When I tell people it is more profitable to run a regional business they don’t believe it.
It is a widely held view that you cannot run successful businesses with National impact from outside of the cities.
I reckon that view is wrong.
The ABS tells us that of the 81,316 businesses in NSW, 32,526 are outside of the main cities. These regional businesses are not all local businesses such as farms, accommodation, food services and retail trade. There is a growing number of construction, engineering, technology, finance and IT businesses developing regional areas. There is a regional trend towards the ‘new’ economy that is growing out of our traditional economies of agriculture and mining.
These businesses are developing in the regions because it is more profitable. They are more profitable because they can
- have the same market access as any other company in the city,
- it is cheaper to operate a regional business
- regional CEO’s are resilient and creative
- employees who move to the regions get more value for their salaries through lower cost of living and high availability of amenities.
Communication technology is developing quickly. Whichever tools these businesses are using, they are now connecting their markets effectively, quickly and cheaply. Some of these businesses do not even show where they are based; they are in their space and doing their thing.
One of my clients runs a totally internet based business that connects supply and demand (rather like Uber, AirBNB, etc) from a regional centre with great success. Neither his suppliers nor his clients have any idea where he is.
Another uses his regional base to expand his market access. By being based between Sydney and Brisbane, he thinks he has two major markets to supply his heavy industry business to. He now has the luxury of being able to pick his clients.
Firstly, land is cheaper. Way cheaper. Sometimes land is only 10% of the cost of the same amount of land in the city. Consequently, rents are cheaper. Storing goods on land between two major cities, or on highways that connect all of the major cities is good business. Businesses that need larger areas of land can get out of the Big Smoke.
Other costs of electricity and labour are about the same.
Transport is widely available. Export businesses can fit in with the massive export industries of mining and agriculture that emanate from the regions. Import businesses are a ‘backload’. There are many empty containers and trucks that head out to the regions to deliver back to export markets. There is no reason why an ‘import and distribution’ business should be in the city. They should be in the regions.
Regional CEO’s are tough and creative:
What really strikes me in the businesses that I advise is the resilience of the CEO’s and their teams. These people are used to making obstacles into opportunities. There is something intangible in the bush that develops the attitude that can resolve problems. While they would never consider themselves to be creative, it is truly incredible just how creatively they can solve problems and create opportunities.
Perhaps this creativity & resilience has grown from the old bush ethic that you can fix anything with enough baling twine and fencing wire.
Employees get better value for the salaries:
One of my The Executive Connection group members had this idea that he needed to attract city based salespeople to his very successful regional business. We started by focussing on the benefits of living in the regional cities from which he operates and then we turned those benefits into value. We worked out it is $50,000 cheaper to live in a regional city. Owning a four bedroom house, having a few kids, driving to work, parking, public transport, participating in sport and leisure activities, and having family fly in to visit, is $50,000 per year cheaper.
It is like having a second income in the family without having to do the work. We made a (very amateur) You Tube video to explain the savings.
If you’re a CEO in a regional business who spends your time working in your business with little time to grow your business, let me surround you with a team of talented like-minded extremely successful executives whose sole purpose is to help you grow and lead your business better than you ever thought possible.
Send me a note, let’s talk!