Small Business Growth Ideas: Buy a Bigger Building

The seams on your booming home-based business are about to burst. Or, the commercial space you’re currently occupying can’t accommodate your growth. Whichever the scenario, your small business has been faced with the opportunity to lease a new space. Here’s how to do so successfully.

1. Determine your office space requirements. Start by measuring your equipment and current work area. Then, project how much additional room you’ll need to accommodate that-and allocate separate space for an office and a showroom. Also consider your company’s expansion plans three to five years out. “You don’t want to have to move again in a year,” says Howard Potter, owner of Utica, NY-based A&P Master Images (asi/702505). 

2. Decide whether you need a storefront or industrial space. If your business sells direct to end-buyers, a storefront in a high-traffic area like a mall or downtown could be ideal. “In our first space, we had 25,000 cars going by every day,” Potter says. “It was great exposure.” If you’re a contract shop, visibility may be less important and an industrial space, which tends to cost less than a storefront, could meet your needs.

3. Shop around. To find a suitable commercial property for lease, some decorators use a realtor. Still, you can go it alone with success. A simple Internet search that includes “commercial rental” and the town you’re looking to lease in will turn up results. “You can even drive around and see what’s available,” says Potter, adding local business contacts as well as family and friends could have worthwhile suggestions. As you proceed, ensure spaces you give serious consideration to can accommodate deliveries, handle current and projected utility needs and meet building code mandates. Crucially, make sure that local zoning laws allow your business to operate at the location.  

4. Negotiate and analyze. The U.S. Small Business Administration advises that you negotiate a one- to two-year lease with the option to renew a lease. Beyond working for a great price within your budget, negotiate for add-on clauses, including the flexibility to sub-lease space and an exclusivity clause that prevents the landlord from renting to a competitor on the same property. As you negotiate, know that the increased overhead you’re taking on is more than just rent. Electrical, insurance, phone and Internet costs can be heavier. Plus, you could get hit with a double or triple net – the monthly amounts you pay for the space’s real estate taxes, building insurance and, with a triple net, maintenance. Know all these costs and analyze them against your current revenue and expenses and projected sales gains. Before signing, consider reviewing everything with a real-estate attorney.