Risks and Safeguards with a Commercial Lease

While it's often said that "money makes the world go round" ... building good working relationships with others has to be one of the most important priorities for your business - that is, if you want your business to be around for the long-term!

At the same time, another priority that's high on the radar of business owners is to minimize their exposure to potential risk. 



As we've worked with our clients who are preparing their business plans, or as they get ready to 'pitch' for funding or buy-in to their proposals, we recognize that building solid, mutually beneficial relationships are important for the survival of your business. 

In this post, our friends at The Lease Coach share some valuable suggestions that touch on and support what we've just said. Thank you once again Dale Willerton and Jeff Grandfield for these helpful tips for our "Business Success" audience!

 
Negotiating Commercial Leases & Renewals For Dummies

Commercial Leasing Tips for Commercial Tenants

By: Jeff Grandfield – The Lease Coach

Dale Willerton and Jeff Grandfield

For many business-owners, negotiating a good lease or lease renewal against an experienced agent or landlord can be a challenge. While an entrepreneur focuses on marketing and managing, savvy real estate agents and brokers are specialized sales people. Their job is to sell tenants on leasing their location at the highest possible rental rate.

As explained in our new book, Negotiating Commercial Leases & Renewals For Dummies (co-written with my colleague, Dale Willerton), tenants may go through the leasing process only two or three times in their entire lifetime – yet they have to negotiate against seasoned professionals who negotiate leases every day for a living. Negotiating appropriate leasing terms is vital for an entrepreneur as the amount of rent he pays will directly affect the business’ financial bottom line.

Whether you are leasing a new location for the first time or negotiating a lease renewal for your business, these are some money-saving tips for tenants: 

Avoiding Personal Guarantees: It may sound over-simplified, but plainly saying “no” to personal guarantees will often be all it takes to avoid them. Too many tenants passively accept a guarantee because it was left to the end of the negotiations for discussion. If you are strongly opposed to guarantees, bring it right out in the open to begin with before you invest several weeks on the deal. In most cases, a limited personal guarantee (which declines over the course of time) can be agreed upon – but should be equivalent to the tenant allowance or other up front risks or expenses to the landlord and not be unlimited. 

Avoiding Letters of Credit: Some landlords request Letters of Credit or Security Notes rather than personal guarantees. This is where the tenant’s bank guarantees to pay the landlord a pre-negotiated amount of money in the event that the tenant defaults on a lease. This type of security is worse that a regular personal guarantee since the money is too convenient for the landlord to access without going through due process. 

Befriend the Landlord and/or Manager: It can be very important for a tenant to develop a professional relationship with the owners and administrators. In the event that you ever need a favour, you will find it much easier to make a withdrawal from the relationship if you have made some deposits along the way (e.g. an annual bottle of the landlord’s favourite wine for the holidays). Since most tenants have only one landlord, but the average landlord has hundreds of tenants, take the initiative and cultivate a relationship.

For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please e-mail your request to JeffGrandfield@TheLeaseCoach.com. 

Jeff Grandfield and Dale Willerton - The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Jeff and Dale 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 JeffGrandfield@TheLeaseCoach.com or visit www.TheLeaseCoach.com.

What's been your experience?

Feel free to add your comments and thank you in advance for sharing this post with those in your circle of contacts!

                                                                                          

QUESTION: Would having a BUSINESS COACH and MENTOR be Helpful to You?  

IF the ANSWER is YES ... Take a look at our "NEXT Steps Program! 

If you're looking for flexible and cost-effective Business Coaching & Mentoring, you'll like our “NEXT Steps - Program”. It's been designed with you in mind, and provides 12 months of valuable assistance that designed to fit your busy schedule!  

For more information see: 

"Option 3 – “PVS – NEXT Steps - Business Coaching & Mentoring Program”

It's listed on our Website Registration page: 

CLICK HERE

Allowance Tips in Commercial Leases

Remember when you were a kid and the weekend would roll around? Wasn't that the time where you eagerly awaited receiving that hard earned "allowance" you'd worked for earlier in the week? 

Perhaps it was through doing various chores around the house, cleaning up things around the yard, or looking after the things that needed attention. Bottom line ... who doesn't like to get an allowance! 

With this POST, our friends Dale Willerton and Jeff Grandfield from The Lease Coach provide us with some more great suggestions to help negotiate or renegotiate a Commercial Lease. Thanks Dale and Jeff for sharing these insights from your many years of experience!

Dale Willerton

Jeff Grandfield

Negotiating Commercial Leases & Renewals For Dummies

Commercial Leasing Tips for Commercial Tenants

By: Jeff Grandfield – The Lease Coach


For many business-owners, negotiating a good lease or lease renewal against an experienced agent or landlord can be a challenge. While an entrepreneur focuses on marketing and managing, savvy real estate agents and brokers are specialized sales people. Their job is to sell tenants on leasing their location at the highest possible rental rate.
 

As explained in our new book, Negotiating Commercial Leases & Renewals For Dummies (co-written with my colleague, Dale Willerton), tenants may go through the leasing process only two or three times in their entire lifetime – yet they have to negotiate against seasoned professionals who negotiate leases every day for a living. Negotiating appropriate leasing terms is vital for an entrepreneur as the amount of rent he pays will directly affect the business’ financial bottom line.
 
Whether you are leasing a new location for the first time or negotiating a lease renewal for your business, these are some money-saving tips for tenants:


Lease Renewal Allowances: If you are an existing tenant, you may think that you can’t negotiate for a tenant allowance on your renewal term. Untrue! Approximately 75% of our clients get a tenant allowance on their renewals. Remember if the landlord is giving allowances to new tenants moving into the property, then why can’t you have an allowance too? Even if your space only needs cosmetic upgrades (e.g. new carpeting or a fresh coat of paint), negotiate for these as part of your renewal deal. Your tenancy, after all, is proven, plus there is less risk for the landlord putting cash into your renewal than taking a chance on a new (and unproven) tenant.


Go Slow For a Better Deal: Tenants often rush a lease deal and leave valuable incentives or inducements on the table. If you have the time to work with, I recommend that you take it. Often, The Lease Coach gets tenants more free rent, more tenant allowance, and/or a lower rental rate just by refusing to sign on the dotted line too quickly. If the landlord or agent is anxious to close the deal, you can use stalling techniques to better your position (i.e. you have to talk with your business partner first, but he/she is currently out of town). Tenants who invariably regret what they agreed to will usually tell you that the whole process happened so fast that they hardly realized what they were agreeing to.


Select the Best Lease Length: While a five-year lease term is still standard, it may not necessarily be the best term for your company. Three years, or even one year, for some tenants may be better if the cost of leasehold improvements are low enough as these are generally amortized over the life of a lease term. The agent – motivated by a greater commission – will want you to sign the longest term possible; however, the landlord may be more flexible. Choose the lease term that is best for you and your company.


For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please e-mail your request to JeffGrandfield@TheLeaseCoach.com.


Jeff Grandfield and Dale Willerton - The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Jeff and Dale 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 JeffGrandfield@TheLeaseCoach.com or visit www.TheLeaseCoach.com.

What's been your experience?

Feel free to add your comments and thank you in advance 

for sharing this post with those in your circle of contacts!

                                                                                          

QUESTION:  Would having a BUSINESS COACH and MENTOR be Helpful to You? 

IF the ANSWER is YES ...  Take a look at our "NEXT Steps Program!  

If you're looking for flexible and cost-effective Business Coaching & Mentoring, you'll like our “NEXT Steps - Program”. It's been designed with you in mind, and provides 12 months of valuable assistance that designed to fit your busy schedule! 

For more information see: 

"Option 3 – “PVS – NEXT Steps - Business Coaching & Mentoring Program” 

It's listed on our Website Registration page: 

CLICK HERE

Commercial Leasing Rates - Know the Details!

Finding the right location, at the right price for your business to operate from is an important consideration for every entrepreneur. In retail, the mantra has always been, “Location, Location, Location”. 

As we’ve worked with our clients, we encourage them to look for locations that will allow them the opportunity or option to grow their businesses in the future. When it comes to your location, your customers need to be able to find you, and you’ll want your location to provide them with a comfortable customer experience. Don’t overlook factors such as ease of accessibility, ample parking, and providing those who come with a safe environment. And speaking of things to keep in mind – here are some additional timely tips from our friends at The Lease Coach! 

Thank you once again Dale and Jeff for providing these important considerations for our “Business Success” audience.

Dale Willerton

Jeff Grandfield

Negotiating Commercial Leases & Renewals For Dummies
Commercial Leasing Tips for Commercial Tenants
By: Jeff Grandfield – The Lease Coach

For many business-owners, negotiating a good lease or lease renewal against an experienced agent or landlord can be a challenge. While an entrepreneur focuses on marketing and managing, savvy real estate agents and brokers are specialized sales people. Their job is to sell tenants on leasing their location at the highest possible rental rate.

As explained in our new book, Negotiating Commercial Leases & Renewals For Dummies (co-written with my colleague, Dale Willerton), tenants may go through the leasing process only two or three times in their entire lifetime – yet they have to negotiate against seasoned professionals who negotiate leases every day for a living. Negotiating appropriate leasing terms is vital for an entrepreneur as the amount of rent he pays will directly affect the business’ financial bottom line.

Whether you are leasing a new location for the first time or negotiating a lease renewal for your business, these are some money-saving tips for tenants:

Calculating Market Rents: Landlords and leasing agents will often justify their price per square foot as market rent (established on what other tenants are paying). Today, much space is leased by category – a daycare centre may pay less than a hair salon and a hair salon may pay less than a pharmacy. In most office buildings, rental rates are more consistent and market rents can be more easily established. Don’t be fooled. Most lease deals we negotiate for tenants end up coming in well below the so-called market rents.

Establish a Prevailing Rate of Rent: The prevailing rate/prevailing rent is established for a particular building based on recent lease agreements under similar circumstances. While the prevailing rent is not always justified, it will be a good indicator of what other tenants are willing to pay. Be aware of artificially high rental rates that were only achieved through generous free rent incentives and tenant allowances.

Check Your Gross Up: Office tenants, specifically, usually pay a grossed up rent. The R/U factor (which stands for Rentable versus Useable) is normally 8 to 12 percent. Therefore, if you have 3,000 square feet with a 10 percent gross up, you will actually pay rent of 3,300 square feet to compensate for common areas on your floor. It is important for you to find out and verify the gross percentage ahead of time to avoid any nasty surprises. It is the architect who designed the building – and not the landlord – who determines this figure.

For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please e-mail your request to JeffGrandfield@TheLeaseCoach.com.

Jeff Grandfield and Dale Willerton - The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Jeff and Dale 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 JeffGrandfield@TheLeaseCoach.com or visit www.TheLeaseCoach.com.

What's been your experience? 

Feel free to add your comments and thank you in advance

for sharing this post with those in your circle of contacts!

                                                                                          

QUESTION: Would having a BUSINESS COACH and MENTOR be Helpful to You?

IF the ANSWER is YES ... Take a look at our "NEXT Steps Program! 

If you're looking for flexible and cost-effective Business Coaching & Mentoring, you'll like our “NEXT Steps - Program”. It's been designed with you in mind, and provides 12 months of valuable assistance that designed to fit your busy schedule!

For more information see:

"Option 3 – “PVS – NEXT Steps - Business Coaching & Mentoring Program”

It's listed on our Website Registration page: 

CLICK HERE

Commercial Leasing Tips for Commercial Tenants

Location can be a 'Key to Success' with many business concepts. 

While with others ... they seem to be able to thrive almost anywhere - just like this Dandelion we found growing from a crack in a well-worn railway tie.

When it comes to finding the right location for your business, we'd encourage you to think about what will be best for your customers. Where would your customers expect to find you? If it's important for your customers to come to you, your decision on a location can 'make or break' your business. And when you've found that 'perfect location', work diligently to secure it on terms that are in your best interests. Getting some assistance from professionals who've helped other entrepreneurs can save you both time and money. 

Here with some more timely commercial leasing tips are our friends from The Lease Coach!  Thank you Dale Willerton and Jeff Grandfield for sharing these helpful tips for our "Business Success" audience!

Dale Willerton

Jeff Grandfield

Negotiating Commercial Leases & Renewals For Dummies
Commercial Leasing Tips for Commercial Tenants


By: Jeff Grandfield – The Lease Coach 

For many business-owners, negotiating a good lease or lease renewal against an experienced agent or landlord can be a challenge. While an entrepreneur focuses on marketing and managing, savvy real estate agents and brokers are specialized sales people. Their job is to sell tenants on leasing their location at the highest possible rental rate.

As explained in our new book, Negotiating Commercial Leases & Renewals For Dummies (co-written with my colleague, Dale Willerton), tenants may go through the leasing process only two or three times in their entire lifetime – yet they have to negotiate against seasoned professionals who negotiate leases every day for a living. Negotiating appropriate leasing terms is vital for an entrepreneur as the amount of rent he pays will directly affect the business’ financial bottom line.

Whether you are leasing a new location for the first time or negotiating a lease renewal for your business, these are some money-saving tips for tenants: 

Be Pleasantly Assertive … Not Passive: If you don’t take control of the situation, the leasing agent will. If you see a property you would like more information on, call the agent and ask him/her to e-mail you the site plan and related details. Don’t drop what you are doing and run over to the site for a meeting. For the first meeting, have the agent come to you at your place of business. If you like what you hear then, you can schedule to meet at the site a few days later. Try to set viewing times convenient for you … remember that you are the customer. 

Location, Location, Location: For most retailers, selecting the right property is critical enough, but leasing the right location within that building can be even more important to your success. On the other hand, most office-type and industrial tenants do not rely as heavily on location to produce business. Proper site selection takes time and objective consideration. Remember that your location is the most difficult part of any lease agreement to change after you open for business. 

Negotiate for Early Occupancy: If your commencement date is June 1st, but you are ready to open your new business on May 19th, the landlord doesn’t usually mind (as long as the site isn’t still occupied by another tenant who hasn’t yet moved out). The landlord will, however, expect you to pay rent for the early occupancy period. By negotiating for rent free early occupancy, you can make money – depending on how you look at it. Whether it’s a few days or a few weeks, you win! 

For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please e-mail your request to JeffGrandfield@TheLeaseCoach.com. 

Jeff Grandfield and Dale Willerton - The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Jeff and Dale 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 JeffGrandfield@TheLeaseCoach.com or visit www.TheLeaseCoach.com.

What's been your experience?
Feel free to add your comments and thank you in advance  

for sharing this post with those in your circle of contacts!

                                                                                          

QUESTION: Would having a BUSINESS COACH and MENTOR be Helpful to You?
 IF the ANSWER is YES ... Take a look at our "NEXT Steps Program!

If you're looking for flexible and cost-effective Business Coaching & Mentoring, you'll like our “NEXT Steps - Program”. It's been designed with you in mind, and provides 12 months of valuable assistance that designed to fit your busy schedule!

For more information see:

"Option 3 – “PVS – NEXT Steps - Business Coaching & Mentoring Program”

It's listed on our Website Registration page:

CLICK HERE

Business Planning Now - Potential Gains Later!

Over the past few weeks I've enjoyed working closely with a client in putting together a fairly detailed business plan. While we never met face-to-face because of the distances involved, the process we used seems to have worked well. In this instance, the business plan was needed to secure additional funding for the purchase of specialized operating equipment. 

Why were we involved?

Good question! 

It's not that the client was new to business, in fact, they previously owned and operated a very successful business which they sold several years ago. 

Like so many entrepreneurs who are very good, even exceptional at doing what they do, a KEY to SUCCESS is knowing when to bring in additional help!  

Know your strengths and your areas of weakness. Your customers come to you and use your services, and purchase your products because they know they can count on you to deliver every day. The fact is - writing a business plan just isn't one of those daily things that the owner has on their regular 'to do' list! But it is an area where we can help!

There are many reasons for having a business plan. Start-up is one of them, but for the entrepreneur who's thinking long-term, having a business plan can become even more important. As we've seen over the years, one of the biggest reasons for having a business plan is that it can help you maximize the value you receive when you retire, or move on to your next venture!

Now, here are some great suggestions to help you when it comes time to preparing for your business exit strategy! Thank you to our friends from Sunbelt Business Brokers in Edmonton.

Minimizing Taxes When You Sell Your Business

ALTHOUGH our one-cent coin has been retired, the premise "a penny saved is a penny earned" still holds true for those in business. We don’t want to pay out any more than we have to in taxes.

To capitalize on the best tax strategies when selling your business, an owner needs the professional guidance of accountants, lawyers and financial advisers.

At Sunbelt, we advise Sellers to drawn on such expertise regarding two main tax structures in the sale of a business:

1) the shares of a corporation and

2) the assets of the business.

Sellers who own the Shares in their corporation can receive some or all of the proceeds of the sale of their business tax-free - if they meet the criteria of the Lifetime Capital Gain Exemption.

Asset Sales are often preferred by a business Buyer. Here the assets are recorded at fair market value and amortized over time, accelerating the Buyer’s tax savings. Asset sales also avoid most of the legal and tax liability that the business might face in the future.

Hybrid tax strategies are more complex and involve negotiating the sale of a combination of assets and shares. Today we will simply be looking at Share and Asset Sale approaches.

Tax considerations, type of business and lead times can affect the type of Sale. Timing on the close of the sale of your business can also be a significant factor as you will see below.

Share sale

The difference between the cost of the shares and the sale proceeds is a capital gain. By taking advantage of the Lifetime Capital Gain Exemption in 2016 of up to $ 824,176, share owners can receive the capital gain tax-free, if they meet the criteria.

Advance planning is usually required to ensure:

A.     Shares are of a Canadian-controlled small business corporation;

B.     Shareholder(s) have owned the shares during the 24 months preceding the sale;

C.     Substantially all (at least 90%) of the company’s assets are used in an active business in Canada at the time of sale;

D.     A minimum of 50% of the company’s assets have been used in active business in

the prior 24 months.

Potentially significant tax could be saved by removing any excess cash, portfolio investments and investment properties not being used in the active business. Many of our clients have achieved this through insurance vehicles.

Another option is to multiply the capital gain exemption by having your spouse and/or children own shares (through a trust), so each can use their lifetime capital gain exemption. This can be set up through an estate freeze two years prior to the sale of the business. We highly recommend working with your accountant and a tax lawyer as part of your exit planning team.

Negotiating the structure of the purchase can be difficult as the Buyer and Seller have conflicting goals. Sellers want to sell shares for tax-free capital gains; Buyers want to buy assets to get the stepped-up asset values and to avoid liabilities for past business activities. The purchase price is often discounted in a shares sale because the Buyer is losing the tax shield against future earnings.

If you own shares of a small business corporation, set an annual review with your accountant and tax lawyer to continue meeting capital gain exemption requirements. Keep in mind that as shares are deemed to be sold at fair market value on death, appropriate planning may avoid placing a tax burden on your estate.

Asset sale

The remaining value relates to goodwill, also amortized over time. When the Seller receives proceeds in excess of the "tax cost" (UCC) of the asset, tax will be due. The proceeds need to be allocated to the various assets being sold; some may need to be appraised.

The Buyer may agree to buy some of the assets at the end of December and some at the start of January, splitting the taxable income and capital gains between two years, helping to minimize taxes for the vendor. Your accountant and tax lawyer can help you determine if this is of advantage.

The existence of significant eligible capital property (goodwill) can benefit both the Seller and the Buyer in an asset sale. The Buyer, who can amortize the goodwill, will generally be willing to pay more for assets to offset increased tax costs to the Seller.

The Seller may enjoy a small tax savings or a small tax cost and a significant tax deferral or a moderate tax deferral depending on whether or not the sale of eligible capital results in income eligible for the small business deduction.

Planning - three-to-five years ahead - is the best way to maximize the after-tax dollars on your sale.

A Sunbelt Business Broker can work to help you optimize your tax position in structuring the sale, setting the transition requirements, and helping both parties negotiate a favourable financing strategy.

The Sale of your business can be a fairly complex transaction, and your Sunbelt business broker is there to help facilitate the process for the Buyer and the Seller’s mutual tax advantage, where possible. 

Sunbelt Business Brokers Edmonton

Sunbelt’s team of brokers, operating at local and regional levels, have experience selling small to medium sized businesses.

Michael McCulloch

Dale Alton

 

Sunbelt is the world’s

largest business brokerage firm with approximately 300 licensed offices located throughout the world,

and 33 offices across

Canada alone.  

More than 1,400 Sunbelt brokers annually coordinate an estimated 4,000 Main Street and Middle Market business transactions. 

A variety of strategies are required to sell businesses from different industries, of different sizes, and in different economic climates. Many Sunbelt brokers have specific industry experience and cooperate with their counterparts to identify the buyer and create the right framework for the sale.

Your Local Sunbelt Business brokers sell a diverse mix of main street businesses valued under $3 Million. Mergers and Acquisitions of larger and more complex business transactions of up to $30 Million are managed out of the Ottawa Head Office. We would like to help you plan and look forward to retirement, expansion or an exciting new business opportunity.

Have you ever thought about selling your Business?

Sunbelt represents clients who may be interested in buying a business like yours. If you are thinking of selling a business now or in the next 3 years, discover what your next steps should be. Feel free to contact our Sunbelt Business Brokers Edmonton office if you have any questions or would like a free confidential consultation. Give me a call. Dale Alton – 780-878-8787

Sunbelt - The Place to Buy or Sell a Business. 

* Thank you once again Michael and Dale for providing us with the valuable insights provided in this article!  

Over the years, we've enjoyed assisting entrepreneurs who are based in a number of different locations. Technology has allowed us to extend our reach and work closely with those who are even further afield! Our Business Coaching and Mentoring assistance can be tailored to meet your needs. Here are some of the many comments that business owners have provided regarding the help they received from us with their business development plans:

· This will help focus my attention, instead of being scattered
· It will get me more organized, streamlined, and keep me on track
· I’m able to really evaluate the risks associated with moving forward
· I’ll be better prepared for what to expect as I grow my business
· It reinforces the need to have a well thought-out business plan 

Having a business plan can help ensure that you're heading in the right direction with your business, and that you have the necessary resources to get you safely to your intended destination! 

In closing, we invite you to consider Pro-Vision Solutions Inc. as a part of your TEAM of business professionals. We're pleased to assist you with your business planning, through start-up, growth and expansion. Let us know if you would like to have a conversation!

NOTE: For more information on the services provided by Pro-Vision Solutions Inc. and how we can assist ... please visit our Website: www.pvs4u.ca