Proactive Business Retention: Identifying At-Risk Companies Before It’s Too Late

Economic developers often focus on new business recruitment, but the companies currently operating in your area are just as valuable. These businesses provide stability to the workforce and improve residents' quality of life if they offer customer-facing products or services.

You can’t always tell when a business is struggling or preparing to relocate, but there are valuable indicators to track within your organization. Based on decades of experience, the team at Golden Shovel Agency has identified five signs a company is preparing to move or is at risk of closing in your area. Here’s what you can do about it. 

Lease agreements are ending or being negotiated. 

Landlords can have a tremendous impact on business retention. If they decide to increase the rental costs of their properties significantly, businesses may choose to relocate. Companies may prefer to leave a good location to reduce or maintain their operating costs.

The team at Golden Shovel Agency recommends that economic development teams try to mediate as objective third parties during rent negotiations. They can ensure that property owners are fairly compensated for their land while supporting the financial needs of tenant businesses. 

There are noticeable changes in customer behavior.

Companies rely on customer demand to grow, and even the best-run businesses can struggle if demand shifts. This is why economic development teams track macroeconomic trends – they need to be aware of how national (and international) events can affect local businesses.

For example, when consumer confidence lowers, spending decreases. Communities with tourism-heavy economies or luxury industries may struggle more.

Economic uncertainty can affect all aspects of the local community, from changes in housing demand to visits to nearby coffee shops. This is why reading and following global events is essential for municipalities of any size. 

The business is struggling to hire.

Access to talent is one of the most significant factors for site selectors. Companies struggle to find adequate employees and are unwilling to move to areas without a large enough workforce with the right skills.

Economic development teams can act when they notice companies having trouble hiring. They can work with local colleges to develop training programs to upskill residents. Some municipalities can also use statewide resources to support training efforts.

Your community might not have access to skilled talent immediately, but if you can use local resources to create a pipeline, you can prove to existing organizations that they can hire and grow in the near future. 

There are state and regional regulatory changes. 

New laws can change a business's decision to remain in the region. This is another instance where factors outside the EDC’s control determine whether a business stays in the community. Operational incentives in competing states could lure companies out of your region, while new laws and guidelines deter them from staying.

Legislation isn’t entirely out of your team’s control. You can lobby for or against proposed laws based on how they affect local businesses. Your leadership team can advocate for the business community. If a law out of your favor passes, your team can work directly with companies to address their concerns and identify potential solutions.

Nothing about business retention is passive. Your organization can build strong relationships with stable companies and work closely as partners when times get tough.   

The business is growing and expanding successfully. 

Don’t just look for negative indicators to see if a business is preparing to move. A growing business that has scaled its efforts in recent years may relocate to a larger location outside your community.

While your economic development corporation should celebrate the successes of local companies, it also needs to be prepared for their natural next steps. Do you have larger facilities or open sites to accommodate them? Will you be able to respond to their talent needs?

Business retention and expansion mean anticipating the growth of local employers so they can scale successfully. You don’t want companies to grow up and leave the nest once they are too big for your community.   

Value Retention as Much as Attraction

A new business is always welcome in the region, but that doesn’t mean you should neglect the companies already invested in your community. Evaluate what percentage of your time and resources go toward business retention and expansion efforts, whether that means keeping companies in the area or intervening when they are struggling. Saving a company can significantly impact your region, even if most residents don’t realize what happened. Economic development can be a thankless job, but your hard work is reflected in the bright future ahead for your community.

You don’t have to grow your city, county, or state alone. Golden Shovel Agency is your economic development partner with resources and talent to help you achieve your goals. We have developed a Business Retention and Expansion whitepaper featuring tools you can use to start and scale a BRE program in your community. This actionable whitepaper also includes examples of how other communities are approaching BRE and the success they are having. Download your Free copy today!