3 Things Every Entrepreneur Can Learn from Amazon’s Second Headquarter Search
Some of the best strategies used by Amazon to play cities and states off of each other that you can utilize too when vying for tax credits.
[caption id="attachment_119967" align="alignnone" width="750"] Brossard, Canada - September 03, 2012: Money App icon on High Resolution screen of New iPad 3. The iPad is produced by Apple Computer, Inc.[/caption]
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On Thursday, Amazon announced plans to open a search for a second headquarter city in North America. According to the press release, the new headquarter will be a full equal to Amazon's headquarters in Seattle with 50,000 employees and investment north of $5 billion.
Chicago, Dallas, San Diego, Pittsburgh, and Toronto, along with states like Michigan have already voiced interest. On the surface, this can be great for the economy of the metropolis that snags the e-commerce giant.
However, what we may not see is the bidding war among contenders. Small and medium companies can leverage a bidding war too when seeking tax credits and cash incentives.
State and local governments aren't just bidding on Fortune 100 companies--they're also interested in securing smaller companies with quality jobs. In fact, state and local governments are in a dogfight to secure jobs and increased tax base and therefore willing to pay for it.
While your company may have only 0.1 percent of the employees Amazon has at its headquarter, you're not precluded from also pitting cities against each other when vying for public dollars. Remember the word 'incentive' alone means to incite or stimulate.
Some of the best strategies used by Amazon to play cities and states off of each other in return for a lucrative tax credit are as follows:
1. Create ample exposure.
Part of the effect is to create an auction atmosphere with ample exposure to churn up the bidding war. In Amazon's case, they issued a national press release. For a smaller company, consider calling several cities or states about your potential job creation and capital investment. Even consider releasing a statement of your intended project to the local press.
2. Be transparent.
You don't have to put all of your cards on the table, but sharing some information sets a positive tone. Amazon issued a seven page request for proposal highlighting key preferences and decisions drivers.
The company went as far as saying, incentives offered by the state/ province and local communities to offset initial capital outlay and ongoing operations costs will be significant factors in the decision-making process. If tax credits are driving the decision don't be reluctant to put it out there. In the final stages of the negotiation, you may also want to communicate to all the cities who their competition is too.
3. Go on the road.
Roadshows serve a variety of purposes including an introduction of future plans, a forum to provide information and an opportunity to generate excitement and interest. As Amazon narrows down their list of potential sites, they will soon reach out to communities directly and get them excited about the prospect of the project.
As an entrepreneur you can do the same. Go and visit the various communities you're considering and start setting up meetings. Roadshows are critical in selling your brand and vision.
Small and medium companies are not exempt from taking advantage of the same tax credits and incentives as multinational companies. It would be incumbent upon every growing company to look at Amazon as a model for obtaining incentives and make the business case that you too require incentives to thrive.
It may be unlikely to score a billion-dollar tax credit and incentive package without investing billions in capital and adding thousands of jobs. However, you can expect to secure incentives based on the need of the project.