Helping a mate - Commercial Feasibaility - Lease

[Kamak]

Hi Guys

I have a great mate who is giving considerable thought to picking her homeware business up and moving and needs to do a feasiablity study if you like on the pros and cons of doing this, including whether to take up the offer for free rent or other incentives. Does anyone have some experience with this sort of thing? I'd really like to help her if I can build up a spreadsheet with the indicative costs or at least things she should consider.

 

[Scott No Mates]

As your friend already has a business model which they are happy with (possibly), then they would be well aware of their current occupancy costs ie: (rent + outgoings) / gross turnover (from direct sales, not internet etc).

To determine their future rent, they should consider either improving this ratio (ie lower rent + o/g or greater turnover). This is a basic metric.

For their budgetting purposes they will need to compare:

Cost of fitting out new premises (design fees, DA, construction/fitout), down time, printing of new stationery, relocation costs, lease fees (if different to renewal), time to be spent negotiating new lease (or cost of tenant advocate/lease negotiator).

Also need to consider defit & make good cost of existing premises, phone/mail redirection, period paying double rent (if applicable), changes to website etc.

 

[Martyn Fleming]

Hi Kamak

Good points raised by Scott.

Something else that's worth considering is how your mate intends to build patronage and sales at the new premises and the expected time to do break even and grow.

If the business will rely on goodwill (clients remaining sticky between location 1 & 2), it's worthwhile factoring in the distance between location 1 & 2 and the impact this will have on building up the business again. That is, the longer the distance, the more patronage drop-off you should expect.

If the business depends on foot or drive-by traffic (I expect this will be the case), location will be critical and perhaps goodwill isn't so important. Despite this, people take a while to absorb the fact that a new business does in fact exist and respond when driving or walking by.

These relate more to the cashflow of the business and are less directly related to 'move costs', but can be worth thinking about when weighing up different options (one close, one further away).