If you’ve ever contemplated setting up your own business then this new series could be just what you need to get the cogs turning. In the coming weeks we’ll be exploring all aspects of going it alone – from determining a clear proposition and plan, sourcing premises, sorting equipment, making decisions on hardware and software, marketing and promotion, finances and staying on the right side of employment law. Our aim being to help you consider what’s important before you realise in your enthusiasm you haven’t properly considered something or that the decisions you’ve made have boxed you into a corner.
This time, thinking about where your business will be located and searching for premises.
Thinking about long-term requirements
Making the right choice when it comes to business premises should help cut down on unnecessary costs both in the here and now and further down the line. You should think carefully about what your business needs to both operate and expand and what you can actually afford, both now and in the future.Working from home, at least to begin with, may be both practical and cost effective but there will be negatives too – not least distractions, poor delineation between work and home life, and, for client-centred activities, the box room may not be a suitable venue so you might end up doing a fair bit of travelling or end up hiring rooms (at cost) for meetings and presentations. This may, therefore, be a false economy.
Drawing up a list of requirements will allow you to consider what you need in more detail. Location is a crucial component – ideally you’d want somewhere that’s easy for both potential customers and staff to get to. Remote premises may be cheaper but if they’re hard to get to they may severely hamper your ability to operate. Consider car parking provision and links with local transport too.
It can be tempting to choose a location to reflect the image you’re trying to project but paying over the odds for luxury suites can severely impact on your bottom line and may be something you can’t afford from the outset. You need to be realistic.
The size of the premises you’re investigating and the internal and external layouts are also crucial. Choose somewhere with not enough space (or space that’s poorly configured) and your working experience is likely to be uncomfortable. Many processes may even be impossible to achieve if the building space is particularly prohibitive and you may not be permitted to make the changes you need to make somewhere workable – be sure to check before signing up.
Think of the future as well as your current needs – growing your business will require room for storage and extra staff. How far could your chosen premises accommodate your requirements and at what point would you have to think about another costly move? You need to think about the practicalities too - Are the facilities good enough? Do you have any special requirements; perhaps access arrangements for staff or customers? What’s included and available when it comes to water, drainage, power and utilities? With a clearer idea as to your requirements, make a list of locations and premises you’d be willing to consider. What size of building would be appropriate? What requirements can you not budge on and which are merely ‘nice to haves’.
Renting or buying? What's affordable?
Cost is likely a key factor in determining where to locate – and you’ll inevitably need to trade off location with affordability.
For most, renting premises is likely to be the most realistic option. Rented premises are likely to be easier to find and much cheaper than buying. Rented premises typically allow you a degree of flexibility that you don’t have when owning premises. When securing rented premises you should agree conditions in advance and contracts typically offer a significant degree of legal protection. Bear in mind that you’re typically responsible for maintaining and repairing a building even if you don’t own it. Rental agreements are often prohibitive when it comes to making interior changes. You’re also at the liberty of the landlord deciding to increase rents and you need to bear in mind that agreements typically run for a 15 year period.
If you are looking to buy, then be sure to factor in not only the purchase price but also costs for ongoing maintenance and repair. You’ll also need to budget for solicitors’ fees, building surveys and stamp duty and commercial mortgages typically require you to stump up 15% of the purchase price by way of a deposit. Securing one can be incredibly time consuming. Buying, however, obviously brings the advantages of the fact that if you own premises you can tailor and configure them as you require. Owning your property means you might also choose to sell, perhaps at an increased value, depending on the vagaries of the market, in the years ahead?
Whether buying or renting it’s vital to check legal terms to ensure there are no hidden clauses, obligations or costs. You’ll also want to ensure that leases are not overly long and repayments are likely to be affordable allowing you to keep to your side of the deal over the contract term. If buying, you need to ensure you can not only afford repayments but also the relevant insurances and other costs. A commercial property solicitor will be well placed to check through your lease and point out any pitfalls, helping you to secure a better deal.
When considering affordability remember to factor in the myriad of outgoings that will impact on what you’re able to afford. As well as mortgage or rental payments, you’ll need to think about the equipment you’ll need (IT, telephones, stationary, even vehicles) and the upfront costs to move into new premises. All these incidentals will soon mount up.
With a clearer idea of requirements it’s time to see what’s out there – do your research and check local and specialist newspapers for current listings. Surveyors, local authorities, chambers of commerce, trade associations and commercial agents are all good sources for current property listings. Your own personal or business network may also be able to provide some ideas. Whoever you consult, you should look to create a generous list of possible purchases, stick to your requirements and be thorough.
Previous: Starting out in practice: The business case
Next: Starting out in practice: Hardware and software
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