Assessing Your Business Needs
- Lesson Materials Assessing Your Business Needs Worksheet
- Completion time About 25 minutes
It's an exciting time! Whether you're finally ready to move your startup to its first location or your small business is flourishing so much that it's time to relocate. Whatever the reason, choosing your next business location requires a lot of research and planning.
In this lesson, we'll cover everything you need to think about, plan for, and anticipate. We even brought in Steven White, Senior Broker for William Raveis Real Estate, to add expert insight.
Think about your target customer. Now think about the area you're considering moving to. Do they match? In order for your business to succeed, your business location needs to match your customer profile; this includes age, race, employment, economic stability, and gender.
For example, opening a daycare in a struggling neighborhood with few family households won't do much for business. The Small Business Administration offers great – and free – resources for demographic data.
In order for you to capture foot traffic data (which will help you paint a picture of your potential location and clientele), you'll have to put on your “Sherlock Holmes” hat and investigate. Below, we've attached a Foot Traffic Worksheet that will help you piece together the area's customer base.
Believe it or not, competition in your potential location can be a good thing. Similar companies in the area might indicate that the location is a good spot for your business – just make sure that your business has something better to offer than the competition.
In today’s mobile-friendly world, comparison shopping can be a tactical business driver if you’re the better option. Steven White explains:
Outside their real estate broker’s expertise, [business owners] should research specific requirements related to the type of business, cost of goods and services, projected demand over the life of the lease, and competition impact.– Steven White, Senior Broker, William Raveis Real Estate
Take note of other businesses nearby. For instance, are there businesses that aren’t in your industry but attract the same customers? These businesses can draw foot traffic.
In addition, make sure your business is in proximity of businesses that will benefit potential customers and employees. If your business requires you to meet with visiting clients, being close to restaurants will be a great advantage for “schmoozing.” Your employees will also appreciate the option to eat out or run errands.
Most importantly, make sure your business is in proximity to your suppliers. If your suppliers aren’t reasonably located, shipping costs could get expensive and delivery delays more frequent.
Accessibility goes hand-in-hand with proximity. Make sure your business location is accessible to main streets or highways for deliveries. In addition, make sure there are adequate loading docks if that’s something your business will need.
Your business should also be easily accessible to visitors and employees. Double check that there are a number of transportation options, including public transportation, driving, or shuttle buses.
Other accessibility questions you should answer before you start your search:
- Will you need a reception area for visitors or couriers?
- Will you need 24/7 accessibility for employees?
- Will there be employee and visitor parking?
Is your business a startup? If so, will you need room to expand later on? Steven explains what you should keep in mind:
Start-up businesses often need expansion space. That opportunity could be in the same building or available in the general area in the not so distant future. The timing of the expansion should reasonably coincide with lease term extensions/expirations. Should expansion not be available within the same building, an alternative nearby will be more desirable in many cases.– Steven White
Preparing for a worst-case scenario is just as important as planning for success. In this case, an exit strategy:
An exit strategy is also important if the start-up fails. It could involve a shorter lease term to start out. Options to extend are common in commercial leasing with built-in increases should those options be agreed upon and exercised.– Steven White
Your real estate broker should be your right-hand person in choosing your office location; however, that doesn't mean you shouldn't double check things and solely rely on their word – particularly when it comes to your lease agreement.
Make sure you 100% understand what type of lease you are signing. In commercial real estate, there are a few options:
- Gross Lease: leaseholder pays a flat rental amount and the owner pays for all the property charges regularly incurred by the ownership.
- Net Lease: leaseholder pays property expenses in addition to rent.
- Triple Net Lease: leaseholder pays for real estate taxes, building insurance, and maintenance in addition to rent and utility costs.
It's always important to know all the terms of a lease and how they might affect costs beyond the signing of the lease and any extensions thereof. Are you paying for a proportionate share of property taxes, property insurance, and maintenance/repairs of the building? Factoring in any increases in costs over the term of the lease can be critical and must be accounted for in the Business Plan.– Steven White
Questions to ask your realtor:
- Can we get the price per square foot down?
- Who else is in the building?
- Can we get the lessor to build out space?
- Who pays your fee?
- Are there any building or construction projects planned for the area that might affect the businesses in the area?
Other business considerations you’ll need to look into include the following:
- Zoning Regulations | U.S. Small Business Administration
- Taxes | Tax Foundation
- Lesson Materials Assessing Your Business Needs Worksheet
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