Migrating Across the Land
Migration is a habit that dates back to the dawn of time. People moved across the land because their resources - water, vegetation - dried up and they needed to find a new resting ground. Today, migration still exists. Companies are heading north, south, east and west because their resources are no longer available, the land and the cost of doing business has just gotten too expensive, or they want to consolidate existing facilities.
Management Review talked to the leaders of three companies that moved all, or part of, their facilities. Even though these companies are from different industries and locations, many of their reasons for moving were hauntingly similar. And all viewed their move as successful - worth the money, time and effort.
EXPANDING FOR SURVIVAL
A couple of years ago, Basic Food Flavors Inc., a processor of hydrolyzed vegetable protein, soy sauce, and soy base products, wanted to expand its business in Southern California. That sounds simple enough, but the company faced one bureaucratic stumbling block after another. Donald Staley, the company's president, first set his sights on a building near its existing Pomona facility.
As part of the zoning and permitting process, Staley had to present a design plan to the South Coast Air Quality Management District. First, he was told that he would have to make expensive modifications before the district could okay the new facility. Then, the district said that it would take at least six months to review and approve the paperwork. This was particularly frustrating because Basic Food Flavors had had no prior air-quality problems. In addition, the costs involved would have been tremendous: With a guaranteed six-month delay, the company would have paid $25,000 a month for a building that it didn't occupy, and wouldn't be able to occupy, until the paperwork came through - if it came through - Staley says.
The next plan was to buy the piece of property adjacent to the Pomona facility. Staley went to the city, submitted his expansion plans, and 10 months later, Pomona gave its approval. Then the bomb dropped. "The sanitation department wanted $450,000 to tap into the sewer - we are not General Motors; we are a small company," Staley admits, realizing the expense was just too great.
Staley knew it was time to leave California. As luck would have it, he was flipping through some business magazines and stumbled across an ad for the Nevada Development Authority. He figured he had nothing to lose, so he gave them a call. "They were very helpful. They took us around to everybody involved in the move - air quality, sanitation, the city," Staley says. Within two weeks, the city of North Las Vegas approved all of the company's relocation plans, a far cry from the bureaucratic bungling it faced in California. And Basic Food Flavors began production in Las Vegas last summer.
Tom Houghton, president of H.S. Precision Inc., a manufacturer of test rifle barrels and synthetic stocks, experienced many of the same frustrations when he tried to expand his Prescott, Ariz., facility. "We needed to expand; we were at a point in our life where we were out of space. And bank financing is almost impossible to get in Arizona," Houghton explains. High costs were the key factor in making a move. "Industrial property in Arizona is very expensive - about $125,000 an acre - the tax structure for running a business is pretty high, the assessment rate for business is two-and-a-half times standard residential. Then they tax personal property, income tax. . ." and the list goes on, bemoans Houghton. He knew it was time to get out. But the question was, to where?
Colorado headed the list for a while, that is, until the bank financing fell through. "The deal was pretty close to being signed, but we couldn't get a bank to give a letter of commitment in writing - everything was verbal," Houghton explains. …