1. Prepare to find a commercial broker
Even if you’re familiar with commercial leasing, your startup will benefit tremendously from the help of a professional. A commercial real estate broker, preferably a Certified Commercial Investment Member (CCIM), advocates for your startup during the leasing process. When you hire a commercial real estate broker, you’re hiring a seasoned professional who has worked on hundreds of commercial leases. Using your business goals as a foundation, your commercial real estate broker communicates to the landlord why you’re the right fit.
2. Hone your business plan
You’re getting ready to lease a building. This is a huge step and an intrical part of your startups future. At this point, you should have a detailed business plan as well as a concise pitch that can easily be explained to anyone during the leasing process. You should know exactly how your building will fit in with your overall business plan and strategy. If your business plan isn’t ready, ask yourself if you’re really prepared to lease a building.
3. Have your financial information in order
As a startup, you may not have a long financial history to share. Organize whatever you have available. During the commercial leasing process, you’ll need to be able to demonstrate sources of income or cash flow related to your startup.
4. Be ready to offer a personal guarantee
These days, a personal guarantee is the norm during the commercial leasing process. Landlords are simply protecting themselves from potential default on a lease. This won’t be up for negotiation. Know going into the leasing process that you’ll have to sign personally.
5. Save up for a security deposit
Leasing to a startup is essentially a gamble. No matter how confident you are in your startup’s future, a landlord is still going to want protection. It’s common for landlords to require a security deposit — oftentimes higher than the norm — for startups.
6. Be aware of landlord lien rights
As your startup grows, you may need a business loan. The lender will require your landlord to sign a lien waiver. Keep in mind that this can be a lengthy process, especially if your landlord isn’t responsive or hasn’t been kept in the loop. If you’re fairly certain you’ll require a loan in the future, bring this up during negotiations.
7. Know exactly how much space you need
Think ahead when you’re selecting a space to lease. While a smaller building might save you money, it could also cost you in productivity. You can’t cram your business into a inadequate space and expect it to function well. Have a solid idea of how much space you’ll need so that your real estate broker can help you find a perfect fit.
8. Leave room for expansion
As your startup grows and becomes more successful, you may find that you need more space. You can plan ahead for this several ways. Consider leasing in a building that you can expand into, consider a shorter term lease with renewals, or ask for a provision to expand into larger space with the same landlord without penalty.
9. Ask for a termination option
Not every landlord will offer a termination option, but it’s worth looking into. A termination option gives you the opportunity to pay a penalty when terminating as opposed to being liable for months or years of rent.
10. Keep an open dialogue
Know that throughout your lease, you should maintain a positive working relationship with your landlord. Communicate your needs, let your landlord know if anything isn’t going as expected, and be open to compromise. With a positive relationship, your landlord will become part of the multi-faceted team that ensures your startup’s bright future.
Ready to take your startup to the next level? Talk to Pridgen Real Estate Services about tenant representation. Our team will partner up with your business to find the right space at the right price — so you can focus on success.