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COLUMN: Lynn Gate - What kind of premises should you look at?

YOU'VE found the perfect office space for your business. The next step is to move in and start growing your business.

YOU'VE found the perfect office space for your business. The next step is to move in and start growing your business.

Before you can do that though, you need to come to an agreement over rent and rates payment with the landlord or agent.

This is the point when many entrepreneurs fail to get the best deal, or at least negotiate on the terms.

What many entrepreneurs don’t realise is that virtually every term of value to you as a tenant can be negotiated, so it’s vital that you go into a meeting already having an idea of the terms that will benefit your business the most.

As one of your company’s largest overheads, you need to be sure not to sign any agreements until you know that it is going to be realistic for you to meet payments and grow profitably. There are two options in commercial property agreements; long-term lease or short-term licence.

If you are a start-up or small business you will find a flexible, short-term licence most suitable. Licence agreements tend to be made for less than six months, non- exclusive, and be terminable at short notice (around one month) by either tenant or landlord. This is the ideal situation for a new business unsure of where it will be in six months’ time.

A licence also provides an easier option, as they tend to ask for a low initial cost compared to a lease, quite often just one month’s rent, which can mean you are able to make that important move quicker.

Lease costs can include everything from a purchase cost, legal fees, survey costs, stamp duty, land registry, security deposit and a month’s rent. Ongoing expenses could include service charges, insurance, utilities and any maintenance.

This is why licence agreements are most commonly available in a business centre environment – and this is also one of the main reasons I recommend small businesses live here. Cash flow is king in the survival of a business and this can be easily determined by your .

As a result of the recession, landlords are more willing to negotiate costs in order to secure a tenant. An advantage of this is that it’s possible to ask for a rent-free or reduced rent period.

Although you may have poured your heart and soul into writing a detailed five-year business plan to ensure you know exactly how your business will grow, every entrepreneur knows the road to success is never smooth.

This makes estimating how long you want your agreement to be a little more difficult. The shortest lease you are likely to get is for 12 months – but a licence could be anything from three to six months, giving you the option to re-evaluate your situation sooner.

It is also good business practice to look for a flexible agreement that includes break clauses. This will allow you to up or downgrade your premises based on your business requirements, which means you can take a risk to grow your business quickly, or to make strategic cut backs, without being heavily penalised.

Finally when you do enter into negotiations, make sure that you approach the agent or landlord with several other options in your back pocket. If they are aware that you have alternatives, they will be more inclined to negotiate with you to ensure the agreement is right for both parties.

If possible then it’s always advisable to have a solicitor check over your agreement before you sign, to highlight any potential areas of concern or clauses.

Then all that’s left to do is to sign on the dotted line and make a quick trip to Ikea.

:: Lynn Gate, managing director of Gateshead-based The Office Company

 

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