Guest Column, By Dean Swanson
Opening a brick-and-mortar location will be one of your biggest ongoing costs, as well as a legal commitment, so it’s important to weigh all your options before you sign on the dotted line of your lease. In this column I will discuss some important considerations regarding how to stake your claim on a location for your business.
This is the 10th in a series of columns that provide several helpful business topics for the new small business. It is based on one of SCORE’s recent projects that was developed with the help of and in partnership with FedEx. This project is called Startup Roadmap and outlines every step in starting a business. A SCORE mentor may use this program to help you reach your goal smoothly.
Choosing your company’s physical location is a crucial decision — one that can make the difference between customers finding your business or passing you by. The right business location will help you connect with your target customers, establish credibility as a business and demonstrate immediately what you sell. I will discuss three vital tasks for consideration.
Task No. 1: Research
As I have stated, opening a brick-and-mortar location will be one of your biggest ongoing expenses, so it’s important to weigh all your options before you sign on the dotted line. Start by determining your location requirements based on your business plan. Here are some questions to ask when looking at locations:
• Are there customers nearby? If your business relies on customers actually walking in your door, you’ll need to choose a location near lots of people in your target market.
• Does the space need modification, or is it move-in ready? If structural updates such as rewiring or knocking down walls are needed to make the space suitable for your business, get a local contractor’s estimate on how much this will cost and how long it will take.
• Is the area zoned for your type of business? Zoning laws may restrict the type of signs you can put outside your business, the hours you can operate or the type of business you can run from that location.
• What businesses are nearby? You don’t want to be too close to businesses that directly compete with yours.
• What is the cost? Rent is only part of your total cost for a commercial space. Other costs can include utilities, janitorial services, security services, real estate taxes and maintenance of common areas.
When choosing your location, there are also other considerations specific to various industries (watch for further suggestions on these in future columns).
You should also consider whether you need dedicated office space or if you could use a co-working space instead.
Choosing your physical location is a complex decision that has lasting legal and financial implications. Take advantage of your SCORE mentor’s experience and knowledge of the local business environment to help you make the right choice. Your mentor can review your ideas and remind you of the factors you may not have considered.
Task No. 2: Negotiate a commercial lease.
If you are not purchasing a location, it’s a good idea to have more than one location under consideration as you start negotiating. This way, you can compare what different landlords are willing to offer and bargain with them to get the best deal.
Here are several items to consider when you look over a commercial lease:
• What is included in your cost?
• Find out if your space has its own utility meters or costs are split among tenants based on square footage.
• For services that aren’t included in the rent, estimate your monthly costs and build them into your overall cost so you can make an apples-to-apples comparison between different locations.
• Is a security deposit required? If so, how much?
• How will fit-up or build-out costs be handled?
• If you want to make additional changes to the space in the future, can you do so?
• Can you sublet all or part of the space to another tenant?
• Can you get protection against competition?
• Can you get a co-tenancy clause?
• How will disagreements between tenant and landlord be handled (mediation, arbitration, etc.)?
• What are the lease terms?
• What happens if you need to terminate the lease early?
• Can you get any additional perks thrown in?
Keep in mind that negotiation is accepted and even expected when discussing a commercial real estate lease. If you know what features of a lease are essential for your business and which are just nice to have, you’ll be in a better position to negotiate.
Task No. 3: Buy or lease equipment for your location.
Figuring out what equipment you need for your business, and where you should cut back or splurge, will help you avoid making poor choices. Once you know what’s essential and what’s just “nice to have,” you can make the most of your startup budget and ensure that you’re properly equipped for success.
You may need some or all of the following:
• Mobile devices
• Printer, copier, scanner
• Phone system
• IT assistance
• Packing and mailing equipment
• Industry-specific equipment and furnishings
Dean Swanson is a volunteer certified SCORE mentor and former SCORE chapter chairman, district director and regional vice president for the northwest region. The local SCORE chapter can be found online at www.scmnscore.org.
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