Businesses spend an enormous amount of time and resources trying to figure out the absolute best location for a future business operation. Local communities and states also invest a lot of energy trying to attract those same companies.
What makes for a good business location? Granted, the answer to that question is infinitely more complicated than what I can fit into a short magazine column, but here, in no particular order – except for the first and the last – is my list of 10 basic indicators of a good business climate.
Geography. Is the prospective site location in the general geographic region you need to be in? After all, if you need to be on the West Coast, it really doesn’t matter how great Jacksonville or San Antonio are. This should always be your starting point.
Transportation infrastructure. What do you need in order to be able to ship raw material in and finished product out, and does the location have it? Do you need north-south and east-west interstate access? What about rail access? Water? Direct air to both coasts, or to Europe or Asia?
Work force quantity. Is there a work force in sufficient quantity for you to be able to find the employees you need?
Work force quality. Are they sufficiently well educated? What are the absenteeism and turnover rates?
Good business climate. Is the community a place where your company can be successful? Are other companies located there able to operate profitably in a national, or even global, marketplace? Can your company be profitable there?
Business-friendly environment. Is there a spirit of partnership between the local business community and the local and state government, or is the relationship tense and adversarial? Are local businesses treated with respect, or is their every move treated with suspicion?
Regulations and bureaucracy. Will you have to operate your business within a framework of stifling and confusing regulations that are outside the norm for other locations where your company has operations? Will this environment add to the cost and uncertainty of operating your business?
Labor environment. What is the labor-management relationship in the community? Is there a recent history of work stoppages? It’s not whether the local work force is unionized that is important, it’s the likelihood of slowdowns and stoppages that will rough up your balance sheet.
Reasonable living costs. Living costs are the single most important driver in determining the relative wage and salary structure for a community or region. Will your workers be able to afford to buy a home on the wages your company can afford to offer? If not, you can expect to encounter lower quality and higher turnover in your work force.
Incentives. You’ll notice that I left the subject of incentives for last, because that’s where they fit into the picture. Incentives, no matter how generous, will never turn a bad location into a good location. The objective in your incentives negotiations is to reduce your cost of getting the new facility up and operating. Therefore, an incentive should reduce or eliminate an actual expense that your company would have to make anyway in the new location.
If you can answer “yes,” or even “sort of,” to each of these questions, then you’ve found yourself a good potential location. If not, you’re probably better off continuing to look elsewhere.
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