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Selecting Location for Company Headquarters

By:   •  September 26, 2016  •  Study Guide  •  795 Words (4 Pages)  •  1,270 Views

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MEMORANDUM

DATE:            July 24th, 2016          

TO:                Partners and Advisory Board of Mechaniquote.com

FROM:        John Lewer., Partner JL

SUBJECT:     Selecting Location for Company Headquarters        

Our rapidly growing company needs to establish a formal headquarters from which to base our operations. This report will compare two possible alternatives for the location of our new headquarters. After providing real world statistics and analyzing the data, I will provide you with my recommendation.

Problem: Selecting a Location for Company HQ


Running a high demand website such as ours is no longer possible from our current location.  Our company needs to establish a formal headquarters and provide office space for new employees. We also need to convey a professional company image.

Alternatives

Remaining in Florida is our first option. The other possible location for our company headquarters is California. I am considering this state because it is a central hub for technology companies. California is also on the cutting edge for developing new products and services.

Establishing Criteria for Selecting New Location

There are many factors that I considered in my analysis. The most important criteria that our new location must have are:

  • Low Corporate Tax Rates
  • Low Price Index
  • Low Average Salaries
  • A Good Economic Environment

Discussion:  Evaluating Potential Locations by Criteria

Low Corporate Tax Rates

The main goal of any business is to maximize profits. Keeping costs at a minimum is one way to achieve this. After comparing the corporate income tax rates of California and Florida, I have come to the conclusion that Florida is the lower of the two. Florida rings in at 5.5%. This is slightly lower than the national average. California’s tax rate is a staggering 8.84% (Tax, 2015).  This 3.34% difference could equate to millions of dollars in lost income. Figure 1 below shows the tax rates for each state.

[pic 1]

Retrieved form Tax Foundation. Copyright 2015.

Low Price Index

Establishing a headquarters in an area with a lower cost of living could prove to be beneficial to our employees and our company. As a national company, our income is not based in one region. We compare our income to the national average. By working in an area with lower price indexes, the company can spend less money. Overhead such as rent, utilities, and supplies will be reduced. The employees can maintain a better standard of living. This could lead to increased utility and ultimately translate to a more efficient workplace.

 

Florida has a much lower cost of living than California. A person living in San Francisco, California would have to make $76,000 annually to maintain the same standard of living as a person in Ft. Lauderdale, Florida making $50,000 (CNN, 2015). The cost of living is over 50% higher in California.

Lower Salaries

Our company will need to hire more web developers to keep expanding. Web developers in the San Francisco area of California earn an average of $87,965 annually. The comparable salary in Florida is only $65,000 per year (Glassdoor, 2016). We can save money by remaining in Florida and paying lower salaries.

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