Get To Know BDO Consulting - Corporate Expansion in 2016

May 2016

By Tom Stringer, National Site Selection & Business Incentives Service Leader, BDO USA, LLP and Michelle Cammarata, Director, BDO USA, LLP

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In an era of unprecedented economic uncertainty and political turmoil, determining where to locate business operations has become a critical decision for corporate executives. Competition for investment is fiercer than ever, and distant problems can alter entire markets and industries. So whether you’re contemplating a relocation, expansion or consolidation, you will need to evaluate your existing locations to determine if you've made the best choice in business partners.

How do you decide which locations and economic development agencies are assets and, perhaps more crucially, which are liabilities? To help you figure out your next move, we have put together a list of what makes a strong economic development partner, and what behaviors point to locations and groups that you should avoid:

Value-Added Behaviors

To find the best location to grow your business, look for these five attributes: 

1.  Aftercare
This rule is time-tested and critical: the best economic development agencies treat their existing business community as valued partners. They stick around after the ribbon cutting ceremony. This is the mark of smart economic developers, ones who answer questions and are willing to help businesses succeed over the long term. They recognize that when a business feels valued and understood, it rewards its community with growth, new leads and strong references.  Loyalty counts on both sides of the table.

2.  Play with the all-star team
Stronger teams are not only better suited to win projects, but they're also better partners after the deal is won. They get and stay organized, know their product through and through, and work overtime to provide information and answers to key stakeholders quickly. Communities that prove they can deliver should land on the short list of potential sites for your new home.

3.  Overall certainty about business environment
Businesses thrive on certainty. In the context of site selection, predictability is good for planning purposes and can serve as a strong foundation during times of disruption across businesses and political establishments. Businesses should be able to look years ahead and be reasonably certain of tax rates, assessment methods, incentive programs, employee skill sets, and other key financial and operational considerations. So be sure to seek a community with a steady hand.

4.  Get to an answer – even if it’s not ‘yes’
In government matters, red tape is often unavoidable. But with the right strategy and right economic development partner, you can manage bureaucracy when applying for incentives and permits. Find a partner who knows the system and acts with a sense of urgency. Even understanding what can’t be done and why not helps facilitate decision making.

5.  An opportune location
The best agencies play to their strengths. Rather than trying to be all things to all companies or all industries, they target the best fit for their community’s demographics, labor force and business environment. It’s worth investing in location analysis to cut through the blizzard of sales and marketing to find your match.

Site Selection Red Flags

To choose the best location for your business, you should be mindful of these five points:
1.  Pay attention to locations that deliver on promises...or don’t make them.

In recent years, several states and cities have broken their commitments to provide incentives, in spite of businesses holding up their end of the bargain. Locations with a history of reneging on their incentives deals may be seen as the outcasts of the site selection industry (and rightfully so). Trust is hard to regain, and bad memories linger. Worse still, negative experiences are shared and repeated, compounding one bad experience into a trend. However, don't make the mistake of taking a damaged reputation for granted. It's most likely rooted in fact.
2.  Watch out for smoke and mirrors.

Some states stuff their incentives packages full of complex tax credits, training services and other benefits your company may never use or need. You want tangible benefits you can actually use.  The most desirable incentives packages maximize cash or cash-equivalent savings in the early years when expenses are high.
3.  Avoid getting bogged down in minutia.

Some economic development programs operate more like the DMV than a well-oiled machine, with complex applications, long, multilayered review and approval processes, and staff who fail to communicate. These inefficiencies will blow your deadlines, costing time and money. Look for a stronger partner in your region or find one elsewhere.
4.  Be ready to make the first move.

In today’s economy, each and every asset can be monetized, and businesses are more mobile and more aware of their worth than ever. If you’re committed to your community but want to explore savings opportunities, you might need to make the first move. Not every agency excels at business retention and, in fact, most prefer to chase new business rather than tend to their existing customers.
5.  Look for a well-articulated value proposition.

A location is more than the site of your office building. Pay attention to the quality of the roads, schools and other assets. States and jurisdictions need to understand their value proposition and actively communicate it to you. A community that fails to communicate what it has to offer will also fall short of helping you maximize value or avoid unnecessary costs.
A version of this article appeared in BDO’s Winter 2016 Real Estate Monitor newsletter.