I often hear from startup business owners that they have trouble getting responses from landlords and leasing brokers. While I can understand the frustration of not getting a return phone call or email, I also understand the view of landlords and agents.
After listening to, and commiserating with, the business owner, I start asking some questions. It usually doesn’t take long to find out that they probably aren’t even ready to start looking at spaces to rent yet.
Do you have a business plan?
My first question for a start-up, or any business that doesn’t have a long business history, is, “Do you have a business plan?”
Why is a business plan important for the leasing process? Your business plan will provide almost all the information that will drive your leasing decisions:
- Where should I locate my business? Your business plan should tell you where your customers are located, how far they will travel, and what kind of location they expect you to be located in.
- What kind of space do I need? Your plan will tell you the characteristics of the space you need. Will it need good parking? How long will customers stay? How many customers will there be at one time? Are the amenities of the space important to your customers? How much space will you need for equipment, employees, or storage? How much money will you make on a per-square-foot basis? Do you need tenant improvements to customize the space?
- How much can you afford to pay for rent? Again, how much money will you make? What are your other expenses? How will compromises in location or amenities affect your income? Will you need help from the landlord with paying for, or constructing, tenant improvements? What are your startup costs and do you need a rent discount or free rent at the beginning of your lease?
- What are your own financial resources? Again, will you need help with Tenant Improvements or free rent? Is your own credit good? Can you, and will you, sign a personal guarantee? How long of a commitment are you willing to make?
If you don’t have a business plan, then you are not ready to go looking for spaces for your business, yet. In order to help you find a space, I’ll be asking you all those questions above. I simply can’t help you find a good space unless we can answer those questions.
Prospective business owners tend to start asking about rent rates, and even start asking for rent discounts, when they don’t have any evidence for themselves or the landlord/agent, that they will be successful as a business. Because of this, they can’t tell when a particular space will meet their needs. If they do agree to rent it, and can convince the landlord to let them, they end up going out of business quickly due to poor planning.
This is why so many landlords and listing brokers become unresponsive to startups or any business that isn’t obviously well established. They are simply tired of wasting their time, either with a prospective tenant that will decide not to lease… or what is sometimes worse, wasting time renting to a tenant who will be out of business in a year.
How do I get the attention of landlords and agents?
A large portion of what we do when representing tenants is to help them understand their space needs. This requires asking a lot of questions, and often will require bringing experts like space planners, architects, IT professionals, equipment suppliers, or contractors.
But, another important aspect of what we do is ‘packaging’ the tenant for the landlord and their agent. We help our clients put together a package of information to present to the landlord, containing:
- Business plan
- Financial projections
- Financial/Net worth statement for owners
- Credit report for owners
- Professional resume for owners/officers
We will not typically present all this information at the beginning of the process. However, by letting the owner or their agent know at the beginning that we have this information, and being able to summarize it, lets them know that we are a serious prospect as a tenant.
Putting together this package will give us the ability to identify the strengths of the business or tenant, so we can highlight them for the landlord. We want to present the tenant in the best light possible and explain the benefits of having the tenant to the landlord. Also, having this information early allows us to identify any possible weaknesses from a landlord perspective and have plans for mitigating those weaknesses.
So, in summary, if you are considering starting a business or want to find a new location for your existing, new business, don’t start looking for lease space before you are truly ready. Instead, take the time to organize your requirements and the information your landlord will need to make a lease decision. Once you are fully prepared, then get with your broker and start the search!