The attendant impact on businesses, particularly the small business holders have heightened increasingly in recent times due to the difficulties and widespread uncertainty in many countries due to the post pandemic consequences.
Therefore, more and more businesses are looking for ways to fight back against the harsh economic realities and hostile environments that has shaped their world and one of the ways widely considered is the change of business location to reduce the cost of doing business, in particular for rent reduction.
Lately, it has been observed that more businesses, key markets with headquarters and main base of operations or offices in choice location, where they have established connections and network with customers, have continue to embark on relocating to neighbouring states and remote areas.
This trend became rampant and increasingly more in all sectors of industries in post pandemic era.
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Checks from Lagos state, Nigeria’s economic capital, revealed that the most common reason given by many business operators for relocation was that it is a way to minimise the high rising cost of doing business, and still remain in business.
According to the report, the view was that location or relocation factor in a business should be more on overall business gain to maximise income, access to competent workforce, be closer to customers and business resources amongst others.
The survey explained that these key variables adequately and effectively give competitive advantage to business location or relocation which is largely determined by cost of operation, and operating cost of doing business which is driven by many financial factors.
However, such linear decisions can have serious consequences on the non-financial factors such as customer retention, sales or market share growth, proximity to resources, or more broadly, long sustainability of the businesses.
This is even as Small and Medium Enterprises(SMEs) and Business Development expert, Dr. Timi Olubiyi said, the choice of a business location is an economic decision of the business and should only be considered strategically with thorough evaluation rather than just for financial reasons, that is, reducing operating costs or on mere sentiments.
He affirmed that the sharp decision can influence conditions in which the business activity is subsequently conducted, adding that, If a business selects a wrong location, it may have an adverse effect on access to customers, competent workers, good transportation, access to resources, and so on.
He argued that, this should be done with caution and strategy because location plays a significant role in overall business success while, noting that, the criteria dictating the location of businesses in the past, were, for example; access to raw materials, low costs of labour force, production means, costs of transport or benefits from government amongst others.
According to him, presently, what drives business location is the cost of doing business. However, globalisation and technology have been the most important factors in industrialised countries, where remote work and digital adoption have been on the rise.
Conversely, he said, location is especially critical now in post-COVID economy and it is especially crucial for these small businesses since location can determine the growing concerns and earnings to support the business.
He maintained that, where a business is set up can have a significant impact on its success which can jeopardise potential income, dissuade existing customers, increase delivery costs, and compromise future business growth and related supporting industries.
He highlighted that when examining the role of location, some start-ups and small businesses may just require a website and a presence on the internet that can offer better proximity to customers than a physical location where the cost of running the business is high.
He stressed that, for businesses in retail, traditional stores may be complemented with technology and an online presence, hence, reducing the number of outlets or branches.
Speaking further, Olubiyi espoused that the new normal has clearly demonstrated that technology and digital adoption can provide a competitive advantage for businesses while lowering the cost of doing business, particularly, the overhead cost of running a business activity (rent, electricity, renumeration, local taxes and fees). The COVID-19 crisis has brought rapid change in the way businesses in all sectors and regions conduct their operations.
He averred that COVID-19 crisis has removed the technology barrier in business and the introduction of many applications to improve operations and globalisation are now available, while stressing that, the adopting of digitization and the use of technology to improve customer and supply-chain interactions is increasing globally.
He stated that some businesses have even re-strategised and moved part of their business operations online, implementing more than 60 per cent of their business operations on the internet to stay competitive and reduce the cost of doing business in a hostile environment, not just physical change or relocation.
Olubiyi posited that many businesses are currently struggling as a result of their adherence to the old-fashioned brick-and-mortar business model, despite the fact that the new normal has been established through the effective use of technology and digital channels.
He said the important thing to note is that new strategies, business models, and practises are required for businesses to stay profitable and stem the tide of high inflation, harsh environmental conditions, and weak consumer spending.
Continuing, he added that, location of a business is one of its most important factors for success, and online is also a location. Perhaps, across sectors, businesses may need to refocus their offerings, fill the technology gaps by adopting digital channels, increase their online presence and develop digital products more.
The national president of Association of small business owners of Nigeria (ASBON), Dr. Femi Egbesola, said government needs to assist SMEs to boost their businesses in as much as SMEs needs government to contribute to regional economies and ultimately improve the immediate gains of livelihoods.
ASBON president posited that government must work closely with SMEs and wider business community to advance SMEs inclusion into the digital economy through tailor made digitisation strategies of cutting edge digital solutions, insights and policy.
“Collaboration is the key to developing a commercial landscape that is fit for future growth. Through effective partnership the public and private sectors can together create a supportive environment where SMEs can thrive,” he said.
He decried that businesses in Nigeria is currently eroded by policy mishaps, inflationary pressures, bleak economic future, low purchasing power, high operating cost, insecurity issues, fx constraints, illiquidity challenges, dilapidated power infrastructure, massive job loss and redundant labour.
He expressed hope that the banks would continue to meet the working capital requirements of the SMEs.