Relocating your business can be an agonizing and expensive experience. But when you weigh the benefits against the costs, moving could be the best thing you could do for your company.
Relocating a business can be agonizing, whether you're moving to the inner city or somewhere else, but it can also do great things for your company
Entrepreneurs tend to be fairly superstitious people. Not to the point of wearing the same socks every day, but most of us recognize the role that luck plays in business, and we don't like doing anything that might change our luck for the worse. I suspect that's one reason we find it so hard to relocate a successful company.
I relocated my company in 1994, and it was one of the toughest decisions I have ever made. As it happened, we were moving to the inner city, as several of the companies on this year's Inner City 100 have done, but I doubt it would have made much difference if we'd been moving to the suburbs or to another state.
Moving is always difficult, especially when you're doing it as a matter of choice rather than out of necessity. You constantly second-guess yourself. You struggle with memories, attachments, all the comfortable little habits you're going to have to change. You have dozens of fears and anxieties--some based in reality and some in superstition.
But in the end, moving often proves to be a great thing for your business. It was for mine.
I admit that I more or less backed into the decision. Our offices were in Manhattan at the corner of Seventh Avenue and Thirty-third Street, and we were happy there. We'd been running our messenger and delivery service out of that location for 15 years, starting with one small office and growing to occupy two floors. It was a comfortable space with a great view, and our lease was good for another 18 months, at which point we'd have had no trouble renewing. So moving was not even on the radar screen.
What did show up on the radar, however, were a lot of problems at a warehouse we'd bought in Brooklyn for a little records-storage business we'd started. That business was just an adjunct to our main business, but its problems were beginning to take up an inordinate amount of my time.
So I sat down to figure out what was causing the problems--and had a revelation. "Boy," I thought, "this is a great business." The storage company was growing fast and getting very profitable. I could see how it might someday become the engine driving the whole train, provided we could get on top of it. That meant, among other things, that I'd have to spend a lot more time at the warehouse. Inevitably, the question popped into my head: What would happen if we just moved the main business there?
The answer was obvious, and it floored me. We'd save more than $300,000 a year, including rent, taxes, and utilities. At a 30% gross margin, you'd need $1 million in sales to cover that much overhead. By moving, we'd be getting the same benefit without adding a single salesperson.
The next question was, Did we need to be in Manhattan? Certainly not for our customers. I doubt that more than three of them had visited our offices in 15 years. We'd probably have to leave behind a small sales office and the messenger part of the operation, but even after deducting those expenses we'd still have annual savings of $250,000. From a business standpoint, the decision was a no-brainer.
And yet, when we thought about it, we kept coming up with reasons not to move. We'll lose too many employees. The area around the warehouse isn't safe. We won't be able to hire the people we need. We'll ruin the chemistry of the business. And on and on.
They weren't real reasons, of course. They were just fears we had--which didn't make them any less powerful.
Listen, most people dread the prospect of moving. They don't like change, and they're afraid of the unknown. No matter how much they complain about where they work, they'll come up with reasons why a new place would be worse. And I was no different. I had the same fears that other people have. Moving was the last thing I wanted to do.
But I also knew that to make the right decisions in business you have to put your emotions to one side. I'm not saying that you should ignore them, just that you should handle them separately. When you do, moreover, it's important to make sure you're dealing with facts.
We didn't know the facts, for example, about how safe or unsafe the area in Brooklyn really was. It was inner-city, but that didn't mean it was high-crime. The fact was, we'd been using the warehouse for two years without any significant problems. Nevertheless, to allay concerns, we decided to install a state-of-the-art security system on the premises and operate a van service for employees going to and from the subway.
We dealt with all of our remaining fears in similar fashion. Even so I kept wavering. It took 10 months to prepare for the move, and whenever we hit a snag, I went back and questioned the decision. How would customers feel about our moving to a different area code? How long would it take to train the new employees? Was it really a good idea to leave a lucky location?
I don't think I became fully committed to the decision until we had officially informed our employees and signed a contract for the new telephone system, at a cost of more than $100,000. We moved about three months later. On my last day in the old office I cried.
What I didn't see, what none of us saw, were the benefits that would come from starting over in a new place.
Moving has the power to rejuvenate a business. I'm not saying that it always happens, but when it does, the effect is amazing. You feel as though you're launching the company all over again. There's a whole new level of excitement and enthusiasm. It's fun in the same way a start-up is fun. You're learning something every day.
In our case, there were three unexpected developments that fueled our rejuvenation. First, we were forced by the simple act of moving to do certain things we probably should have done before, such as upgrading our phone and computer systems. We'd built them piece by piece over the years, adding an extension here, a gizmo there. But you can't move jury-rigged systems, so we had to decide what we really wanted. Acquiring the new systems energized the entire company.
Second, moving forced us to change old habits, develop new disciplines, and take a fresh look at various parts of the business. Once we had some distance from the messenger service, for example, we realized it was taking up too much of our time and energy and providing very little in return. We closed it down.
I also became more disciplined about seeing customers. I had to. When we were in Manhattan, I could squeeze the visits into breaks in my schedule. After the move, I had to plan my visits. The result was that I did a much better job of staying in touch with customers.
But the biggest surprise, and the most important discovery, was that our fears were completely unfounded. Yes, we lost people. About 25% of our staff decided not to make the move, and another 10% left afterward. Those who stayed, however, were excited about being there, and the new people we hired brought enthusiasm and fresh ideas.
And hiring didn't become harder, as we'd feared. It got easier. We were recruiting in an area of relatively high unemployment and offering above-average wages. Granted, the location was a negative for some people, but it was a positive for others. The inner-city employees we hired, moreover, have proved to be more reliable than those we've had in the past, maybe because they're closer to home.
As for our concerns about safety, they just disappeared. We run the van only in bad weather now; otherwise, people prefer to walk. Meanwhile, we've yet to experience our first break-in. We had two at our offices in Manhattan.
Most important, the chemistry of the business has never been better. We're less spread out physically than we were before, and there's a greater sense of being together, on the same team. The atmosphere is more relaxed. The communication is faster. We're having more fun.
And me? I'm having a ball. Maybe it's a coincidence, but the storage business took off shortly after the move, and I've had a front-row seat. I've been able to watch the business grow before my eyes. There's nothing like it.
I can't believe how lucky this place has been for me. My only fear is that someday I might have to move.
Norm Brodsky is a veteran entrepreneur whose six businesses include an Inc. 100 company and an Inc. 500 company. This column was coauthored by Bo Burlingham.