Tips when looking for business premises
Provided by Business Partners Ltd, South Africa's leading investor in SMEs
One of the things you have to think about carefully when starting or buying a business is where it is or will be housed. There are many factors that will influence your decision, but let's look at the most important issues to get you in the right frame of mind.
The location of your business can either make or break it, depending on all the circumstances involved. So it's not a decision to be made hastily and without some experienced advice.
For those of you who have no clue about where to start, here are some points to ponder:
Location, location, location
- When buying a home, you probably have certain criteria: safe area, easy access, not too remote, convenience, the size and condition of the actual physical structure, etc. This is a good place to start when 'shopping' for a business premises
- Basing yourself in a big, fancy mall may seem like first prize, but sometimes the lease agreements, rentals and operating conditions synonymous with big shopping centres can be a strain on your business
- What does the potential landlord look for in a tenant? This is good to know so you're not caught off guard if he suddenly makes certain demands or leases to businesses you may not be comfortable being neighbours with
- Speak to your potential 'neighbours' and hear what they have to say about the premises, the landlord, the area, etc
- What are the other businesses? For example, are you one of ten boutiques in the centre/area? Do other businesses provide an overlapping customer base?
- Where are you located within the broader premises; in a pokey corner somewhere or in full view of potential customers?
- If you're buying an existing business, will it be worth moving or does it have loyal customers who depend on its location? What are the costs of relocating?
- What kind of security, insurance, general maintenance and other benefits does the Landlord offer?
Leases, legalities and landlords
Triple-check the conditions of your lease and then check it again three times. Better yet, get a commercial property lawyer to check that you are aware and satisfied with all the conditions of a lease before you sign it.
- What is your rental per square meter? You may be surprised to find that you're paying more than your larger retail neighbour
- How is the rent charged, e.g. according to your monthly turnover or size of the premises?
- Are recoveries of costs included in the rental or will they have to be added to the total rent payable?
- What are the security requirements, e.g. rental deposits, personal sureties?
- Can the landlord kick you out in favour of a higher-paying tenant?
- Ensure that the lease period is long enough; you don't want to be moving in a year
- Under which circumstances can you or the landlord cancel the lease? In this regard, are you prepared to follow all the 'rules' and are they practical to your type of business?
- This may sound terrible, but no matter how 'nice' your potential landlord seems, don't trust anything they say. Put everything in writing, with no room for misinterpretation from either party
- Who's drawing up the papers - your lawyer or his?
- What if you want to move premises?
- What if you or your landlord wants to renovate/remodel your premises or the centre
- What if you can't pay rent for a month or the business fails?
- What if the landlord goes bankrupt?
Some of these points may sound a bit harsh or intimidating, but such is the nature of business. And being overcautious when it comes to your property can end up saving your business should anything not go according to plan. In this case, all the clichés about "dotting your i's, crossing your t's" and "reading the fine print" ring true.
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