On the Move:
Relocating a business doesn't have to mean a lot of heavy lifting; Here's how to lighten the load

By Christine Larson
23 April 2001

Like many small-business owners, Chris King had fantasized for years about doing business in paradise -- pulling up stakes and relocating his bicycle-parts factory to a place with open roads, rugged bike trails and a ready supply of labor. After 26 years in Santa Barbara , Calif. , he was feeling increasingly cramped by worker shortages and skyrocketing real-estate costs.

So, in February last year, Mr. King uprooted Chris King Precision Components and moved the entire operation 500 miles north to Shasta Lake , Calif. , bringing along 30 of his 60 employees. Now, for about the same monthly cost he once paid for a plain-Jane metal industrial space in upscale Santa Barbara , he owns and occupies two new state-of-the-art buildings, with mountain views and a cafe with a full-time chef.

Mr. King has reaped all the classic benefits of relocation -- more-plentiful labor, a better real-estate deal, local tax incentives. Yet he is the first to agree that a move can be stressful, even harrowing. In his case, construction of the new buildings fell behind, employee morale sagged and production fell 30% in the months before the move. "Nobody's going to walk through the process unscathed," Mr. King says.

Still, small businesses across the country are on the move. One study of U.S. businesses operating in 1997 found that by the year 2000, nearly 15,000 companies employing fewer than 100 people apiece had relocated to a different state, according to Brandow Co., a research firm in Camp Hill , Pa. In-state moves such as Mr. King's were even more common. Nearly 23,000 small businesses moved into the country's largest 60 metropolitan regions from elsewhere within the same state.

For companies hoping to move, here is some hard-won wisdom from firms that have managed to relocate successfully.

For Mr. King, the main reason for the move was the scarcity of labor in Santa Barbara , where rising costs have displaced the blue-collar workers he needs. It's a problem he shares with many entrepreneurs. "The No. 1 reason today that small companies move is the inability to recruit a high-quality work force," says Dennis J. Donovan of Wadley-Donovan Group, a business-relocation consultant in Morristown , N.J.

For Mr. King, local incentives were another important attraction. "Some areas will basically pay you to move, and I wanted to take advantage of that," Mr. King says. Limiting his search to so-called enterprise zones in Utah , Nevada , Oregon and California , he finally settled on Shasta County , where he qualified for a state tax credit of 7.5% on equipment purchases, plus a local discount on land that saved him $1,000 per new hire.

Small companies often neglect to add such relocation incentives to their list of criteria when considering a move, says relocation consultant Jan Dickinson, president of Dickinson Consulting Group in Portland , Ore.

"Most companies look at infrastructure costs and the quality of life. But there are so many other things they don't necessarily think of," he says. In addition to general demographics, real-estate values, taxes and lifestyle, she says companies need to consider long-term forecasts for labor and infrastructure, convenience and reliability of transportation and shipping, local attitudes toward acceptable commuting time and the cost and complexity of local building codes.

A surprising amount of detailed relocation information is available on the Web. Commercial real-estate agents and local utility companies also can be good sources for preliminary screening.

Of course, state and local chambers of commerce or economic-development agencies also can provide detailed information. But Mr. Donovan, the relocation consultant, says it's best to approach these groups after you have already identified your top choices. He says that such groups are most helpful in the final stages of your search, when you need a detailed understanding of any available incentives. At that point, these groups can provide valuable advice.

Economic-development agencies vary widely in the services they offer. Some may go so far as to fly you out for a visit or arrange for a relocation consultant to help plan your move. Still, many small businesses advise taking assistance and information from these groups with a grain of salt, because they have a vested interest in selling you on their region.

However blissful a new area might seem, it's ultimately your tolerance for worker attrition that will determine where -- and whether -- you move, says Mr. Donovan.

"You have to be certain before you pick a location that a good portion of your critical employees will come with you," he says. Ideally, he says, you should retain 75% of your "critical" and half of your "key" workers. Once you've identified your short list, Mr. Donovan recommends surveying these people to see who is willing to move where.

Without testing the waters, you may end up in the same boat as Richard and Susan Jennings of Michi Inc., who moved their lighting-manufacturing company to Bend , Ore. , from Belmont , Calif. , in 1998. The couple assumed that most of their 16 employees would be eager to leave the urban crunch of the Bay Area, but held off on announcing the relocation until they had broken ground on the new factory. A few months before the move, they invited about a dozen employees to relocate. Not one did.

"We were freaked," Mr. Jennings admits. But it was too late to pull out of the move, so Mr. Jennings induced one employee to move up to Oregon for a year to train new staff. He also lined up manufacturers to which the company could subcontract work if necessary. For help in recruiting a new staff, he called on the Oregon Economic and Community Development Department, which initially had sold him on Bend by helping him land a low-interest loan for his new site. The department screened candidates and arranged more than two dozen interviews before the move.

Ultimately, Michi Inc. found and trained a new staff without missing deadlines. And in some ways, starting fresh took a load off Mr. Jennings's mind. "Sometimes it's better if you don't bring people," he says. "If you do, you're responsible for their happiness."

Watching out for employees during a relocation is far more complex and costly than simply paying for a moving van. Even bare-bones relocation policies typically cover moving costs -- either through a stipend, reimbursement or direct payment to moving companies -- as well as familiarization trips and, in many cases, assistance in selling or buying homes. According to the
Employee Relocation Council in Washington , D.C. , employee-relocation costs can start as low as $2,000 for a renter and $6,700 for a homeowner but often run much higher, well into five figures, depending on the distance of the move and the generosity of the policy.

In the case of Chris King's bike factory, the company paid for all interested employees to visit Shasta County . Employees who decided to move received a second trip, with two paid days off and an additional two days to move. Managers received $2,000 for moving expenses, while lower-level employees got $1,000. The company also offered a $1,000 interest-free loan for 90 days and gave managers a $5,000 relocation bonus.

For employees who aren't moving, companies need a second, written policy, which may include severance pay, extended benefits or outplacement services. In addition, companies frequently offer extra incentives to keep operations running smoothly during the move. Mr. King, for example, added a "stay 'til the end" bonus to keep employees from trickling away before moving day.

"At first the policy worked really well. Then it fell apart at the end," says engineering manager Matt O'Rourke. Although management carefully laid out the relocation plan in writing, it didn't write out the terms of the retention bonus. "It seemed so simple. You stay until the end. You get a bonus," Mr. O'Rourke says. Nevertheless, some employees who quit before the last day expected the bonus, as did some employees who relocated. The misunderstand-On the Moveing undermined morale in the months before the move.

To sidestep similar misunderstandings, some companies require employees to sign commitment letters, indicating that they will relocate -- or won't -- and setting forth the terms.

Moving your equipment can easily cost six figures. But the costs of hauling equipment pale in comparison to the potential expense of business disruptions.

When Brian and Linda Spencer of Spencer Composites Corp. moved their six-year-old business to Sacramento from Lincoln , Neb. , last August, problems with permits and construction delays nearly brought the business to a standstill. The company, which designs and manufactures resin parts used in items from rocket motors to dental implants, spent $150,000 moving its machines across the country.

But when the 250,000 pounds of equipment arrived, the new facilities weren't ready yet. The equipment sat nearly idle in the empty building for three months while Brian Spencer spent weeks with government officials, sorting out permit-related delays.

"We could easily have gone out of business," says Linda Spencer. "I'd recommend having at least three months of sales in the bank, in case something goes wrong."

Moving coordinator Jan Dickinson suggests maintaining dual office locations for at least a week or two, providing customers with cell-phone contacts during the move and planning for some overlap between old and new employees.

Relocation consultants also can help avoid disruptions. Although most small companies can't afford the typical five- or six-figure price tag for an entire move, some consultants will work on an hourly basis, drawing up a relocation plan for you to carry out yourself. Hourly fees can run up to $200 an hour, and a project plan might cost $3,000 to $5,000 or more.

Relocation consultants can be found through local chambers of commerce, economic-development corporations, moving companies and some Web sites.

Although almost every major relocation will leave its scars, in the end, the greatest harm can come from failing to move at all -- or not moving far enough.

"A common mistake is going down the road or 10 miles away, then finding yourself in a year or two engulfed by growth" and facing renewed problems such as labor shortages, says Mr. Donovan. "Then, you need to do it all over again."

---Ms. Larson is a writer in Sacramento , Calif. She can be reached at Breakaway@wsj.com.

(Copyright (c) 2001, Dow Jones & Company, Inc.)