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What to Consider Before Moving Your Business to a New State

by Mike Abelson   July 21, 2017
Some states have lower taxes, more funding resources, a higher density of talent, and other perks for small business owners.
Business Tips

For decades, Connecticut offered huge tax breaks to lure in companies. The state’s business relocation strategy worked. More companies are headquartered in Connecticut than any other state.

It didn’t last forever, though. Why did businesses move to the south? Other states caught on to the game and started offering even better perks.

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If your state isn’t doing enough for your small business, it may be time to consider moving your business to a new location. Let’s look at some of the reasons small businesses are packing up and moving to greener pastures.

Business Moving Guide

Moving a business from one state to another can be tricky. If you want to relocate but don’t know where to go, consider the tips from our business moving guide below.

Costs of Relocating a Business to Another State

Moving a business to another state is expensive in the short-term. For one thing, your executive employees will likely expect you to foot their moving expenses. Some of them won’t move no matter how much you pay them. That means finding new employees, which is expensive, too.

Don’t forget about the actual physical process of moving. You will need to find a commercial moving company. They will be expensive.

Even moving across town isn’t cheap, but you can add a few zeroes when moving your company out of the state. Small businesses should expect to spend around $10,000 to $30,000 to relocate.

In the long-term, a business relocation strategy can pay big dividends. However, your company must last that long. Try to save up a nest egg before you move. If you can’t save enough, then reach out to investors for help. Once you get to the new state, hit the ground running, and have a plan to keep your business profitable throughout the moving process.

Taxes and Cost of Living

What does Texas, Nevada, Washington, South Dakota, and Wyoming all have in common? Besides having a relatively low cost of living (minus Washington), these are the five states in the U.S. that don’t have an income or capital gains tax for corporations or individuals.

Fewer taxes mean more take-home money for you and your employees. Combine that with a lower cost of living (again, except in Washington), and you have a recipe for increased profits.

State Grants and other Programs

The top states for small businesses get that way by offering a healthy financial environment where companies can thrive. One way for a state to do that is by pouring money into companies through grants and other programs.

Regulations

It can be expensive to run a business that’s heavily regulated by the government. Every dollar you spend to jump through legislative hoops is less money to move your product.

Some states haven’t reviewed their small business laws for decades. They add new regulatory burdens on top of old ones, making it very difficult for entrepreneurs to operate.

Fortunately, there are states that proactively look for ways to ease the regulatory burden for small businesses. Tennessee is known for its straightforward rules. Other business-friendly state governments include Alaska, Indiana, Missouri, Kentucky, and North Dakota.

Financing Sources

California is one of the best states for business. That’s not because its tax burden is the lowest. It’s because California is where venture capitalists are putting their money.

You need money to make money. Sometimes that requires taking out a loan. When your state has more loan sources (think: bank branches, angel investors, venture capitalists, etc.), then you might have a better chance of getting approved for funding.

Online funding  for small businesses is a growing industry. Like the personal loan market, it’s filled with a wide variety of financial products. Some are better than others. Many are expensive.

It helps to live in a state with a wide variety of funding options. That way, you might be able to choose between a few different products, and then hopefully find one that’s affordable.

Employees

When moving your business to another state, you need to consider where you’ll get new employees, since not everyone on your team will make the trip.

If you move into a community that’s light on talent, then it will be more difficult to find workers for your business. It might also be more expensive.

States with solid higher education programs are effectively churning out new business professionals every year. Many of these graduates get funneled into nearby businesses that capitalize on the younger, cheaper talent.

The Case Against Business Relocation

So, why doesn’t everyone move? Well, there are some downsides:

  • The weather – Some business owners are willing to sacrifice a little profit to live somewhere with great weather. It stays uncomfortably hot in Texas for a lot of the year. South Dakota and Wyoming have cruel, unforgiving winters that locals like to say “keep the riff-raff out.”
  • People have less money to spend – When you live in a state with lower wages, that means all the other employers are paying their people less, too. There’s less money to go around, and so you might not be able to charge as much for your product.
  • There are fewer people – Texas has some of the biggest cities in the country. But Wyoming has twice as many cows as people. South Dakota has three times as many cows as people. Fewer people translates to fewer customers for you.
  • Active venture investing communities don’t exist – New York and California are home to many investors. This type of capital is not as available in other states, which makes it more difficult to find funding.

If you run an online company (one that doesn’t generate profits from local customers, and one that can hire remote employees), then you might be immune to some of those issues.

Don’t Choose the Wrong State

Forbes.com recently reported on a study about the best and worst states for entrepreneurs. They looked at 21 factors, ranging from socio-economic to the percentage of local entrepreneurs who said they started their new business because of opportunity instead of necessity.

The worst states on the list shared a few traits, like a declining working-age population, few people starting new businesses, and high failure rates for startup companies.

The worst states included Rhode Island, Connecticut, New Jersey, Maine, and Alabama.

That doesn’t mean you should stay away from these states, though. Even if the tax burden is high and the success rates are low, your business may still thrive in one of these areas. You just need to justify the risk with a solid business plan.

Final Thoughts

Before you move your business to a new location, it helps to do some serious research. Find out how your new competitors are doing. If they are struggling to survive, then you might be subjecting yourself to a similar fate.

Moving your business headquarters to a new state is a very big decision. We hope this short article has helped in some way. If you have any questions or are ready to request funding right now, we would be happy to help.

Mike Abelson   Lendza Marketing Manager
Digital Marketing
Mike enjoys helping entrepreneurs and startups succeed through smart and innovative marketing strategies. He’s partnered with CEOs and executives to grow businesses from the ground up. Mike believes that the customer is a company’s most valuable asset. When he’s not traveling for work, he enjoys reading adventure and science fiction novels.