Looking for a space for your business is exciting! It's also a decision that can make or break your business.
Here are 3 common mistakes to avoid when scouting out a location.
1. Rushing into a decision
Choosing the right location requires time and should not be a spontaneous decision. Draw up a list of practical criteria ahead of time that you can use to guide your decision. That way, if you get swept away by a place, you can be sure you're making a rational decision.
NeighbourhoodIt may seem obvious, but the neighbourhood you choose will have a great impact on the success of your business.Choose the neighbourhood based on:
- Where you live
- Where your employees live
- Where your competitors are
- Where your customers areOnce you have a good idea of where you'd like to set up shop, take the time to explore the area, walk around and see what kind of opportunities it could offer your business.A few words of advice from Vincent Poirier, co-founder of Momzelle: "Don't make the mistake of rushing into a decision when you visit a space."LocationEven if you're in an excellent neighbourhood, the exact location of your business is important. Do your homework on when the street gets busy and whether gaining or losing popularity.If you're opening a restaurant, shop or other service-industry business, you'll want to be visible and on a main street. However, if you don't need to have a storefront, look for something on a side street, as you'll get a better deal on rent."It's a lot easier to find a place when you come prepared with a list of requirements," says William Plamondon-Huard, CEO of Plantzy.Physical spaceWhen you're calculating the amount of square footage you'll need to run your business, consider how much room you'll need to grow. The place shouldn't be too small or just right for your needs now, but it also shouldn't be a lot bigger than you need, since the amount of rent is usually proportional to the square footage.Also, be sure to think about any special features you'll need inside and how they'll be used. For example, a kitchen for your employees' lunch break will not have the same requirements as a kitchen for a restaurant.Finally, make sure that everything is in good condition and that there are no safety risks; it's easier to negotiate repairs or renovations before signing the lease.
2. Signing the lease without reading it
Every commercial lease is different, and commercial spaces are not subject to the same rules as your apartment.
In contrast to a typical residential lease, commercial leases are more of a contract between the landlord and you. Keep in mind that everything is negotiable, and also that anything not spelled out the lease will be your responsibility to pay for.
The length of the lease is also something you'll need to agree on with the landlord. You'll need to decide what you want your future to look like.
Short-term lease: 1 to 2 yearsShort-term leases are ideal if you're looking for a transitional space and moving somewhere else later will not have a negative impact on your business.Long-term lease: 5 to 10 yearsLong-term leases have some financial advantages, because with inflation and increasing real estate values, the fixed amount of rent you're paying today could end up being below-market in a couple of years. In addition, building a customer base takes time. You don't want to have to change locations just when things are starting to pick up for your business.
When the lease is up, the landlord is not obligated to renew it and has every right to offer your space to someone else. For this reason, you should think about adding a renewal option to your lease. Negotiating a commercial lease requires you to know what you're doing. Consider getting help from a real estate professional for this step.
5 things to check before signing the lease:
- Does the heating system work well?
- How much does the average electricity bill come to?
- Where are the emergency exits, and are they easily accessible with nothing blocking them?
- What type of lock does the front door have, and is it in good condition?
- Has there recently been vandalism in the neighbourhood?
As a tenant, you agree to pay the rent and comply with the responsibilities written in the lease.
3. Failing to consider insurance
Keep in mind that you'll also need to insure your space for potential risks. Here are a few factors to consider before you make your final decision about the place you want:
- Are the premises clean and safe?
- Are the emergency exits free from obstruction?
- Is there an automatic fire sprinkler system?
- Will your customers be coming into your space? If so, is it safely set up to prevent accidents in your store? Is it wheelchair accessible?
- What type of heating system does the building use? How much do the annual heating costs come to?
You might also like: Finding the right location to run a successful business