Amazon announced they will split their new headquarters between two cities: Long Island City (in Queens) New York, and National Landing (formerly Crystal City) in Arlington Virginia. Numerous cities vied anxiously for the honor of landing this headquarters, which will bring upwards of 50,000 well-paid jobs. (Right now, they are slated to be split between the two locations.)

Amazon is getting massive subsidies and tax breaks from the "winning" cities. According to CNET, these incentives run into the billions:  $1.525 billion in incentives in New York, and $573 million in Virginia. Whew! That's some serious corporate welfare.

And that's the key part here: Amazon is big and cities fell over themselves to offer money to get Amazon to pick me. This pick-me dance is limited to the big players. If you walk into New York Mayor Bill de Blasio's office and say, "I'm thinking of bringing my startup to New York. What can you do for me?" you'll get laughed out. Actually, you won't even make it into the office. 

Locating your business in a big city has a lot of advantages. For one, there's already a large workforce there. You probably won't have to worry about relocation costs in order to attract employees. (Although with record low unemployment, any business may have to reach outside their area code.) But, you will be faced with high salary costs.

Now, if your new company is a restaurant, high salary costs can be offset by charging high prices because everyone in the neighborhood earns a high salary. But, you're offering virtual services to a global or national community, people in lower-income areas won't be quite so willing to pay high prices necessary to make your hiring competitive in the market in which you've chosen to locate.

It may be easier for you to do your business where you currently live--and, frankly, most of the US population lives in and around big cities. 62.7 percent of Americans live on 3.5 percent of the land. But you can still have city life with lower salaries.

For instance, this interactive map can show you the average household incomes across the United States. You may be surprised at how much that can differ. 

So, before you pick the city for your business venture ask yourself the following questions;

  • Who is in my market? If your market isn't limited geographically, you have flexibility for where you locate.
  • Can I attract the people I need to this area? Do the people you want to hire want to live in San Francisco or New York or would they be happier in Kansas City? Where are they living now?
  • Are there local universities and colleges that can help supply me with interns and new grads? While you definitely want experienced staff on your payroll, a local school can be a benefit to your company.
  • Can I afford to pay what my employees need to live in this city? The median home price in Kansas City is $141,900 while the median home price in Queens is $640,000
  • What is the commute like? What will work-life balance be? Millennials and Gen-Z value work life balance. Generally, the bigger the city, the worse the commute. 
  • Do I even need an office? Is working in the same location even required for your business to succeed or can you have telecommuters? 

Think through these before you settle on a location because governments won't offer you big handouts until you're already big and profitable. 

Published on: Nov 15, 2018