5 Things to Consider Before Hiring a Site Selection Consultant
by King White, on Feb 22, 2016 10:00:00 AM
A site selection consultant can bring significant value to companies trying to find the optimal location to expand their call centers, data centers, distribution centers, headquarters, manufacturing plants, retail stores or shared service centers. However, it is critical to hire the right adviser who possesses the tools, resources and experience to ensure you are receiving the best advice possible without any conflicts of interest.
“As the site selection specialization has matured, many service providers trying to compete in the field have learned the buzz words and developed great presentations touting themselves as site selection experts. The harsh reality is that companies need to see through the smoke-and-mirror sales pitches if they want to find a true partner that can optimize their site selection decision,” explains King White, CEO of Site Selection Group.
To assist companies with finding the right service provider, Site Selection Group believes there are five things to consider before hiring a site selection consultant.
Nothing is more valuable than the experience of a site selection firm. The knowledge gained from working on complex projects and touring around the world can never be replaced by databases and online research tools. It is the first-hand interviews of employers, workforce development and economic developers that provides a site selection consultant the anecdotal market intelligence to provide true insight into the viability of a location for a company.
Conflicts of interest
It is critical that site selection consultants have no conflicts of interest and their fiduciary duty is solely to serve your company, not any landlords. The biggest conflict of interest that has emerged is at real estate firms that present themselves as site selectors while representing property owners and even having ownership in real estate. Similarly, large tax firms are often limited on what services they can provide to which customers due to Sarbanes-Oxley regulations. Regardless, you need to carefully evaluate what conflicts a site selection consultant may have to avoid any problems down the road.
Technical capabilities and human capital
One of the biggest challenges for site selectors is maintaining the latest demographic, labor, economic incentive, real estate and industry data utilized in site selection modeling tools and having the human capital to manipulate the data. A site selector’s unrecoverable costs on data is a minimum of $250,000 per year, which is making it more challenging for smaller site selection firms to compete.
Many of these smaller firms often depend on free data from the Bureau of Labor Statistics and other similar free sites that don’t produce the level of analytics needed to make informed decisions. Furthermore, this free data is not providing the geographic depth and analytical capability that is becoming standard in the modern site selection process. As a result, companies need to closely evaluate what type of data, the data analytics platform and manpower that site selectors have to make sure they will receive the level of analytics needed to make informed decisions.
Site selectors will often become specialists in certain industries or project types. Some of the typical industries include food processing, plastics, retail, aerospace, software, automotive, medical devices and other niche industries that have special labor, infrastructure and real estate needs. Similarly, site selectors have also become experts in certain cross-industry project types such as call centers, data centers, distribution centers, manufacturing operations, shared service centers and headquarters. If you can find a site selector that has extensive experience in your type of project or industry, then it might save you a lot of time trying to educate them on critical drivers important to you. They will already have an immediate understanding of what location may be more appealing.
Lastly, it is critical to understand how site selection consultants are compensated. This can be a fairly complicated process subject to the scope of services, depth of deliverables and amount of risk the site selector takes. There are several different ways to compensate site selectors including lump sum consulting fees, performance-based fees and hybrid flat/performance fees. Regardless of the fee model, it is critical to structure them in a way that meets your budgetary constraints, motivates the site selector to negotiate the optimal real estate and economic incentive package, and ties the site selector’s compensation to the long-term success of the project.
Beyond the five items discussed above, it is very important that a company select a site selection firm whom it trusts will help make the right decisions for its business. If the level of trust doesn’t exist then you probably need to look harder for a consultant that is more closely aligned to your culture or desired approach.