Site selection process: 6 steps to find the right business location
How you conduct your site selection process can make or break your international business development project.
Choosing the ideal site is very risky, and doing it wrong can have disastrous consequences:
- inadequate infrastructure
- recruitment trouble
- poor ecosystem
- additional costs
Problems like these have a direct impact on the operational and financial performance of your new venture—but if you follow the right methodology, you can easily avoid them.
In this article, we’ll show you how the pros do it. Follow these 6 steps to set up your business abroad—and make your new venture a success.
Step #1: Define your site selection criteria
Choosing your host region where you will set up your business is the first step in the process, and the stakes are high. You need to consider its regulatory environment, tax policy, the economy, labor law and culture, the availability and skill level of local workers—and that’s only part of the list.
Your screening process will need to include many criteria for selecting the right site, and overlooking even one of them can distort your analysis.
The risks of choosing wrong site include hitting dead ends during the site selection process, incurring extra costs and running into operational problems in the short, medium and long term.
As you evaluate your candidate regions for setting up your company, don’t make the mistake of focusing solely on the availability of sites that meet your operational needs.
As you’ll see, many will be able to offer locations that match your size requirements and your business.
The real question is whether the region itself where you may set up your business measures up to your expectations.
To find out, begin by listing the criteria your host region needs to meet, and focus on 2 main categories:
- financial criteria
- qualitative criteria
Financial criteria are the most obvious, because they have a direct impact on your new venture’s bottom line and can affect your company’s competitiveness.
This category includes:
- wage levels
- real estate costs
- utilities costs
- logistics costs
- national and local tax laws
Although they’re often overlooked, qualitative criteria enable you to evaluate the key success and risk factors for your future site.
These criteria are more subjective: they encourage your project team to imagine themselves inside the facility’s daily operations and anticipate all the obstacles they could encounter.
For more on this, read our article Your site selection study: 28 qualitative criteria for success.
Qualitative criteria can be grouped into 6 main categories:
- overall environment in the region
- recruitment potential
- quality of the local infrastructures
- vitality of the local ecosystem
- quality of life
- openness to the world
Step #2: Do an in-depth site selection study
Once you’ve listed your site selection criteria, you can start screening your candidate regions. Which of them actually meet your requirements?
Analyze your financial criteria to draft a preliminary operating budget. This initial analysis will highlight differences in costs from region to region. But be sure to compare apples to apples, and keep an eye out for regulatory differences between countries.
Some project teams never look past the financial data. That’s one of the most commons mistakes of site selection: those criteria alone can’t tell you whether your new site’s operations will be successful. What happens if there’s political instability or labor unrest in your host country? What if you can’t recruit the skilled workers you need on the local market?
We could go on, but you get the idea. Failing to consider qualitative criteria significantly increases the danger of choosing the wrong site to set up your company.
Qualitative analysis is a longer, more subjective process, but it’s indispensable if you want to protect yourself from unpleasant surprises.
That’s why we developed our ready-to-use qualitative business location analysis template for businesses like yours. We’ve helped many clients through the site selection process, and our experience can help you find your ideal site.
Our matrix covers all the qualitative criteria we listed above—but of course you can add any others that are essential to your project. And it’s simple to use. For each target destination:
- give each item a score from 0 (very poor) to 10 (excellent), based on the project team’s impressions
- assign a weight coefficient to each criterion, based on your perception of its importance to your project’s success
- give each destination an overall score
Use these scores to draft a shortlist of the best regions. You’ll investigate them further in the next step.
Step #3: Draft your site selection specifications
Now that you’ve identified the regions where your new business is most likely to thrive, it’s time to draft a set of business location specifications.
This is the core document that details all the requirements to set up your business aborad. You should be able to share your specifications with all of the local partners who will be involved in the project: this will make it easier and faster to find your ideal site in their region.
Obviously, you’ll draft your site selection specifications based on the work you’ve done in the first two steps. But this time, you’re not looking for a region: you’re searching for the right site within it.
Your specs should begin with a quick overview of the background and goals of your project, and then cover 5 main sections:
- Overall environment of your new site
- Human resources and hiring
- Real estate strategy
- Land and buildings
For each item, you should specify your needs and expectations, and ideally assign numerical values. Remember that your site selection specifications should allow your partners to define clear search parameters. The more accurate you are, the faster they can provide you with a list of candidates that meet your requirements.
By answering all of these questions before you begin talks with your local partners, you’ll save time. Your conversations with them will go more smoothly, and the search process will be much more efficient.
For this step, you can use our model site selection specifications, which cover all of the areas listed above.
Step #4: Work with local partners to identify potential sites
In this step, you’ll form a team of local partners to support you and accelerate your search by sharing their knowledge of the region.
In this step, the quality and accuracy of your site selection specifications are key to success. Use them to build healthy, effective relationships with your local partners, including:
- Accountants and legal advisers
- Real estate experts
- Economic development agencies
Economic development agencies, like Nord France Invest, are indispensable allies for your site selection project. They know their region inside out—and have solid project support expertise plus the contacts you need to make your venture a success.
If you are looking to set up your business in France, get in touch with us! Find solutions tailored to your project in the Hauts-de-France region with our personalized assistance at no charge to you.
Step #5: Visit your target locations and make a final decision
Working with your local partners, you’ve now identified a selection of sites that meet the requirements documented in your specifications. But before you make your decision, you need to gather additional information and visit your candidate locations.
Your local partners know how high the stakes are, and they’ll understand that you need to take your time reaching a verdict. To choose the ideal site, you’ll usually need to make multiple visits and see the same properties more than once.
To make things more convenient, a growing number of professionals now offer virtual visits. This can be useful for your initial visit, or when you need to show properties to your executives.
When it’s time to sign the papers, it’s important to bring an attorney, a notaire or other legal adviser with a thorough knowledge of any special requirements under local law.
Step #6: Get off to a successful start
You’ve chosen your region and found the right site to set up your business. After several months of analysis and investigation, you’ve made a very high-stakes decision for your company.
You can’t wait to get your new venture up and running.
But there’s still a long way to go. You need to:
- Handle all the administrative procedures
- Recruit your future employees
- Connect with key players in the local ecosystem
- Link up with with local officials
In this step, support from an economic development agency is extremely valuable. Their team can help you manage your checklist, make the right contacts and get to know your new environment.
Choosing the right site to set up your business is primarily a matter of following the right methodology.
When companies fail, it’s usually because they’ve skipped key steps and based decisions on a partial analysis. Or wasted time searching for sites because they haven’t given clear information to their local partners.
If you take a step-by-step approach and follow the method we’ve outlined here, you’ll maximize your chances of finding the right site. And your site selection process will be even more effective if you download our ready-to-use tools.