Most of the entrepreneurs we've worked with over the years go into business because they really are good at what they do, and want to now do what they've mastered in a business of their own.
That makes a lot of sense doesn't it? However, what's frequently overlooked is that just because someone is good or proficient at what they do - doesn't automatically mean they will be successful running a business that does that type of work or provides that type of service. There are many other facets of a business that the former 'employee' turned business owner will now have to appropriately address. There's a long list of functions and responsibilities that need to be considered.
Going through a business planning process as we do with our clients helps entrepreneurs look at the bigger picture, helps to organize the business, and improve your chances of success! Let us know if you'd like to further explore this as you'll see mentioned at the end of this post.
Now here are some very important considerations with respect to you Commercial Lease agreement. Thanks to our friends, Dale Willerton and Jeff Grandfield with The Lease Coach. Please enjoy their contribution!
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Negotiating Commercial Leases & Renewals FOR DUMMIES
Differentiating Between Good and Bad Leases – For Commercial Tenants
By: Jeff Grandfield and Dale Willerton – The Lease Coach
As we explain in our new book, Negotiating Commercial Leases & Renewals FOR DUMMIES, a bad
lease agreement may hold you back from making a good profit or even result in
the closure of your business. Great entrepreneurs in poor or mediocre locations
will never reach the full potential that a better location may offer. On the
other hand, perhaps you’ve picked a great location, but leased too many (or too
few) square feet; this can prove to be a problem as well.
Combine a poor location with a high rental rate and
you have a recipe for disaster. Your business will never succeed, let alone
sell for a profit. Too many business-owners are shopping for cheap space, but
for the most part, get what they pay for location-wise. This isn’t to downplay
the need for skillful negotiation; you don’t want to pay too much for a good
location – it’s all relative. In many of the larger plazas and enclosed malls,
the property may be recognized as an excellent location, but getting stuck in a
quiet area of the property may make your business less visible than you would
like.
Another factor can be a lack of adequate parking
for your customers. One tenant The Lease Coach worked with for a midterm rent
reduction came to the unfortunate realization that their newest location was
parking starved. Just when people wanted to visit, the parking lot was already
full of vehicles. Customers parked briefly outside the front door, came in to
complain that they couldn’t find a parking space even close by, returned to
their cars and drove away.
A good lease agreement will contain primary
business terms (rent, size of location, term length, etc.) that are essential
to the completed lease deal but will only make up a small portion of the lease.
The rest of the lease agreement contains hundreds of secondary or ancillary
clauses that may or may not be financial in nature and are, typically, written
in the landlord’s favor. It is a common mistake for entrepreneurs to overlook
these terms feeling they are simply “standard”. Many of these terms can be
adjusted to reduce potential negative impacts to your business or limitation on
future rights.
Making a good lease great means removing, deleting,
or negotiating restrictive clauses in the lease agreement that will hold your
company back. For some commercial tenants, the renewal-option clause can be the
difference between whether you get to stay in your location for the long term
allowing your business to grow. A demolition clause can force you to move out
of your premises if the landlord wants to knock down the building and put up
another type of building. A poorly written relocation clause can force you into
a costly move. If a business-owner wants to sell their business and assign
their lease agreement to the buyer, the lease must have a comprehensive lease
agreement clause. However, commercial landlords often include conditions
controlling or potentially prohibiting the lease assignment (unless suitable
wording is added for the tenant’s protection). An exclusivity clause prevents
your direct competitors or neighboring tenants from offering the same services
or products. Review the hours and days of operation required in your lease; you
may need to negotiate modified days or hours when it’s unprofitable to stay
open. These are just a handful of examples of why it is important to read and
negotiate all the terms of your lease before signing.
Brevity in a lease agreement is the enemy of most commercial
tenants. A good lease agreement is longer, not shorter. Never just assume that
what the lease doesn’t say will play out to your benefit later – it won’t. As
the commercial tenant, you want everything that could possibly be an issue
addressed in your lease agreement. Remember, it’s often what is missing from a
lease agreement that really comes back to haunt the commercial tenant.
If you plan to sell your business, try to think in
terms of whether you’d buy this business based on its current lease agreement.
As a prospective buyer, what parts of the lease agreement would you not like?
Would the rent seem high? What about the Operating Costs (Common Area
Maintenance / CAM costs)? Would a shortage of parking or an undesirable neighboring
tenant drive away your potential customers and buyers of your business? Are
there renewal options valid to a future buyer? Thinking about these issues
beforehand can make all the difference in your decision-making process.
All of these are scary scenarios requiring proper
guidance from a professional who is working for you, being paid by you, and
serving your needs.
For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please e-mail
your request to JeffGrandfield@TheLeaseCoach.com..
Dale Willerton and Jeff Grandfield - The Lease Coach are Commercial
Lease Consultants who work exclusively for tenants. Dale and Jeff are professional
speakers and co-authors of Negotiating Commercial Leases & Renewals FOR
DUMMIES (Wiley, 2013). Got a leasing question? Need help with your new lease or
renewal? Call 1-800-738-9202, e-mail DaleWillerton@TheLeaseCoach.com or visit www.TheLeaseCoach.com.
What's been your experience?
Feel free to add your comments and we'd very much appreciate if you would share this post with those in your circle of contacts.
QUESTION: Are you looking at writing your BUSINESS PLAN, but finding that to be a challenge?
Over
the years we’ve found that there is great value for an entrepreneur to
put together their own business plan, yet we also recognize that writing
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