Key Factors in Deciding to Expand Your Business
HGrowing companies often find themselves in need of more space. When they outgrow their current building, they must choose how to grow. In making a decision to relocate its company operations, business owners and executives logically and rightly perform a detailed cost analysis: relocation expenses, changes in lease or land costs, improvement costs, the costs of disruption and possible downtime. All of these costs are easily quantifiable and can be documented in a spreadsheet and their effect on the bottom line calculated.
But in our experience, there are a number of other factors, often less easily quantified that should also factor in to the relocation decision. In the Santa Clarita Valley, over 70% of the companies have relocated here from neighboring communities, and they have done so not only because the pure numbers make sense, but also because these other factors aligned in favor of the move.
1. Building size and capacity
The need for more square footage is the most obvious criteria for selecting a new space. But companies should also consider the capacity of building for other aspects of their operations. Increased operational activity may require additional power that the building might not be equipped with. Newer buildings are state-of-the-art and tend to have higher ceilings, which enable more efficient stacking of storage pallets for supplies, materials, and product. Parking for employees must be sufficient for expanded operations, and there should be easy access and mobility for truck deliveries and shipments.
2. Operational efficiency
Sometimes companies will choose to supplement an existing location with a nearby space, often for office personnel in sales or administration. With each additional location, however, operational efficiency becomes compromised. Time is wasted traveling between locations, and communications between departments can be compromised. Duplicative systems and redundant supplies add cost. One company that consolidated operations into the Santa Clarita Valley saw an immediate 30% improvement in efficiency by bringing all company activities under one roof.
3. Logistics & transportation
In real estate, they say it’s about location, location, location. For a business, the same may apply. There’s a business cost to location, one that adds up when the company does not have easy access to the transportation system, or whose access is to our most congested freeways. That lack of access adds up in logistics costs, adding time to the delivery of supplies and materials, and hassle to the delivery of finished product. Easy access to freeways that help you move your product to your customer swiftly and efficiently can improve customer satisfaction and decrease logistics costs.
4. Workforce
Locating in an area with a workforce that meets your company’s needs is important. Turnover increases when employees have long commutes, and relocating new hires can be expensive. Companies should evaluate where their current workforce resides into their relocation decisions. If a significant portion of your workforce lives in a certain city, relocating there can improve employee satisfaction. If an employee’s commute is reduced, it is as if the company just gave that employee a raise. In fact, studies show that in the Los Angeles Metro Area, employees will work for less pay to work in a location with a shorter commute.
Obviously any decision to expand or relocate must make financial sense. But to truly evaluate the financial impact the decision, more than lease and land costs must be considered. The Santa Clarita Valley anticipates over 2M Square Feet of state-of-the-art buildings to begin construction in 2014.