Sometimes when new companies experience sudden growth they find themselves in need of a new space as soon as possible. But for a new business owner, the process of locating a space and negotiating a good lease can be a challenge. Here are a few steps to take as you start the lease process, as suggested in the article “When Your Startup Is Ready to Rent an Office on Its Own”:
#1 Asses and Organize Your Finances
One of the most important questions a property owner will need to know about is whether or not your business will be able to pay rent and what will happen it you cannot. Property owners usually require a security deposit or a personal guarantee from an individual who can be financially responsible for your business. Take some time to compile financial references, bank statements, tax returns, and possibly even some sort of documentation from your bank vouching for your available credit. If at all possible, try to avoid offering a personal guarantee for your office space, which would mean putting your personal assets on the line in the event that the company fails – a very risky move.
#2 Select a Space With Room for Growth
You do not want your business to have to move again immediately, so really think carefully about the ideal amount of office space your business needs as well as the type of space your business needs – both at present and in the future. If at all possible, try to ask the landlord for an option space, or the first rights to an offer on another space in the building that becomes available during your tenancy. You might also consider choosing to rent extra space from the beginning, which you can sublease to another business on a short-term basis – but make sure that this is agreed upon clearly in your lease. Also try to get the right to assign the space to another business or individual in the event that you do need to move.
#3 Get Expert Help
Before you seriously consider any spaces, make sure you have someone that can give you solid commercial real estate advice. Try to look for a commercial real estate broker who specifically represents tennis or start ups. You want an agent who will understand the particular needs of a new businesses and can be a liaison on your behalf with landlords. It is important to work with a tenant broker, because you know they will represent you and your business versus the owner of the property. Usually these brokers are paid for by the owners of the property, so it will not be a financial burden to your business.
For further advice, consider consulting an engineer, architect, and an experienced real estate lawyer who handles leases and the particular area where you are looking. Working with these professionals early in the process could potentially save your business time, stress, and money in the long run. Another general benefit of seeking professional expertise is that it frees you up to continue to focus on your day today business tasks. If you are too distracted by the leasing process it can hurt your business is productivity at the time.
#4 Watch For Hidden Costs
Leases can be riddled with hidden costs for tenants. Whether it is marking up utility costs, or charging extra fees for construction, these expenses can have a drastic impact on the overall price tag of the space. This is another reason it’s beneficial to seek legal counsel. Experienced brokers or attorneys can help find these costs and judge their fairness in the current market and location. They can also help determine the benefits your company might be entitled to in a lease, such as a rent-free period, an allowance for tenant improvements, or other owner contributions and incentives.
#5 Determine Your Business’s Specific Needs
Sometimes businesses need a property owner to build out on the property, which is a major but not uncommon decision. If this is something your business needs, it is obviously going to be a major part of lease negotiations. But in addition to this companies might also have more specific needs – for instance having to do with antennas, energy, backup power, or kitchen facilities. Expect most leases to only cover very basic amenities, so in addition to negotiating for any construction you need done, you will also need to be very clear about any of these other special requirements.
If you’re startup business is getting to the the point where you know that you will need a new space, make sure that you as the owner are also ready to take this step. Seek the right counsel, do plenty of research, and make sure you know what your business needs and can offer a property owner.