Any experience or guidance relocating a business to another state?
July 08, 2024
by a searcher from Northwestern University - Kellogg School of Management in Dallas, TX, USA
- looking at acquiring a B2B fabrication company
- the business is currently located in an industrial park in the California Bay Area
- seller owns the building and rents the space to the business at a heavily discounted rate
- the building is worth 6-8x the business
- seller is retiring and will be selling the building in###-###-#### months
- seller wants the building to be vacant for the sale so the business needs to relocate within 18 months
- I would operate the business for ~12 months in the current building prior to relocaction
- this business sells to customers nationwide and not dependent on local customers or relationships
- looking to relocate the business, potentially to Texas
- there are a few large pieces of equipment that would need to be disassembled and reassembled
- the cost/time/risk to relocate is being factored into the purchase price
- I know there are many legal and tax hoops to jump through
- aside from needing to relocate, the business checks nearly every other box
- not too concerned about losing employees, the fabrication work does not require specialized skills
Anyone have experience with something like this?
Any references for potential commercial moving companies?
Is this too crazy to do?!
Thanks!
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
1) The distraction of having to try and find a new facility, get a lease signed, and get things prepared to move. This can negatively impact operations because it can take a lot of time. Finding industrial space is very challenging right now in most markets due to high demand for the space.
2) The cost of moving equipment and potentially building out space. Not only do you have to pay to move the equipment, but you also must configure the new space for that equipment, so you might have to spend money on build-out or electrical for your space to accommodate your equipment.
3) Down time while moving the business. You will not be able to produce during the move. That down time can be longer than you think if it takes time to hook up equipment and as you get new employees trained up. Even though the work might not be technically difficult, it is unlikely your full staff is going to move and you will have to hire and train people which means you could have an extended down time or slower production for a while.
4) It will be a concern for lenders if you are going to finance any portion of the purchase. If you plan to use SBA financing. the SBA typically wants a lease in place at closing that gives you options to get to 10 years to protect specifically against moving risk. They had businesses fail in the past due to being forced to move shortly after acquisition, which is why that rule is in place. You can get exceptions to that rule and even build moving expenses potentially into a loan or line or credit, but you would need to prove available space is out there in advance and likely have much of the process priced out in advance. And there is still no guarantee the lender will get comfortable with the risk of you having to move the business up front.
There is always a risk and expense to moving a business at any point in the business lifecycle. Doing so within 12 months of acquiring the business is going to put strain on the business. My recommendation would be to try and negotiate a longer-term lease deal that provides you more time than 12 to 24 months to move the business. I think it would be more likely to get a lender comfortable if you had more time. If you would like to discuss any of this in more detail, I would be happy to do so at any time at redacted We have worked with lenders to get them to approve moves in advance of closing, but a lot of work needs to go in on the front end to get them comfortable and it is not always possible to get them comfortable.
from Bowling Green State University in Surrey, BC, Canada
If you are committed to moving and the seller is committed to selling, then make sure you're talking to a regional bank with a presence in both markets. And make sure your business plan details and budgets the move - you may want to look at buying the building on the other side of that move. Give the lender another reason to do the deal - a nice chunky owner-occupied property mortgage.
For your investors, you will need to pitch the value of premses ownership which may or may not resonate. For me, I see premises ownership as a benefit for something like a manufacturing business - control your destiny, moving sucks, the building is a great means of building tangible equity to potentially draw on in tough times.