Often I hear the comment that “we would like to have room to grow” and a that a “long term commitment gives us the feeling that we’re stuck.” Some people seem to be adverse – at least before they really think about it and weigh the consequences – to making a long term lease commitment. A real estate strategy is a very significant component of a business so when people make the aforementioned comments my first challenging question to them is “do you know the exact date that your requirements will change and you’ll need more space?” And, “can you predict today the exact amount of space you will require if and when those changes occur and what your budget will be at that time?” My motto is that growing is a GOOD problem, not a bad one. So for those who say that they cannot answer those questions precisely here are my best 6 suggestions and the reasons for them:
Commercial Space Growth – 6 Simple Tips To Help You Make a Better Decision
6 Simple Tips To Help You Make a Better Decision
1) Base your decision today on what you know for sure for the foreseeable future. Don’t speculate because it can cost you big time. What if that contract you bid on doesn’t materialize or your current growth plan takes longer than anticipated? Are you truly willing to jeopardize the health of your company on speculation?
2) Make the best deal now for the longest term possible so that you meet your minimum needs. Locking in a good deal will allow you the comfort of knowing what your fixed costs will be on an annual basis so you know what your targets are. No surprises.
3) Trying to renegotiate on an annual basis will likely put your company at risk. It’s a near certainty that once you have invested money and time into establishing your roots within a space that the landlord will raise the rent on an annual basis. Is your company growing fast enough to take on that added expense? What will that cost differential be? If it becomes too expensive what is the price of moving and how will that disruption affect your bottom line and your productivity?
4) Having a secured lease gives you a home. If you take on a short term commitment you run the risk of being pushed out onto the street. It’s important to keep in mind that landlords are looking for stability and certainty of income for their investment properties. If you are unwilling to provide that then they will continue to look for a company that will.
5) Securing a longer term lease reduces stress and saves you a ton of time. The process of renewing a lease often starts 6 months or more before the renewal date. What happens if it drags on for months without a conclusion? Imagine the stress and uncertainty. Furthermore, imagine the inconvenience of having to repeat that process every year. Is it worth putting your company at risk and exposing yourself to high levels of stress for the ‘feeling’ of freedom?
6) Most decent leases have a sublease provision in them. If your company needs to grow then you do have a way to leave your current space and this is also true if your company needs to shrink. Find a temporary solution for the new requirements and then a permanent one after your current space has been taken over by another company. One final point. If you need to move and carry your original space for a while, well then that’s precisely why I say that growing is a GOOD problem. If that happens, at least you know 100% that you can afford it and that your company isn’t at risk. If you’re growing that means you’re profitable, so that’s just the cost of making smart decisions. The consequences could cost you far more. Set your company up for success based on what your needs are today and deal with the positive growing pains down the road. Your peace of mind is worth it.
Until next time.
– Mitch Gauzas