Location decisions are vital. They affect everything from staff morale to operations and profitability. No pressure, but you better get it right!
Much like choosing where to move your family, making a location decision for your business is simultaneously exciting and dreadful. The possibilities for a new chapter—whether you are deciding to expand where you are, move your current operations, or start new operations—is exciting.
But the burden of work that goes into of making the right decision for this new chapter is dreadful: who will do all of the data gathering and exploration, who will review the options, who will make the final decision, how will the staff feel about the decision, and, ultimately, will the decision prove to be the right one?
The location decision-making framework presented in this post uses the process of homebuying to guide the narrative. And just like homebuying, the location search is as much art as it is science.
Businesses and Site Selection consultants should consider the six factors below when embarking on a location search. The LocatEDTM portal can be an invaluable resource to quickly access these six factors so that you can find the optimal location for your business.
1. Study your peers
Just as a realtor analyzes past sales of comparable homes to understand the lay of the land at the start of a home buying journey, you should understand how your location requirements compare to similar businesses.
Keep in mind
Two important dimensions to consider at the start are size (number of jobs and amount of capital investment) and geography. Like homebuying, it is helpful to know if what you are looking for is in plentiful supply or if you will require a niche property. You should also research where similarly situated businesses have located.
- Size: Is your project relatively small or will it garner national media attention and public scrutiny?
- Geography: Where have past projects located? You may want to be in a geography near your suppliers and some competition to benefit from denser talent pools and markets. On the flip side, you may not want to locate right next to your competitors so that you avoid competing for the same talent pool.
How LocatED helps
View three important data-informed perspectives for your search:
- What is the typical occupational mix for similar businesses?
- How do your location requirements compare to others in the industry by size?
- Where have other businesses like yours located geographically?
2. Find the best neighborhood
Every person and family will have a different definition of the “perfect” neighborhood. One household may want tree-lined streets with space and great schools while another one may want to be in the heart of downtown where everything is within walking distance. This part of the search clearly mixes art and science.
Keep in mind
You may have identified the top two or three factors that will shape your location search, but how do you weigh multiple, sometimes competing, factors? For example, in a survey of corporate executives, two of the top three site selection factors cited were the availability of skilled labor and labor costs, two often competing factors (because salaries rise alongside increased skills).
To capture multiple factors into one single score, site selection consultants typically use some form of a weighted average to integrate a wide array of factors into one quantitative score that can be used to compare (and filter out) locations (For international examples, see Mercer or CBRE presentations; for domestic examples, see Atlas Insight or Cushman & Wakefield presentations).
The key at this stage is not to develop the perfect list with the perfect weights. Instead, the key is to identify a set of priorities and then calculate “scores” to whittle down your list. Priorities might include how willing you are to pay for skilled labor, whether you need to be near specific types of infrastructure, or how sensitive your margins are to taxes.
Don’t like the final set of locations? Adjust the variables and weights until you arrive at list that feels comfortable. This is art and science, not one or the other.
How LocatEDTM helps
Quickly compare the most promising locations based on your priorities. Search using industry-typical category weights or adjust based on your business’s unique needs and interests.
LocatED’s Location CompetitivenessTM module identifies the top locations at the state, metro, or county level. It can pull in dozens of key factors (e.g., number of workers by industry or occupation, labor costs and productivity, quality of the infrastructure, regulatory environment) into one dynamic index.
3. Determine your budget
Like homebuying, once you have identified the neighborhood, you need to understand whether the economics work for your business. In this case, you look at not only the price but the property taxes, the costs of public services, and your financing options before and after any incentives (i.e., job creation grants or property tax abatements).
Keep in mind
Once you have narrowed down your top locations, you should determine how profitable your company will be, both before and after incentives. This should be more than a profit number—you should consider which incentives are available to anyone that qualifies (i.e., statutory incentives) or are subject to an agency or someone’s (i.e., governor’s) discretion.
How LocatEDTM helps
Predict your business’s likely incentives package for each of the lower 48 states as well as which incentives you qualify for, the ease of securing those incentives (e.g., by-right vs. somewhat discretionary vs. wholly discretionary), and how it will impact your bottom line over a 10-year period.
LocatED’s AI Incentives PredictorTM provides topline estimates of your likely incentive package based on 35,000 past projects, while the Incentives Profitability ModelTM estimates eligibility and profitability impact of over 275 economic development incentives across the Lower 48 states.
4. Examine real estate opportunities in your top locations
Anyone who has searched for the perfect home or apartment quickly realizes that you either find a perfect neighborhood that lacks the perfect property or your find the perfect property in a less-than-ideal neighborhood.
Keep in mind
Once you find the ideal location, you still need the ideal real estate, whether it is land, an industrial building or warehouse, or office space. While prospective home buyers have access to sites like Zillow, information about available industrial or commercial properties is scattered across numerous websites and standardizing the data to make comparisons is time- and data-intensive. Thus, an already complex and high-anxiety process is further complicated by the need to compile and analyze real estate details across portals.
How LocatEDTM helps
Identify high-potential real estate listings within your target geographies, saving much needed time and money.
LocatED’s Real-Time Real Estate PortalTM integrates each state’s industrial sites and buildings portfolio with commercial office space listings. This provides a more robust view of each state’s real estate portfolio than even states’ own economic developers have.
5. Decide how to prioritize talent, and take a hard look at the data
For households with kids, no apartment or home search is complete without considering whether the neighborhood has good schools. Some households make this the top priority while others include quality schools alongside other priorities. And with your location search, you must consider the talent pool in your target geographies.
Keep in mind
Many businesses prioritize talent above all other factors, meaning they will only look at locations that offer the highest quality talent pool, no matter the costs. Others may look for a balanced location offering a mix of quality yet affordable talent.
There is no right answer but there are certainly some wrong ones (i.e., you may quickly realize you cannot afford to compete for talent in certain markets or you cannot find the quality that you may need).
How LocatEDTM helps
Examine multiple factors related to talent, instead of relying on simple proxies like college attainment rates or occupational counts. This includes:
- How many workers a location has for a given occupation versus how many active job postings are listed for those same types of occupations.
- Educational attainment levels in each metro, (“development”) including the mix of STEM and soft skills present in each area (“deployment”).
- An area’s talent pipeline, searchable by state, school, and degree field.
- All this and more are powered by LocatED’s Real-time Labor Supply-Demand PortalTM, Talent Development vs. Deployment ModelTM and Higher Education PortalTM.
6. Make sure the location feels right
After you have finished your online search for a home or apartment, you still need to visit the neighborhood and see the actual real estate. Even if the neighborhood looks attractive online and the real estate looks perfect, you want to kick the tires. You will talk to neighbors and walk around to get a “feel” for the neighborhood and only then might you be ready to make a decision.
Keep in mind
The lessons on the factors of production – land, labor, capital, and entrepreneurship – from your introductory economics course still hold. As a business owner, you need to find out if other businesses have access to critical capital, if firms in the area tend to thrive, or if entrepreneurs struggle to convert good ideas into successful firms.
Furthermore, look for a stable tax and policy environment that partners with business stewarded by a government that balances stability with sound public investments and public expenditures to maintain a comfortable quality of life for its residents.
How LocatEDTM helps
Get a clear picture of each location’s capital (availability and accessibility), entrepreneurship, policy, and quality-of-life strengths and weaknesses relative to other communities at state, metro, and local levels.
At EDai, we add business climate and quality-of-life factors to this squishy location “feel” conversation.
The LocatEDTM portal leverages over 25 different factors to paint a picture of how good a fit a community may be for your business.
Your location shortlist is a few clicks away
The location search is very similar to buying a home. At its core, the process seeks to identify a location that balances profitability with an attractive and comfortable location for a business’s operations and, most importantly, its people. With so much at stake, this complex process that combines qualitative (like cultural fit) and quantitative (like talent cost) factors needs to follow a clear and efficient strategy.
EDai’s proprietary LocatEDTM portal was purpose-built to help decision makers across categories—businesses, site selection consultants, and economic developers—follow the “ideal decision making” steps quickly, efficiently, and comprehensively. We’re here to help you navigate this multi-layered and often overwhelming process with data-driven insights and industry experience that will help you feel great about your location search. If you are interested in learning more, please reach out for a demo.
