Securing a premises for your start up business can mean the difference between it launching or never opening.
Have you seen the Start Up Loans TV Advert? David O’Neal, owner of ShortCuts, is one of the featured businesses. He launched his Milton Keynes-based children’s hair salon with the help of a Start Up Loan. Below David shares his top tips for securing your first premises.
If you’ve never rented a commercial property before, have a look at the local commercial letting agents websites and get a feel for the rental value for the type of letting licence you’re after (retail, food and drink, office etc.). This will give you an insight into commercial lettings, as they are completely different to residential ones.
View, view, view
Whether you’ve started your business plan or not, you must view premises. This is great way to keep motivated and visualise your business. It will also help your business plan as it makes you think about what you might need and what extra costs you might incur this is crucial, particularly when speaking with potential funder providers such as Start Up Loans.
This will be an additional monthly outgoing on top of the annual rent. Make sure you ask the letting agent for the Rateable value of the property before proceeding.
Negotiating a good deal doesn’t mean you have committed yourself to a lease. A lease can take MONTHS to negotiate and agree (mine took 4 months). However, you do need to be confident that you will have sufficient funding in place as you will need to get a solicitor involved which will incur fees.
You can negotiate on a number of different things; for example, you could ask for a contribution to the fit-out costs, request a rent-free (or reduced rent) period whilst you get the business up and running or a minimal rental deposit (the less you give as a deposit, the more you have for furnishings). It is important to remember that when you start the business, your cash flow will be tight. Anything you can do to reduce monthly outgoings, especially during the first few months, will be hugely beneficial.
Seek legal advice
A lease is a large document with very sophisticated language that only people in law will understand. Do not try and save yourself money by taking out a lease without seeking legal advice. It is expensive, but worth it. Also, remember to include legal costs in your set up costs as this is a big chunk out of your budget.
Don’t be afraid to pick up the phone and call the letting agent to speed up the process. Poor communication between the landlord, potential tenant and solicitor can really slow things down.
Be aware that not all prices quoted (for rent, deposits etc.) will include VAT. Take this into account when budgeting.
Plan ahead, and control your costs
Once you get the keys, the clock is ticking. Make sure you are ready to renovate from day one. It’s crucial that the premises has electric/water/gas etc., so start working on having meters installed prior to signing the lease to prevent any unnecessary delays. Make time for the move, and keep a close eye on costs. Don’t get carried away with furnishings, you should have already planned out what you need so stick to that and you can always get extras further down the line when there is less pressure on your bank balance!