Today I am going to talk about Outside Incentives.
If you’re a manufacturer or manage any type of business that has a lot of employees and you have a large payroll, communities want you and want you bad. So, what you need to do is use that leverage when you’re looking at one location or another.
If we’re talking about big companies that might decide they want to relocate to Texas or Alabama or South Carolina, etc. there are statutory incentives that local communities can offer you. It’s written there in the manual and they say “Hey! You come here and this is what we can do for you.” But there are Negotiated Incentives that are far, far more than that and if you don’t know it, you’re going to leave money on the table.
One of my best friends, who since passed away was a super, expert incentive negotiator and I can’t tell you the times I was having lunch with him and he’d say “Yeah XYZ company, I made them $30 million.” Holy smoke!
Now, his client would say to him, “I know I can get 3 million in incentives. We have already analyzed things and so we’re going hire you but we already know we can get 3 million.”
My friend would say, “Yeah, yeah that’s fine. No problem. Just let me do my job.” So, with the negotiator incentives and the package – the same client who could have gotten 3 million on their own gets 30 million! And, of course, the broker gets a percentage of that so everybody’s happy.
There is a lot to the incentive negotiation that has to be done right by a real professional. I guess my point is, unless you want me to get into some of the specifics which I’m happy to do, just be aware that Outside Incentives are available if you’re a big enough company with employees, you need to look into that subject pretty carefully.
The Outside Incentives can be cash. They can be free rent or buildings. They can be roads. And, by the way, with a lot of these things items, some of the government officials will publicly resist at first and then offer privately later.
With negotiation in general, it’s the same thing – maybe we actually want to go to North Carolina, but we don’t want to tell the North Carolina government. We won’t say, “Oh yeah! We’re coming North Carolina. Don’t you worry about that.” What we say is, “Well, we’re considering North Carolina. We’re also considering Alabama and Georgia and some other places. So, what can you do for us to come to your state?” That’s big. You’d need them to work for your business.
Then, you also need a team that knows what they’re doing and you need to have control over the whole process, because if you have a broker that is finding you space in North Carolina and accidentally says, “Oh! Don’t worry, they are definitely coming here.” That deal is pretty much done. That will cut your legs out from underneath you. So, you need the incentive negotiator and site selector to be the same person or the same company so they’re all on board. It needs to be top secret, which is typically it is. This needs to be handled right because a lot of money is at stake.
As a matter of fact, even if you’re considering remaining where you are, but you could leave and save a lot of money or make a lot of money, then you just need to make that known, too. Say, “Hey! You know, we would maybe like to stay in this city and state, but the incentives to go elsewhere are just too good to refuse.” And, see what you can get for staying.
N: The truth of the matter is that Alabama could say something that would completely change your plans.
C: Absolutely! I don’t know if you’ve noticed all of the big auto manufacturers going to Alabama and Tennessee. There are packages involved that are serious, serious business.
Now, we do run across some people who say,“Oh no, I don’t need Government Incentives. I’m not that way.” Well, do you have stock holders to think about? It is similar to paying your taxes. You need to pay what is due, but there is nothing wrong with arranging things so you could pay as little as you have to. So, it’s something to think about.
I think the biggest point to take away here is that the amount of money we are talking about can be much more than you think it is. And one final thing too, with a lot of Statutory Incentives, there is a lot of red tape if you are doing this by yourself. If you are being wooed to go to a certain area and you have certain promises made to you, at the end of the day, don’t be surprised if at the last minute they say, “Oh, oh wait a minute. I see you don’t qualify for this or that exactly, and those things get taken away. It’s all negotiable and it gets pretty brutal, but the point is that there is a big number out there for Outside Incentives and you need to be aware of it.