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What Size is the Right Size?

Andrew Ross Sorkin, the New York Times columnist, helped popularize the phrase "Too Big to Fail" with his bestseller about the 2008 financial crisis. The book takes an inside look at how top executives make decisions -- often the wrong ones -- under pressure. One of our takeaways is that business leaders need to strategically prepare for growth, and not merely in sales and market share but also within their geographic footprint.

Growth should not be left to chance. The failure to assess and plan for physical expansion could subject a company to saturated labor markets, constrained and/or poorly situated facilities, inadequate infrastructure and unwanted public scrutiny. But this need not be the outcome; an analytic framework exists to help business leaders make tough location decisions. Such an assessment often takes into account the organization’s unique structure, its operational needs, and the social/economic/political dynamics of the local area and the resources available -- everything from the pool of labor to the pool of water.

The process requires consideration of the "decision drivers" that need to be assessed in making choices about right-sizing an entire corporation, a division, a manufacturing plant, R&D or product development. Doing so mean weighing the risks and the rewards, the obstacles and the opportunities. This implies an evaluation of both the quantitative and qualitative factors that need to be considered when making location and sizing decisions. So, be your own consultant; ask lots of questions.

First, about your internal conditions, among them:

  • Do you have a culture that promotes employee loyalty?
  • Do you have a strong team of managers that can handle and steer growth?
  • Do you have the operational systems already in place to handle expansion?
  • Do you offer attractive career opportunities?
  • Do you pay competitive wages and provide good benefits?
  • Are you overly concentrated in any one location?

Then the external circumstances:

  • How large is your region and what are the projections for growth?
  • How concentrated is your particular industry?
  • How capable is the workforce?
  • How strong and diverse is the local economy?
  • How resilient is the infrastructure?
  • What is the fiscal capacity of the local and state governments?

A clear-eyed assessment of your capabilities and the environment in which you operate should lead you to a decision to grow (or not) in-place or elsewhere. Then it becomes a matter of execution. Doing nothing, or moving too slowly could result in lost advantage or higher costs down the road. Then again, shifting too quickly has its own set of risks including disruption of the organization; impact on business culture, loss of market share and productivity impacts.

The decision on whether to expand, as well as where and when to do it could be the determining factor in the long term success of your entire business. It’s not necessarily rocket science, but it is a decision that should be based on facts, analysis and verifiable business logic.

Andrew Shapiro

Managing Director

Andy Shapiro heads the firm's location advisory practice from its San Francisco Bay Area office, helping clients translate their business objectives and strategic vision into rational, balanced location decisions. His primary responsibilities include site selection, feasibility economic impact analysis and market analysis.

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Contact us today at 609.924.9775 or info@blsstrategies.comto schedule an initial consultation.