Factors to consider when relocating company offices
By Indeed Editorial Team
Published 22 November 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Company relocation involves physically moving employees, major operations and headquarters to another location. Companies move for various reasons, considering several factors because the relocation affects their opportunities, profits and stakeholders. Learning about the factors to consider when relocating a company can allow you to help business leaders to relocate their operations and employees with cost and time efficiency. In this article, we discuss the factors to consider when relocating company operations, explain why companies move and provide tips to help company managers move operations efficiently.
Factors to consider when relocating company operations
The following are some factors that businesses consider when relocating company operations:
Overhead costs are the costs involved in running a company's day-to-day operations and producing a product or service. Some organisations classify these costs into fixed monthly and annual expenses, such as insurance or variable expenses, such as advertising. Companies may also split overheads into manufacturing, selling and administrative overhead costs. Moving a company's operations affects the costs of running a business, so it's important to research these overhead costs and compare the total to the expected benefits of relocation. Examples of overhead costs include the following:
accounting and legal expenses
salaries and wages
government fees and licences
Hidden costs are unforeseen expenses that arise from business operations, such as relocating. For example, some employees cannot relocate with a company, which brings up the hidden costs of hiring and training new staff. Other hidden costs a company may experience when moving its operations include the following:
equipment maintenance or upgrades
utilities, such as internet permits and licences
a security deposit on the current lease
the higher cost of supplies in the new location
Companies also consider the impact that relocation operations have on employees and stakeholders. For example, employees prefer to work for companies closer to their homes. They also analyse various factors about the new location, such as parking availability. It's important to notify employees about the move as soon as possible to manage any anxiety or concerns. Consider announcing the location to employees in person and formalising it in a letter. Be honest with the employees about the impact of the company relocation. For example, notify them if a company expects them to relocate or if they expect layoffs.
A company usually gets new tax obligations when it moves to a new city, county or country. Taxes have a significant impact on a company's profit margin. If a company moves to a location with lower taxes, the profit margin increases and vice versa. Business leaders collaborate with certified professional accountants (CPAs) to determine the tax implication of relocating company operations. CPAs help companies to identify hidden tax costs and take advantage of tax loopholes to develop a strategy where a company legally pays less tax.
Companies also consider how the move affects other stakeholders, such as clients and suppliers. For example, the lead time for the delivery of goods and services may increase if a company moves further from the supplier. Many businesses engage with their customers using technology channels, such as websites and social media. Companies usually prefer to move closer to their customers or a location with a larger customer base.
Moving closer to customers grows the customer base and improves a company's impact on the community. Companies also consider the financial implications that relate to a consumer before deciding to relocate. For example, assess if moving closer to the consumer increases or decreases the overhead costs or if the move affects shipping expenses and ultimate costs to the customers.
The company management considers the growth potential of its customer base in the new location before relocating. They analyse the business's long-term goals and determine if the new location can facilitate that growth. For example, a company may analyse the new location's labour and skill set availability to determine if it can get the workforce to grow its operations.
Managers also analyse location issues to determine the growth potential of a company. For example, if a business ships many products to its customers and plans to increase the order volume, it may research the proficiency of local shipping companies to determine the growth potential. Relocating close to a company's supply base also improves its growth potential.
Businesses have a corporate social responsibility, and they try to minimise the impact of locating on the community. Some organisations within a community are interdependent, and if one moves, it affects the entire community. For example, if a company is the largest employer in the town, moving to a faraway town or another country substantially decreases the number of jobs. It can also decrease the town population, as people move with the company or leave to look for employment.
Relocating also affects other small businesses in the community because when people have no jobs or move, the sales of these businesses also decline. Some companies leave a branch to operate in the community and relocate their head offices. Others sell their market share before relocating to minimise the impact on the community.
Companies also consider logistics in their relocation plan. A logistics plan involves physically moving company equipment, tools and assets, such as IT equipment. Some managers maintain a logistics checklist that includes the budget and goals. Consider hiring a logistics company to provide a systematic approach when relocating company assets.
Reasons why companies relocate
The following are various reasons why companies move:
Calculate and compare the costs for permit and licence fees and taxes for the current location and compare them to other locations to determine where a company can pay lower taxes. Some companies relocate to pay less. For example, some companies move to locations with lower sales and personal income taxes.
Companies move to access better opportunities, such as lower business costs. They also want to relocate to exploit a larger market share or customer concentration. Little or no competition is another opportunity that makes companies move.
Access to economic development help
Some towns, cities, counties and countries offer business sales incentives to move to their areas to attract more businesses, create more jobs and generate more taxes. Some examples of incentives from economic development programmes include tax credits for job opportunities, lower utility rates, information on potential business locations or free training programmes. Consider contacting the economic development officers of the area a company is moving to understand the incentives they offer to businesses.
Better quality of life
Companies also relocate to improve the quality of life for their employees. A better quality of life increases employees' happiness and motivation, improving their productivity. Businesses also choose these locations to recruit quality employees. Some factors determining a good quality of life include health care services, lower cost of living, cultural environment, the education system, entertainment options, lower crime rates and the physical environment.
Upgrading business facilities
Companies also relocate to upgrade business facilities. Startups may move to occupy larger facilities and better equipment. Some companies relocate because building a facility requires significant time and capital.
Tips to help company managers when relocating company operations
The following are some tips to help company executives and managers when moving a business:
Create a moving checklist. A checklist improves the success and efficiency of planning an office relocation. It acts as a guide throughout the entire moving process.
Allocate a budget for the relocation costs. Research all the costs that apply to moving, including overhead and hidden costs. Create a budget to manage the company's expenditure on these costs.
Plan infrastructure relocation. Plan to transport infrastructure, such as IT equipment, to the new office premises. Consider getting moving companies to help because they have the equipment and experience to manage infrastructure relocation.
Plan for the new office space. Get a new office space before relocating and consider getting the help of interior designers to create a functional workplace for the business.
Leave the current office space in good condition. Ensure you leave the old premises in good condition to maintain a good relationship with the landlord or improve the chances of a company leasing it to another tenant.
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