Leaving CA: Moving a Manufacturer to a Smaller Town

Thoughts on Moving a Manufacturer to a Smaller Town

Students of financial history know the stories of company towns. It was common during mining booms and in the early days of manufacturing. When an employer opened in a small town, there wasn’t enough housing or stores to meet the basic needs of workers.

The difference was, in the early days of mining and manufacturing, when the owners showed up to build, there was nothing there. Few roads, no water/sewer/power system, etc. Building in a small town next to a large one avoids these problems now.

 

Big Town / Smaller Town Issues

While we don’t have these conditions now, there is a different issue. There is a trend toward employers moving to small towns to control costs. When many companies do it in the same area, the cost of living will rise fast. Local real estate agents are more than happy to sell you a house in a small town for the same per square foot as SoCal. The limited housing supply and employees from the same company bidding for homes will create a rise in prices. This creates a limited window of time to find, negotiate, finance and close. Significant price increases will limit the attractiveness to new or younger families (whose adults are often the most desirable employees by cost).

 

An Economic Activity Example

Allow us to show you a relatable data point on Downtown Restaurants.

We heard that last Saturday night in Chicago, IL., many restaurants were using 10-20% of capacity. That’s not enough to keep a restaurant alive. We read that in Greer SC (Near Greenville), the three-block-long “restaurant row” was over 100% of capacity. Now, a Saturday night in a smaller town is the social place to go, but the contrast is still striking. Small towns are more sociable. Young employees want that dynamic.

As more and more companies move, it is a wise idea to at least consider the idea of buying more property than you need. You may be able to store more inventory onsite, which you couldn’t in California. You may have room to do more pre or post-assembly. Just by having a significantly sized manufacturer move into a town makes the town more attractive. Growth attracts growth.

 

Thoughts on the Transition to a New State

The company can build equity and can later use that equity for loans should there be a cash need. To paraphrase the founder of the Hilton hotel chain: hotels were his vehicle to own real estate. That applies to other businesses too. Significant manufacturing plants can see the pre-relocation purchase of extra commercial real estate attractive. Their suppliers will need space too.

Give us a call, and we can discuss how we can find financing for the smaller(er) town relocation. If you are farther down this path, call us and we’ll map out the costs for you with one of our local instate or out-of-state partners.

Here’s the process:

1. We’ll plan out the working capital lines for new equipment (why pay to ship old equipment?),
2. We’ll find a commercial mortgage for the property and building, and lastly,
3. Get you a working capital line to handle the business interruption “pothole” during the relocation.

Please share this with those you know are considering relocating.

Photo by Nate on Pexels