Does 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 alternate 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 do decide to move? Secondly, would relocating only serve as a bandaid measure to an already failing business? However, in some cases, if you choose carefully, your business will benefit from the rejuvenation of a particular “new” area or location.
Whatever the individual circumstances, making a decision to relocate your business must be done with foresight and planning. There are various reasons that can contribute to a small business owner’s decision to relocate his/her business.
For instance, business may be spiralling downwards, however, the small business owner believes the 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 originally started, however, socio-economic 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 a significant market growth in a particular area that was yet to experience a boom when the business was originally set-up.
Increasing rents: Small business owners often find rent and overheads can be 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 may have changed direction over the years creating location and premises problems.
Personal circumstances: A small business owner’s personal circumstances can also have an impact on the viability of the business. 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: A business’ client-base may be shifting and to keep “in touch” with clients the business owner 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 business’ current location when it comes to gaining access to supplies, etc.
Change of amenities: A small business may have chosen a particular site because of its high visibility, however, over the years changes to the area’s amenities may have taken place having a negative impact on the business premises. It may also be the case that a business has “downsized” and finds that the current premises is too large.
Assessing your needs
Deciding to relocate is a decision that has to be made with specific regard to the future of the business. It needs precise planning and research, the ground work needs to be impeccable and the small business owner needs to be sure that relocating is the answer for his/her business future.
Just as when you entered the business start-up phase, you will now have to go back to the drawing board and conduct your market research as part of the process of pinpointing potential new business 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
Population
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 at particular areas consider the following:
Favourable signs:
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.
Danger signals:
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 especially compiled upon request. For more information about the 4-Site service visit the ABS Web site at www.abs.gov.au or e-mail client/[email protected].
Another major issue you will also need to consider is 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 continue to do so?
Relocation tips
The following are tips to consider when thinking about relocating your business:
Ask your customers/clients whether or not 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 why the current premises or location are now unsuitable.
List what you would like your business 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 their business 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.
Where possible, you should aim for putting in at lease six months of planning before making any major decision. Make sure you do not do anything without first having put in the necessary ground work.
If you find premises in the right location, but it needs some renovation work, organise the pricings/quotes for work before making any decisions on the premises or relocating. This way you will know, before you make a decision, what the financial outlay will be.
In some circumstances, 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 also important to make use of all the agencies and associations which can provide helpful information regarding demographics and economic factors of a particular area. Again, the type of information you will need will depend on the size and nature of the business.
For instance, the The New South Wales (NSW) 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 businesses to help them 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 Web site at www.srd.nsw.gov.au or www.smallbiz.nsw.gov.au.
Case studies
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, Julie found the lease costs exorbitant and to alleviate the lease expenses decided to move out to a shopfront along 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 a little over $300 less than the rate she had previously been paying.
But business did not stay constant. Julie’s clients didn’t bother to follow her to her new location and profits fell. She tried to fight the customer decline with promotions and expanding the lines of clothing she carried, but to no avail.
After a year in her new location, Julie moved her business yet again, into a smaller space in the mall where her business was originally located, paying almost the same lease rate as she was originally paying.
Julies believes in her case 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,” she said.
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 free-standing 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, then you have to look at more than the balance sheet.
Geoff and Stacey’s example shows the importance of picking a location that has advantages other than cost to recommend it. 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 shows how important it is to examine the effects on clients and potential clients closely. 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 month was a financial loss.
