Ask a Mentor: how to tell if premises are right before committing?

Sometimes our Virgin StartUp loan recipients have burning questions that need to be answered – and who better to answer then one of our mentors who help guide the businesses we fund through their first year in business.

Today’s question comes from Charlotte Pearson, founder of Kiss Chayce, an innovative kid’s clothing shop with a sustainable angle. Baby clothes barely get worn the first time round, so Kiss Chayce buys and resells them – beneficial for families and for the environment. Her question is one that’s relevant to many business owners: what do you need to consider when looking at leasing commercial premises?

Dear Virgin Startup Mentor,

We’re looking for the perfect premises for my business, but we’ve never done this before. How can I tell if the premises are right for my business before committing, and how should I go about leasing as a new startup? What are the important things I need to think about?


Can’t See The Wood For The Lease (Charlotte), founder of Kiss Chayce

Dear Can’t See The Wood For The Lease,

This is a question that crops up again and again, as new businesses try to work out whether they should sign for a particular lease. This is especially relevant for customers who are receiving loans (including our loan recipients), as you need to know how much the lease will cost you before we can approve the loan amount; this is to make sure you’re not stung with a higher lease cost that the loan won’t cover, or to make sure you don’t take out an unnecessarily high amount of money.

First off, work out if the premises are truly right for you. If there’s a business already there, pop in and have a chat. See how the layout works for them, and note how busy they are. Whether the premises are empty or occupied, take a few hours to just stand outside and note the amount of footfall. Is it consistently busy, or are there times when it’s a bit dead? How are the shops either side doing, and are they selling products or services that cater to a similar audience demographic (or are they competitors)?

Once you’ve established that it seems like a good option to place your business, it’s time to think about pricing. Try your hardest to negotiate not just a good price, but good terms. Here are some things to think about:

- If there are a number of empty properties nearby, use this as a bartering tool to try and negotiate a lower rent. Empty buildings cost landlords – they want to lease them out.

- Try to negotiate a monthly rent rather than quarterly, which is easier on cashflow.

- Try to negotiate a rent-free period for as long as possible at your business’s start. This is when you’ll be building up your customer base and dealing with launch and set-up costs, as well as ironing out any teething problems. Your landlord is more likely to agree with a rent-free period if you need to refurbish the premises.

- Ensure you’re clear on service charge and any repair commitments. If possible, avoid obligations to keep the property in good repair, as this might mean you then hold responsibility for correcting any repairs at the start.

- Once you’re confident that this is the right choice and the right price point, put an offer in. When it’s accepted, you can factor the costs into your business plan – and then your loan can be approved. However, it's definitely worth getting  a lawyer to look over your contract before you commit - they can highlight any potential future difficulties.

Always remember that leasing a commercial premises is different to private renting; it’s in the landlord’s interest to rent to you, and you have more room for negotiation unless your business is in a prime commercial hotspot.

Good luck!



 To find out more about Kiss Chayce, connect on Facebook.

Image credit: Flickr Creative Commons