How to choose a good location for your business?
This post is going to be about questions to ask before opening a new office in a new country or region, but we also realize this is an economically uncertain time for a lot of brands — although admittedly not for user-generated content (UGC)-driven brands. So we do realize you are probably not thinking about expansion at this moment. But when the global economy is at “full re-open,” there is going to be a torrent of activity simply because of investors and companies wanting to shake off the doldrums of shelter-in-place. If your cash position is good, a new location might be a good addition to serve your customers. (In late 2019, we moved to a bigger location in Poznan, Poland, as one example).
In the past 18 months, we’ve doubled our amount of global delivery locations, moving from six to 10 locations: Istanbul, Turkey, and Poznan, Poland — came online, followed by Lisbon, Portugal, and the Iloilo facility in the Philippines, which initially activated operations in October 2018. Iloilo increased from zero employees to 300+ in two months.
We know a few things about selecting new locations. Here’s a bit of that advice.
What to look for in a new location?
- The quality of the workforce: How educated in the area? How populous? How many people could reach the physical office location (post-pandemic) within 45 minutes to 1 hour? Have similar brands or business models had success with offices in that area? You need an educated, available workforce to do anything properly in business — even if you’re looking at a plant location, you still need the right people around to monitor and staff the plant. Quality of the workforce is the first thing to consider, above all.
- How challenging is the cultural expansion? Is there a lot of nuance to the language or ways of business? Would you need a partner to help you get going in that area, or can it be done mostly with current internal staff and talent managers? What don’t you know about the targeted new area? The best way to figure this out is to talk to former colleagues and others in your industry. Essentially, you want to discover the potential unknowns and hiccups of doing business in that region before you scale up the process of the office.
- What is the broader cost-benefit analysis? How will this benefit your customers in some way, and how will it improve your cost position in terms of spending or delivery of service? This can be the first set of questions you work through, although once you’ve targeted an area, knowing whether the workforce there is strong is more paramount than doing a CBA (cost-benefit analysis). If the workforce isn’t available to you, the CBA is pointless. So consider the location, evaluate the available workforce, and if that makes sense, CBA can be a later step in the process.
- What are your timelines and contingencies? When would you like to come online with the new office? What is the best-case scenario? Worst case scenario? What happens in the event of something like COVID-19? This is essentially scenario planning for the build, launch, and rollout of this location.
- How will your current internal team shift? Is someone moving from a pre-existing location to manage aspects of the new location, or are you hiring the new location completely from scratch locally? Who needs to help onboard members of the new location into your processes and overall culture? Who will “own” the ramp-up of the new location for the first year?
- How can it be presented to current customers, investors, stakeholders, and employees? This can actually be tricky — no one wants to see a company spending money on new locations if they feel like their needs (salary for employees, ROI for investors, etc.) have not been met yet. You need to craft positioning statements (messaging, essentially) for each group in terms of why you are doing this, how it will roll out, and what the benefit is long-term to them. This makes it more palatable and doesn’t come off as growth simply to prove growth.
Those are some of the big buckets to consider initially. As the process gets rolling, there will undeniably be hiccups. Establishing new global locations is rarely an easy process; having done this four-five times in just the last two years, we can tell you that very little goes according to your best-laid plans. That said, growth is a necessity of business, and serving customers is the ultimate goal. If a new facility in Germany allows you to serve those customers better, you need to get that new facility in Germany. It’s going to be a potentially-long, periodically-challenging process, but it must be done for your business. Go get it.
Check also how to expand to Europe.
If you ever have questions about expansion planning or models, we’d be happy to talk.