Different places in the world favor certain kinds of businesses so, depending on your industry, you might need to relocate your startup to improve your chance for success.
Bas Smit published a research that showed why startups often moved to another country. The study showed that investment opportunities were the most common reason for relocation. The following list shows the top-five reasons cited by startups for moving to another international location:
1. Investment Opportunities – 61.3%
2. Early Customers – 54.8%
3. A Larger Market – 51.6%
4. Access to a startup accelerator – 41.9%
5. General ‘Culture’ of the startup ecosystem – 16.1%
This article examines seven major factors that you should consider when deciding whether to relocate your startup or not. Get familiar with them all so that you can make the decision that is best for you and your firm.
1. Suitable work force
Startups need to open where they can recruit and hire the talent needed to operate. Although unskilled labor might be readily available in many locations, not every place has a sufficient pool of marketing and sales professionals, engineers and executives for you to choose from. As a result, your startup could suffocate, being unable to perform the functions that are vital to its existence.
If your startup sells technical products and services, for example, you might need to move it to a place where a large number of workers with the skills you need live. The option could be more cost effective than paying to move your new hires across long distances so they can work for you. Similarly, relocating can be less expensive than training and educating a group of unskilled workers to the level of competency that you require.
2. Cost of labor
At the present location, you might have access to a fantastic pool of employment candidates, but the prevailing wages are simply more than what your new company can afford. In such a case, you can look in other areas of the country and/or international markets where the cost of the labor that you need is affordable.
By paying attention to the universities and startup accelerators available in your area, you can assess the likelihood of having a qualified workforce available to meet your current and future needs. Silicon Valley, for example, is close to well-known accelerators such as Y-Combinator and world-class universities such as Stanford that can dependably produce the type of workers needed for the tech industry.
3. Outdated office
Regardless of whether you started your business in your garage or a small office, you might need to relocate to a larger or more modern facility for your business to grow.
Although trying to relocate to a nearby facility makes sense, a suitable building or office space might not be available. To overcome the challenge, you need to consider relocating to a country, region or city that has the facilities you need at a reasonable price.
4. Lower overhead expenses
Competing in global markets becomes increasingly difficult when you discover that companies that are similar to yours enjoy lower operating costs, and a beneficial regulatory and tax environment.
When you operate with high overhead, your profits quickly disappear and you find yourself without enough money to reinvest in your firm.
The cost of doing business in some places is inordinately high because of factors such as high utility rates, taxes or extreme government regulation. If such conditions apply to you, you might need to relocate so you can take advantage of the cheap energy, low taxes and limited government that other regions or countries have to offer.
As you consider relocating your startup, find out if you can qualify for any tax breaks from any locality, state or nation that could be your host. Of course, you should remember that such incentives usually depend on how many jobs your company will create.
5. Customer base
Consider who your clients are and how your location affects your relationship with them. If you and your team spend a lot of time traveling to meet with your customers, you might have uncovered a good reason to relocate your startup.
Of course, you might also have a situation where your current market is saturated with your products and services. In such a case you need to look for new markets to serve where a healthy demand exists that can support the type of profit margin you need to earn.
6. Investors and mentors
Startups often have intense capital needs that can affect their relocation decision. If investors and their capital are not accessible in your area, you might need to move to a place that hosts more active investors. If you need to frequently host prospective investors at your facility, for example, operating in a location that would reduce travel time and increase access would be beneficial to you.
Mentors are another resource that no startup should do without. If you are currently operating in a place where you cannot find any executives or other industry veterans to supply you with guidance as you establish your firm, you and your business could benefit from relocating.
Having access to people who have experience with your strategic vision, raising capital, developing products and building a team can transform your company. Just as Silicon Valley has a huge pool of mentors and investors for the tech world, you can find a place that has similar resources that are specific to your industry.
7. General business culture and quality of life
Some geographic areas are home to particular industries. Just as the automobile industry grew around the Detroit area, fashion businesses have sprung up in Manhattan. Similarly, Boston is known for hosting biotech and big data companies. Evaluate your business to see if you can benefit from operating in an area that is known as a hub for your particular industry.
Often such centers have a culture and quality of life that is conducive to your type of operation. Despite the high cost of living and operating in such an area, the social connections, healthcare options, and favorable climate might be worth the additional cost.
Always consider all the factors
When deciding whether you should relocate your startup, consider all the factors that are involved. Making a decision based on tax incentives alone, for example, could subject your firm to circumstances that outweigh that benefit. Also, bear in mind that relocating one’s business can be both stressful and costly. Lets consider the case of moving to Silicon Valley as an example.
Despite having access to a fantastic pool of talent, plenty of mentors and investors galore, some tech companies that started there for those reasons discovered that the cost-of-living and competitive labor market made such a choice untenable. As a result, some tech firms have had to relocate to cities or states that offer a better combination of all the above factors.
You should also consider ways that technology can help improve your current operation. Perhaps your firm can use technologies, such as teleconferencing, to bridge geographical distances between your customers. Similarly, you can consider hiring remote workers to expand your available labor pool.
As the owner of a startup, you know that you face risks every day. Every choice you make can either contribute to or detract from your success so make sure to avoid rushing your decision to relocate your business.