Is it time to make your move? These CEOs bet that their companies would thrive in a new location.
Trading Places
Steve Rosa still remembers the day he knew he had to go home to Providence. It was July 14, 1992, his father's 70th birthday. "My dad's not getting any younger," Rosa thought. Rosa lived just 60 miles away, in Boston, but he was putting in 80-hour weeks at the four-person advertising agency that he'd started there three years before. He just didn't have time to drive an hour or more for dinner with the family. So at age 28, Rosa moved himself and his business, Advertising Ventures Inc., to Providence. He figured he would still be within easy reach of the high-tech clients that he had attracted in Boston. The best of both worlds, right?
Wrong. What he didn't realize was that his clients would see things just a bit differently.
Heidi Lang, however, knew a little something about relocation long before she moved her company. She had emigrated from her native Germany to Canada when her husband was transferred to Toronto, in 1987. That's where she started her photo-frame business, Transatlantic Marketing Group (TMG), in 1995. With backing from a venture-capital firm, she built a small factory in a Toronto suburb, where the company made private-label frames for retailers. By 1999, TMG had revenues of $3.4 million (U.S.) and had twice made Profit magazine's list of the 100 fastest-growing companies in Canada.
But practically all her customers were in the United States. Lang, who was bringing in 80% of the company's sales, was spending a lot of time on the road; sometimes four or five days a week. So she decided to move the company to the States. Her VCs suggested suburban New Jersey. She considered Atlanta. Finally, she settled on Jacksonville, Fla. "We looked at all three of them, and I said, 'Well, I tell you, I like the beach!' " Lang says.
Her investors thought she was crazy.
Then there's George Liebmann Jr., whose six-year-old company, Permafresh Corp., is based in Santa Fe, N. Mex. The place has been good to him, but it's not where Liebmann started out, and it probably won't be where he ends up.
Liebmann was a 24-year-old consultant in New York City when he developed the product that would lead to Permafresh: a cork system that preserves the wine in opened bottles with a layer of argon gas. Tired of flying cross-country to meet with wine producers in California's Napa and Sonoma valleys, he moved to Santa Fe in 1997. In that small state (population 1.7 million), it wasn't hard to make connections. The state economic-development department and the staff of Senator Pete Domenici aided Liebmann in many ways, from getting him oriented to putting him in touch with the state's European and Asian trade representatives.
But New Mexico simply doesn't have many development programs available for businesses. Nor does it have a great supply of the sort of business-support services that Permafresh needs as it grows: investment banks, accounting firms, package-design firms, marketing consultants. "I'm spending an enormous amount of time on airplanes, flying to the East Coast," says Liebmann. But where should he move? Back to New York -- where some of his angel investors are? It would make sense, but there's a problem. New York City just is not Liebmann's kind of town.
Why do entrepreneurs and CEOs move their businesses? After all, running a company is hard enough without the stress of relocating it. But location can make a big difference in the success of a company, even though most entrepreneurs tend to start a business in a particular place simply because they live there. That's fine -- for a while.
Consultant David Birch of Cognetics Inc., in Waltham, Mass., has studied the effect of location on growing businesses for eight years and annually compiles our lists of best cities. He says that two kinds of considerations come into play when a CEO decides on a location for a company: business reasons and personal ones. "They're often in tension with each other," says Birch. "As the company grows, I think, the business considerations start to swamp the personal ones." Maybe it's increasingly important to be closer to customers or suppliers, he says. Or to be near a bigger or better labor pool. Maybe the costs of doing business are significantly lower somewhere else.
If there's a poster child for what can go wrong when personal considerations take precedence, it might be Rosa. He didn't do much planning before relocating his agency to Providence. He just picked up and moved. He expected his Boston clients to barely notice the difference, but within a few months he saw that they were not renewing their contracts. Worse, Rosa couldn't find enough new clients to replace them in Rhode Island, a smaller market suffering from a recession and a statewide credit-union crisis. He remembers calling on one Rhode Island manufacturer. "The first thing she says to me is, 'You're crazy for coming here. Go back. I'm moving to North Carolina,' " he says.
It's a different story with Heidi Lang. She's thrilled with her company's new home, in Jacksonville. "Building a company is a tremendous stress," she says. "Now I go home, and I'm going to open my convertible as soon as I hit that one bridge and I see the ocean. I'm like, Yesss!"
Unlike Rosa, Lang based her decision on what made business sense as well as on her desire to live by the beach. She takes pride in knowing her retailer customers inside out -- the look and feel of their stores, what kind of consumers shop there -- so that she can recommend a line of frames tailored to their markets. It was hard to do that from Toronto when most of the chains she sold to had stores across the United States. "You have to do a lot of homework on these stores, and we had none of these stores in Canada," she says.
Besides, starting fresh in a new city gave Lang a clean break, an opportunity to make over her rapidly growing company and prepare it for the next level. "We were very much aware that we needed to change managers," she says. "After you grow to a certain point, you have a set of managers at that time, and then you go to the second plateau of the company and then you require a different type of manager."
