Get Your Business Out of the House!!

By
Commercial Real Estate Agent with The Vollman Company, Inc. CABRE# 01703483

When You’ve Outgrown a Home-Based Business Arrangement

 

First of all, congratulations.  Growing a business over the past several years has been no easy feat and you are now one of the survivors.  If you are a service provider, the house may no longer be a good fit if you need to hire employees, especially since many cities and counties restrict or prohibit workers in a home business other than the owner.  For those of you who sell goods on the internet, through delivery, drop ship, or pick-up, you may likely have more merchandise than room to store it.

 

Either of these scenarios or others can force your hand and cause you to seek new digs.  You started the business at home with the plan to grow and become more profitable. You’ve worked hard to get to this point.  Now what?

 

After working with clients in this stage of growth and transition, 4 primary questions need to be answered and accommodated:

 

1.      What is the entire cost for changing from home to business address?

2.      Have you revised your business plan to reflect the ‘new’ cost structure, vision, and goals?

3.      What is the Rent-to-revenue ratio for your industry?

4.      How do you assess locations, terms, property condition, and lease vs. own in selecting the best new ‘home’ for your business?

 

I’ll touch on the Business Operations items today and address the Location considerations in a follow-up post. 

 

#1. - Entire Cost.  There’s the obvious, like rent or mortgage, new stationary, business cards, and everything else with your address on it.  Less obvious includes the deposit or down payment for space, cost of improvements to the new space (additional build-out, displays, counters, etc), business systems (internet, computers, copiers, POS, credit processing, etc), marketing, and the move itself. 

 

Some businesses may suffer a drop in revenue when they move simply because theres only so many hours in a day.  If you’re moving desks, cabinets, and product to the new store, you’re probably not on the phone selling.  On the plus side, you’re a survivor and have been working your tail off to minimize customer impact.  The more thorough the plan, the smoother the move, which results in the smallest impact on revenue.

 

#2.  Revising your Business Plan – We’ve essentially identified the transition elements above that you need to consider when ‘planting your flag’ in the business landscape.  The remaining and equally important parts of the plan include new growth projections, operating and reserve cash considerations, new fixed and variable cost structure, and future growth plans.  These are essential considerations to make to ensure sustainability well into the future.  If, for instance yours is a seasonal or cyclical business where revenues are predictably uneven throughout the year, events like when you purchase inventory, pre-sell orders, and perhaps the ideal location becoming available may heavily influence your timing and costs.   There will also be new costs for additional insurance and all the payroll costs if you add employees.  You may even be at a juncture where you want to offer benefits to you employees… and yourself! 

 

Most likely, you are expanding because you have a bigger vision and greater goals for your business or company.  Be sure that your plan reflects that vision and those goals and use them to drive you decisions on space, location, and cost.

 

That should be enough to get you thinking about the right set of details regarding your transition of business operations from your home.  Next, we take on the challenges of a new physical location.

 

 

 

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Rainmaker
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Eric Crane -- Your Full Service, Discount Fee Realtor®
DPR Realty LLC - Gilbert, AZ
Greater Metro Phoenix Arizona

Hi, Dan -- great blog for the small business owner who is considering taking the next step.  I like you focus on the 'entire' cost -- including some of the variables that are not always considered up front.  best to you -- Eric

Mar 05, 2013 12:27 AM #1
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Rainmaker
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Dan Mincher, CCIM

Sacramento Commercial Real Estate
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