What Factors Are Important When Evaluating the Business Climate of an Area?

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By Larry Gigerich, Managing Director of Ginovus

Companies must evaluate several important factors when considering possible locations for new or expanded facilities.

It must be economically feasible to locate an operation in an area, or the area should not be considered for the project. As businesses continue to rationalize the size and location of their operations, all factors affecting profitability must be reviewed.

The critical factors impacting site selection decisions vary slightly in importance from project-to-project, but they are considered by all companies deciding where to expand or locate facilities. Please find below a summary of the key issues which should be evaluated by a company prior to making a site selection decision.

1. Location: A company must start the site selection process by identifying the potential geographic areas that could work for the project. There is no point in considering a location for the project, if you cannot serve clients from the prospective area.

2. Workforce: A business must be confident that there is an ample supply of prospective team members, with the necessary education and skill sets. As important, a company must be comfortable in its ability to attract, retain and afford the people required for its operations.

3. Real Estate: A company must evaluate potential real estate options in the locations under consideration for the project to ensure its requirements can be met. In most cases, several adequate real estate options exist for a project, but this should be verified.

4. Tax Structure: A business must have a complete picture of the local, regional and state tax environment to make certain it can operate profitably. Several areas of the country have made changes to their tax structures, and it is important to understand how these changes negatively or positively impact a company’s project.

5. Infrastructure: A company must be confident that there is adequate infrastructure in place to meet the project’s current and future requirements. Transportation, telecommunications and electric infrastructure, just to name a few, are critical infrastructure factors to evaluate during the site selection process.

6. Incentives: A business must have a thorough understanding of what forms of local, regional and/or state economic development incentives are available to help the company lower its project costs. Incentives should never drive site selection decisions, but they are important to ensure the economic feasibility of the project.

7. Regulatory Environment: A company must understand how local, regional and state governmental regulations will impact its business and project. Critical issues such as building plan approvals, environmental permits, utility connection approvals and waste disposal permits, can have a significant financial and timing impact on a company’s project.

8. Cost of Living: A business must evaluate the cost of living in a potential geographic area. It is important for a company to understand the cost of living for an area to make certain it appreciates the impact on its team members who would be working in the selected community.

9. Unionization Rates: A company must review unionization rates prior to making a site selection decision for a new or expanded facility. Clearly, unionization rates and right-to-work laws impact some industries more than others, but it should be considered by all businesses.

10. Quality of Life: A business should consider the quality of life in a region and state as a part of its decision making process. This business climate factor has become more important during the past decade as companies look to attract and retain knowledge workers.

Additional factors may impact a company’s final decision regarding the location of a new or expanded operation; however, the aforementioned issues should always be on the list. These factors can be used quite effectively to eliminate potential locations from consideration. Once a business narrows its options to a few potential locations, the relationships built between the company’s team members, economic development organizations and governmental entities become critical in selecting a location and successfully completing the project.

Larry Gigerich serves as Managing Director of Ginovus, an Indianapolis-based economic development advisory services firm. Ginovus is a leading provider of national site selection, public policy development, community comparative analysis and economic development incentive procurement & management services to private sector, educational, governmental and not-for-profit organizations throughout Canada, Mexico and the United States.

Article Appearing on Inside Indiana Business Website



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