“Location, Location, Location” .. If that caption sounds a bit familiar that’s because we all know somebody who regrets sitting their business in the wrong location or choosing sub-optimal premises. The choice of home for a business is one of the most important decisions the business owner can make, as the ramifications of a poor decision can be fatal to the venture or can be a drag on finance and operations for years to come.
In this article, I will examine some of the main issues that facing business owners when seeking a base for your enterprise. Quite often, this is a decision requiring a holistic approach.
If you do make a purchase, are you going to do it in your own name, the business name, a special purpose vehicle or in the name of your pension fund? Each method has its own advantages and disadvantages and this needs to be considered from a tax point of view as well as a legal one. Often it is a case of swings and roundabouts but it pays to make the correct decision at the outset, so speak to your accountant and double check the small print with your solicitor prior to signing anything.
Renting Premises & Lease Terms
The alternative to purchasing is to rent, either short term or long term. Now is an excellent time to negotiate a lease on very favourable terms, as many units lie vacant. When I leased my premises 15 years ago, the landlord was desperate as the incumbent tenant had vanished overnight and I offered 30% less than the passing rent, which became the basis of all future negotiations for a period of 15 years.
Currently you can find plenty of places with rent-free periods, refurbishment incentives and friendly lease terms, be it office, warehousing or manufacturing premises. Remember that in this economy you will probably be negotiating from a position of strength and you should shop around to make comparisons both in terms of actual rent and the conditions of the lease.
Choosing the Location
It all depends on the type of business you have and whether you rely on footfall, local custom, ease of loading, proximity to suppliers or adequate customer parking, to name but a few considerations. Although it is easy to overlook the needs of your staff, if you have a good team and cannot easily replace them, you are advised to bring their travel arrangements into the equation as well.
Remember, a tantalisingly cheap deal is of no value and indeed may be of negative worth if the location is wrong.
Have you considered the neighbours? If you are a professional firm do you wish to be above a fish and chip shop or amusement arcade? Is the general tone of the neighbourhood in fitting with the image you wish to project? Perhaps you receive deliveries on large wagons and it is going to create friction with the shops next door. Sometimes a raft of small issues can, taken together, create a nightmare – and you may be tied in for a few years.
Short Term Solutions
If you are unsure as to what you want or are perhaps hesitant to make a commitment why not consider a short-term move to serviced accommodation. It will most certainly offer you flexibility and the premises will be well maintained, although too many moves in a short period could be highly disruptive and convey a negative image to your customers.
Customising Your Space
Once you have found the ideal spot you need to measure up carefully and compare it to where you are coming from. Ideally take a senior staff member along for ideas and to point out pitfalls. Some estate agents will measure up the toilets and list it as office space, so be sure to compare like for like, and if needs be engage a surveyor.
You will need to consider the cost of alterations and installing networks for telephones, computer and security systems, plus the ease of moving machinery across. Perhaps the new landlord will contribute to these costs, especially if your cash flow is tight and you are signing a long lease. Do not forget to ensure that rent reviews and break clauses are working in your favour, and make sure you will not be clobbered with service charges or face a large bill for reinstating any alterations you may make, at the end of the lease.
Health & Safety and Running Costs
Is the new building health and safety compliant and will it need modified for disabled access? Are there capital allowances for plant and machinery for a purchaser? If the landlord hasn’t got the answers readily available it may be worthwhile to speak to a professional who understands these issues. Do not settle for vague answers simply because everything else appears rosy.
When it comes to running costs do not assume that they will be the same as your current premises. Some buildings are more energy efficient than others and the differences in heating and ventilation systems can be considerable.
If you decide to go down the purchase route you may find yourself as a landlord, either short term until you are ready to move in or in the longer term if there is surplus space but everything else stacks up in your favour. When purchasing it is advisable to use a finance broker to get you the best deal from the banks especially in the current climate where cash is scarce and loan terms are onerous.
Finally, do not forget to inquire about council tax and utility supply arrangements. They can be an ongoing source of grief that you may not find out about until you have signed the dotted line.