Is a Move Worth the Relocation Expenses?
A thriving and rapidly expanding business is a good problem for a business owner to have, but with a growing team comes a need for more space. Moving locations is a big change, and it can have a significant impact on a business’s success—extending far beyond the upfront relocation expenses.
As your company grows, give yourself enough time to evaluate whether you’ll be financially better off if you move or stay put. To help make your decision easier, here are a few key returns and expenses of moving your business.
Financial Gains from Moving Your Business
Few businesses remain in the same building forever, so you’re not alone in your relocation consideration. Once you make it through the move, your new location may offer several advantages that your old space didn’t.
- Good Capacity for Revenue Generation: More space eliminates the physical barriers of hiring more employees by providing more room for workforce expansion—and a bigger workforce will often lead to more revenue. As long as you’ve found a good-sized location that isn’t costing more than your new growth is bringing in, this can be one of the most profitable parts of a relocation.
- High Location-Based Yield: When you move, you have the opportunity to choose a location more central to town or in a better neighborhood. You may choose to move further away from a competitor, or closer to businesses from which you can benefit. Even if this means spending a little more in rent, being closer and more easily accessible to vendors, suppliers, and customers can reduce operating costs and boost sales.
- Better Area Costs: You may also choose to move to a city that is more business-friendly, offering cheaper office space or lower wage standards. California cities like San Francisco and San Jose are some of the more expensive cities for businesses, while developing cities like Wichita, Kansas, and Knoxville, Tennessee, are some of the most affordable.
- Improved Government Incentives: Lower taxes aren’t the only thing you stand to gain from a relocation to a new city; many growing metropolitan areas also offer substantial incentives to encourage businesses to relocate. Boca Raton, Florida, for instance, provides incentives to small businesses that relocate to the city in partnership with county and state business organizations, while Salt Lake City, Utah, offers funding support and property tax incentives.
Financial Losses from Moving Your Business
Relocating is no easy task, and the expenses, time, and effort can take its toll on a company throughout the moving process. Avoiding a move could mean avoiding these potential expenses.
- High Moving Expenses: There’s no way to avoid high relocation expenses. On average, a 10,000-square-foot office with several employees and workstations could spend upward of $30,000 in relocation expenses. Many businesses also forget to account for the small or hidden costs of moving, including rental applications, security deposits, and new office equipment, as well as updated business cards, checks, or stationery.
- Low Efficiency During Settling Period: Most relocation estimates don’t include the time and resources you’ll lose by focusing on the move instead of your business. Tasks like notifying vendors and customers, updating websites and online profiles, and filling out stacks of paperwork can eat up a lot of time. You may even have to shut down operations momentarily during the move, potentially losing thousands of dollars in revenue.
- Lost Business from Established Clientele: Whether you move down the street or to another city, changing your brick-and-mortar location could lead to customer confusion or loss of interest. Local customers may choose to shop at a closer store, especially if they have trouble finding or reaching your new office. This loss can hit particularly hard as you invest extra effort in building a new consumer base.
- High Costs to Hire and Train New Area Employees: If you move far enough, you may have to pay some employees relocation expenses or take the time to hire and train replacement staff at your new location. While the cost to replace an employee varies based on their earning level, it can cost around $9,444 to replace an $8-per-hour employee and more than $125,000 for a replacement at a technology company.
Making the Big Decision
Choosing to stay or move isn’t a clear-cut or easy choice for small-business owners. As you weigh the pros and cons, taking the time to review our Business Relocation Checklist will help you gain a greater understanding of the main issues you’ll need to consider before committing to a move.
Outgrowing your office space may seem like a hassle, but there’s a lot of good that can come from a properly handled relocation. It’s an encouraging sign that your business is thriving, and it can be a great opportunity for a better bottom line.