Is Relocating Your Business Really Worth It?
If you’re going to move your business from one location to another, there had better be a very compelling reason for it. Credibly always gives our clients three pieces of advice:
1) Don’t move unless you have to,
2) Allow a tremendous amount of time for the process, and
3) Consider all your alternatives, because when you consider the cost to move, you might be better off staying in your current building.
The Cost of Moving: Business Continuity & Productivity
The main cost of moving is the disruption that your business experiences. Usually, two or three folks from your organization are going to have to tour the marketplace, physically look at the buildings, and vet each option. Then, you’ll have to negotiate a lease or a purchase. Once the deal is finally completed, you have all the pertinent issues of moving the operation, and depending on the complexity of the operation, that can be all-consuming.
Lost productivity takes many different forms. It can be your employees talking about, “Can you believe we’re thinking about moving there? Holy cow, that’s going to add 20 minutes to my commute time. How am I going to make it to my kid’s softball game?” And of course, someone in your company has to internally manage the process. Who’s going to lay out the new shop? Who’s going to deal with all the compliance and permitting issues? Who’s going to negotiate the real estate transaction?
Quantifying the Cost to Move
Now let’s talk about actual expenses: Whatever you believe your cost to move will be, go ahead and double it. Say you have a mid-sized manufacturing company in a 25,000 to 30,000 square-foot building. You could be looking at $100,000 to $150,000 to move your operation from point A to point B.
A small piece of that move is the actual office space — typically, that’s 10 to 15% of the building, and all the files that go along with the office component. But when there’s a manufacturing component, you’ve got machinery, you’ve got racking, and you’ve got equipment. You potentially have hazardous storage areas and containment areas. You have a sprinkler calculation for a new building that’s going to have to be retrofit to accommodate your use. And let’s not forget power — taking the power to the building and distributing it to the machines that use the power is a huge cost.
Any time you’re dealing with a municipality, there are a myriad of issues that can add up when you relocate your business. There are going to be compliance issues. You might have to get your equipment rated through UL. You may have to do a seismic study on your racking. You might have to bring your new building up to date to address an Americans With Disabilities Act issue, or a Title 24 issue.
When is the Cost of Moving Worthwhile?
Because of all this, I advise my clients to postpone a move unless it’s absolutely necessary. But there are a few circumstances when moving actually makes sense:
– Flight to quality. That’s when a company has an opportunity to move into a new building from a location that might be old and decrepit.
– Opportunity to own. Going from a leased building into an owned piece of commercial real estate could make financial sense, as we’ve discussed before.
– Acquisition. If a company acquires a competitor, it makes more sense to combine them rather than keep the operations separate.
– Inefficiency. When a company starts to grow, they might look around and grab the quickest amount of space they can in order to accommodate the growth. All of a sudden, they might have two or three different buildings with two or three different office arrangements and management issues. Consolidating under one roof can make the operation a lot more efficient.