Small Business Relocation Planning: Convenience Store Guide

Introduction: The Challenge of Business Relocation

One of the most integral parts of any successful business transition is thorough and exhaustive research. A literature review of the particular issues associated with any business trend or transition can serve any business owner, no matter how small their operation. Though it is important to understand the local and regional aspects of small business — knowledge that can sometimes only be gained through owning a business in a particular area and practicing controlled trial and error — the larger concepts of business relocation and retail service practices also serve as tools for better understanding needs and best practices.

In this particular case, the owner of a small convenience store must assess both local and national information sources on issues specific to the transition he or she is facing. Business relocation is not a simple prospect, and developing some understanding of what has worked for other businesses — and what has not — can be of great assistance to any entrepreneur.

The possible confusion and pitfalls of negotiating a value and compensation package from the North Carolina Department of Transportation (NCDOT) require careful understanding and a concrete idea of what to do and what to avoid when developing a transitional business plan — especially one sufficient to obtain a government compensation package award. (Gambarotto, 1993, p. 34)

Fortunately, winning a government deal or contract is not as complicated as one might think. The government — especially in a challenging economy — can be a reliable source of funds. According to Gambarotto (1993, p. 34), being successful really comes down to two ingredients:

Developing a Business Plan and Negotiating Government Compensation

1. Analyzing the relevant federal and provincial agencies, corporations, colleges, and universities to identify which could benefit from your offerings; and

2. Determining who makes the key decisions in those divisions and how those decisions are made.

Although the process and outcome may be essentially the same in the present case, the challenge of identifying agencies is less of a concern here, since the relevant party is already known: the North Carolina Department of Transportation. Gambarotto suggests that the largest obstacle may be simply believing the process is too complicated. It may require both expert advice and expert intervention. For a small business owner, however, the resources needed to retain such an expert may be out of reach beyond local and regional business association assistance. The best solution may therefore be to become your own expert.

The results of a survey conducted by PlanWare show that the typical business plan runs about 15 pages, requires a few months to research and write, and goes through approximately three drafts. General plans are more difficult to prepare than usually anticipated, especially the financial projections and market analyses. Only limited use is made of external advisors, and most plans are viewed as critically important — frequently used to help raise venture capital. Much more time is spent researching plans than writing them. Two types of plans were identified: basic plans, fewer than 10 pages long, are widely used for internal purposes or to assess the viability of a business; comprehensive plans are mainly used to raise venture capital or bank loans.

Business planners should consider the following lessons drawn from the PlanWare survey (PlanWare Survey, 2002, pp. 9–10):

1. Decide the underlying purpose of the plan first, to get an idea of the required length, amount of research, and overall timescale.

2. Compile a detailed table of contents early. Use it to identify critical issues requiring research and/or outside assistance.

3. Plan a work program and timetable that allows adequate time for researching, rewriting, and redrafting. The more important the plan, the longer it will take to complete.

4. Recognize that the process could be more difficult than expected. Consider seeking outside help at the beginning, especially for the most vital areas of the plan.

With the challenging climate of the post-9/11 economy, the prospect of business relocation holds significant pitfalls for any entrepreneur. Regarding small businesses — and more specifically retail small businesses — there are both benefits and drawbacks that affect transitions such as a relocation. (Small Business Survival Committee, 2002, p. 12) One benefit of smaller size during a transition is that the operation is more focused and often involves much less inventory and a smaller employee base.

In the particular case of this Four Oaks, NC convenience store, the relocation is unavoidable due to the new diamond interchange the NCDOT has slated for construction. The impact of changing location from Main Street to Keen Road at the zero hour could possibly negate the improvements and expansions the owner has undertaken in recent years. Yet it could also give the business the opportunity to expand to a larger degree than could have been funded without the fair-market compensation package offered by the NCDOT. Additionally, the improvements already made may not have realized their full potential, but they will surely increase the fair-market price the business might command in negotiations.

Site Selection and Real Estate Considerations

Though the present owner does have some capital available for this transition, the negotiation of the compensation package will be crucial to the success of the plan. Integral to negotiating an equitable settlement is the entrepreneur's forethought on budget issues, including present and future operating costs, loss of revenue during the transition, costs for architectural and planning services, moving services, environmental impact costs, employee impact, city and county permits, and the possible cost of legal services to facilitate contract negotiations. Another consideration is that the owner may take advantage of significantly reduced interest rates on small business loans. The Federal Reserve cut short-term interest rates from 6.5 percent to 1.75 percent in 2001 — a substantial reduction — and while access to credit remains a challenge for small businesses, lower rates should have a positive impact. (Small Business Survival Committee, 2002, p. 12)

Whether a business owner is looking for a site for a new business or relocating an existing one, choosing the right location is likely to play an important role in success. The Society of Louisiana CPAs recommends addressing the following questions: Does the business require public visibility? Any business that relies on impulse buying needs visibility. A visible location is less important for businesses that provide services at other locations, such as lawn maintenance or on-site computer repair. Manufacturers have different concerns — they typically need proximity to suppliers, shipping modes, and employee pools. (Greater Baton Rouge Business Report, 2001, p. A18)

A major drawback for any retail small business in a relocation is that sales occur only when the retail space is open. It costs thousands of dollars to move, set up a new space, and advertise the change to customers. Business owners typically underestimate the cost of moving by 10 to 29 percent, usually by failing to anticipate costs such as relocating phone, fax, and data lines, according to small business consultant Ramond Silverstein, president of the Chicago-based PRO President's Resource Organization Inc. (Bertagnoli, 2003, p. SB4)

The owner should review as many available regional locations as possible that would benefit a high-traffic, drive-in retail operation. Key considerations include proximity to the new on-ramp and off-ramp, convenience and ease of entry for customer vehicles, room for potential growth, and visibility of the building, advertisements, and signage. The owner should find a location that takes full advantage of the increased traffic associated with the freeway alteration, taking into account the line of sight to the freeway and any other regionally important access roads.

Once potential locations have been identified, a feasibility study should be conducted. According to Stuart Mitchell, senior partner at Business Moves Advisory Centre, such a study will invariably include an appraisal of likely employee fallout as well as a cost-benefit analysis, and will also examine the resources needed to make the move. Ideally, this work should be completed at least six months before the planned moving date. (Garret, 2001, p. 92)

A logical starting point for any relocation plan is the procurement of real estate appropriate for the demands of the business, including present structural needs and room for possible future improvements. (Miller, 2001, p. 13) The location must serve the organization's purpose as a retail entity and must also address environmental impact issues specific to the type and size of business it will house. It is assumed that such a location would require the construction of an entirely new physical facility.

Relocation provides the opportunity to reassess a range of options, from the cost of doing business to the ability to retain employees. In the end, however, relocation is largely about real estate. Key questions include: How will the particular location affect operating costs? Are there local, regional, or community incentives for relocation? Does it make sense to build to suit? With a more efficient floor plan, a business owner may discover that less space is actually needed than originally thought. (Miller, 2001, p. 13)

Architecturally, it is important to understand newer concepts of handicap accessibility as they apply to new construction. In an existing building, an owner may be exempt from costly changes as long as reasonable attempts have been made to accommodate individuals with disabilities. However, when new construction is undertaken, it is typically planned to meet all possible accommodation requirements. It is sometimes necessary to contact a building inspector — either a private certified inspector or one employed by the local government — to review the most recent rulings in local codes, covering both accessibility and construction. The ADA Accessibility Guidelines for Buildings and Facilities (ADAAG), which appears as Appendix B in the Americans with Disabilities Act Handbook, establishes minimum accessibility requirements. Blueprints and shop drawings should be checked carefully for any accessibility problems early in the process, and the site should be inspected frequently during construction to ensure subcontractors complete the work correctly. (Gunde, 1992)

Another expense that is often overlooked is the change in location potentially increasing overhead through necessary leasing rather than ownership of land, or — in the case of ownership — through increased property taxes. Changes in utilities are also frequently overlooked; some rural older sites rely on well water rather than city water services, which can be more expensive in the short run. The owner must take into consideration which aspects of the business are most profitable and which are less so, formulating a plan to expand the former and reduce or eliminate the latter.

Additionally, the owner must consider the impact the new location and transition would have on existing and returning customers. (Miller, 2001, p. 13; Bertagnoli, 2003, p. SB4; Estey, 1982, pp. 15–18) This is particularly important for the repair and hardware retail aspects of the business, which are likely to attract returning local customers in addition to the on-demand service associated with freeway travelers.

Conclusion: Planning as the Key to a Successful Transition

Any business development plan will benefit from both a broad and specific literature review on the subjects associated with the possible pitfalls and possibilities of a business change. Many highly qualified experts assist small and large businesses in developing effective plans for change. One resource is local or regional associations specific to the challenges of a particular type of retail business. Beyond such resources, individual small business owners may not have the capital to retain a professional business advisor, leaving individual entrepreneurs with limited information and requiring them to become experts in their own right. One way to accomplish this is to research the specifics of the needs and transitions of the business they wish to grow.