5 Ways Relocating a Small Business Can Cut Costs

According to a recent National Federation of Independent Business (NFIB) survey of small business owners, American entrepreneurs have started feeling more optimistic about the economy. Some entrepreneurs are even making expansion plans that could include moving their operations.

Business owners cite lower taxes and access to specialized talent as reasons for relocating companies from one town to another. However, the Small Business Administration (SBA) offers five factors that could turn a change of zip code into a way to save money.

5 Potential Reasons to Move and Save

1. Government incentives

Cities and states use tax credits and fee waivers to attract growing businesses capable of creating new jobs. For example, Pennsylvania’s Keystone Opportunity Zones have helped revitalize underutilized neighborhoods. Restaurants and retail stores popped up to support workers at subsidized offices.

2. Access to technology

As one of the cities selected for Google’s experimental, high-speed broadband Internet program, Kansas City, Kansas has weathered an influx of entrepreneurs eager to expand their businesses over a fiber optic backbone. Your company might consider a move to a city with better access to 3D printers, complex processing equipment, or other tools that can help you innovate in your market.

3. Proximity to distribution hubs

Ecommerce and direct marketing companies gravitate to cities like Memphis, Louisville, Indianapolis, Fort Worth, and Oakland because they house major shipping hubs for FedEx and UPS. Businesses in those cities enjoy expedited distribution at discounted rates, often shaving days from standard delivery times.

4. Access to customers

Recent episodes of the television series Mad Men depicted a New York advertising agency setting up satellite offices in Detroit and Los Angeles to build stronger connections with key clients. Business today isn’t much different from that of a fictionalized 1960s. Despite the convenience of the Internet, you could reduce travel expenses and increase your billings by getting closer to a large client, looking for opportunities to serve their neighbors along the way.

5. Mentorship, incubation, and funding

Startup accelerators can lure small businesses and entrepreneurs to unusual places, like West Plains, Missouri. A small town business incubator may not garner headlines, but it can put a growing company in direct contact with regional bankers, investors, and suppliers with more attention to lavish on a “hometown” business.

Due Diligence

While investigating a potential move, the SBA suggests checking for potential hidden costs. For instance, a warehouse in an enterprise zone may save on rent, but could require a larger budget for overnight security.

Likewise, moving to another state could slash your cost of living, only to replace your expenses with increased travel costs for visiting family. Check with your attorney, and with business development officials in your prospective new locations to learn about the benefits and the potential pitfalls of relocating your business.

Joe Taylor Jr. has covered personal finance and business for more than two decades. His work has been featured on NPR, CNBC, Financial Times Television, Fox Business, and ABC News. He recently completed a personal finance book entitled “The Rogue Guide to Credit Cards” (Rogue Guide Books, 2012).