to fight the customer decline with promotions and expansion of the lines of clothing, but to no avail.
After a year in her new location, Julie moved her business again, into a smaller space in the mall where her business had originally been located, yet paying almost the same lease rate as originally.
Julies believes moving was a mistake. "I've always prided myself on offering a personalised service and I figured my clients would follow me wherever I went. It was a real shock when they didn't."
Stacey and Geoff, on the other hand, were pleased with the outcome of their relocation. Originally, their retail computer hardware and service business was located in a city office building. The business was on the second floor at the back of the building with maybe 600 square feet of space.
About two years ago, they moved their business to a small freestanding building on one of the city's side streets. While the savings on their monthly lease weren't huge, their business grew considerably over the two years, growth that they both attribute to the move.
"We're spending about $1200 a year less (on our lease rate), but with street frontage we get a lot more walk-in traffic. I don't think we got any in our old location," Geoff said.
In addition, the new premises has almost doubled their usable retail space. The couple solved two of their business problems, space and visibility. The savings on their operating expenses have been a side benefit.
If you're thinking about relocating your business, you have to look at more than the balance sheet. Geoff and Stacey's case shows the importance of picking a location that has advantages other than cost. Their relocation was successful because they moved to a location that was compatible with their goal of improving their business' visibility and attracting more customers.
Julie's case shows how important it is to closely examine the effects on clients and potential clients. Julie felt that her clients would follow her, but as she admits, she didn't research this. She might have surveyed her customers about a possible move to a new location or canvassed their opinions, but she didn't.
Although she moved her business to a new location solely to lower her monthly operating costs, the net result of the move was a financial loss.
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