JOHANNESBURG - In the early days of a business it is less risky if the first move out of the entrepreneur's kitchen or garage is rented space rather than bonded property.
The risk of failure remains high and the consequences of not achieving the targeted or expected levels often gets exacerbated by the burden of having to pay off property.
To minimise this risk, tenderpreneurs should consider the following tips when looking to find the right space for their business:
1. Location
It serves no purpose to occupy a grand building, even at minimal rent, situated kilometres away from the business’s customers and suppliers. Premises in an inappropriate area could mean employees struggling to get to work, having to navigate congested traffic. Identify an area that suits the clients, the employees and the budget.
2. Size
Find the right size premises because the growth of the business needs to be over the period of the lease, and often beyond. If the premises are too big, part of the rental cost is wasted on unused space. If the premises are too small, growth could mean having to move. This could result in unnecessary and often costly moving and down-time costs. Finding rented space where additional units may be available should you need them might be an attractive option to consider.
3. Office space
Often business premises come with a pre-existing ratio of warehouse-to-office space, or workshop- to-office space, which is usually a legacy of the previous occupants. If, for example, only one office is needed, ask the landlord to knock down the walls of the office space not required, to result in your ideal ratio of office to productive space.
4. The mezzanine level
Many landlords build mezzanine levels to increase the square metres they can rent out. It may work well as office space, but stairs make it a bad idea if you want to use it for storage, and the low roof can limit your ability to stack goods. Mezzanine space should normally be rented out at a lower rate.
5. Operational costs
A seemingly affordable rent may hide high electricity, water and security costs. A building with LED lighting, as opposed to old fashioned floodlights, can save your business thousands of rand over the period of your lease, as can a well-insulated building on air-conditioning costs. Make sure all the operational costs are clearly laid out and considered when you compare different options.
6. Back-up infrastructure
Ask if the premises have back-up systems for electricity and water supply, which have become more important in South Africa due to the increasing uncertainty of these supplies. Increasingly, business complexes have their own back-up generators or solar power systems as well as rain-harvesting systems.
7. Fair rental
Make sure you are not signing up for a rental that is higher than the going market rate. Shopping around for premises will soon give you a good idea of what the average rate per square metre is for the type of premises you are looking for.
8. Affordability
It is one thing to make sure that the rate per square metre is fair and in line with the market, but a different question altogether is whether your business can actually afford the package as a whole - the monthly rent, the operational costs, the cost of moving and possible increased transport costs. Do your calculations carefully to ensure that your business can afford all the costs.
9. Lease period
Carefully consider your business’s needs and make a point of negotiating the most suitable period with the landlord. As commercial landlords tend to prefer long-term tenants, the length of the lease can be used as a bargaining tool.
10. The landlord
Enquire about your landlord by speaking to previous tenants, current tenants in other properties owned and managed by the same landlord, neighbours and your wider business network. Signing a lease with a landlord you have researched will give you comfort that you are entering into a contract with someone you can trust, who respects and serves the tenants and can therefore contribute to your business success.
Ben Bierman is a managing director at Business Partners Limited