What are the risks

of choosing the wrong business location?

Obstacles to recruitment

Poor business location selection can also lead to headaches with human resources.

The first category of risk is the pace of recruitment. If you struggle to find enough of the right talent, you can expect more problems down the line:

• positions go unfilled in the short, medium and long term
• recruitment costs skyrocket
• “good enough” hires result in bad outcomes
• payroll must be increased to attract the right people

For all these reasons, it’s far better to choose a location with an adequate supply of trained workers—not just today, but over the medium and long term.

You’ll also want to find out if your candidate region offers training programs for the kind of employees you need.

Finally, consider your employer brand and identify other companies that will be hiring from the same labor pool.

Competing against a large field of rival employers can limit your ability to recruit the people you want.

And remember that recruitment is only the beginning.

Hiring good employees is important, but so is keeping them.

For expats, a region with high real estate costs, inadequate health care and no international schools will have poor quality of life, and could well cause your best people to leave in search of better conditions.

Lackluster ecosystem

Location selection isn’t just choosing a place. It also means finding your place in a new business community.

So take a close look at the local ecosystem, whose quality can make or break the success of your new venture.

Choosing the wrong destination carries a number of risks.

• If you can’t find capable, reliable partners in the local community, you’ll have to bring expertise in-house or get the support you need from a distance. In either case, costs will rise.
• If your new region doesn’t have competitive R&D centers, you’ll need to bring that expertise in-house as well.
• Lack of support from national and regional authorities may slow your new venture’s growth.

Unexpected financial costs

A business location selection process that neglects qualitative criteria can turn your project into a nightmare. But patchy analysis of financial criteria can also lead to disaster.

For example, overall wage levels are important, but it’s vital to compare apples to apples.

Employer contributions are calculated differently from one country to another, and if you aren’t careful, you can find yourself saddled with extra costs.

The same is true for taxes, which follow different rules in different countries. If you compare corporate tax rates without knowing how taxable income is defined, you’ll set yourself up for unpleasant surprises.

Lastly, take a cautious approach to incentives offered by host governments.

These are often subject to strict criteria, including benefit ceilings, staggered payments, and performance standards that your venture must meet.

If you don’t study these terms and conditions carefully in advance, you may find that some payments never materialize—or worse, that your company must refund payments that have already been made.