Finding the right premises

Jun 27 2006 By Evening Gazette

The location of your business can be a key factor in establishing a successful business.

If market research is done correctly and all the relevant factors are taken into account, your location and premises will relate to the type of market you are aiming at, as well as fulfilling your businesses requirements.

Before looking at what is available you need to draw up a list of your business needs to ensure you retain an objective view, as well as it being a useful document to provide to organisations who may be able to assist you in locating somewhere suitable. This checklist should address the following:

1. The location must suit your business.

2. The premises must provide enough space. Is the way the space is laid out important?

3. How competitive is it in terms of pounds per square metre? Don't forget energy costs - is it efficient to light and heat?

4. You may need access for employees, customers and deliveries seven days a week, or at night.

5. You will need adequate services, including power, phone lines, plumbing and drainage. Do you have plant or processes that need special ventilation or air conditioning?

6. The appearance and comfort offered must be appropriate to your business - for employees and for visitors. What facilities will be needed?

7. Planning permission may be a critical factor. What new planning permission might you need?

8. The building must be structurally sound. Will expansion or layout changes be possible?

9. Security - are the premises alarmed? Does it have good shutters and locks? The security record for the site will also have implications on your insurance costs.

What makes a good location?

1. Which area do you want to be in? Where are your potential customers? Where is there least competition or should you be with similar businesses? Must you be close to specialist suppliers?

2. How expensive is the area? Setting up in certain locations may qualify you for grants or other financial incentives - contact Business Link for further details.

3. Must you be near transport links, such as a motorway, railway station or bus stop? Will you be able to get supplies and make deliveries easily?

4. How will the location affect employees? Will you be able to recruit suitably skilled people locally? Will the location meet employees' needs for housing, schools, shopping and lunch?

5. What local facilities do you require? Do you need to be near a bank, post office or photocopy shop?

6. How important is the image you project? What impression will visitors form?

How long will you stay?

When you occupy premises, there are three kinds of property contracts you can sign.

1. A licence gives you maximum flexibility, but minimum security. You, or your licensor, can usually terminate the arrangement at short notice.

Advantages include:

* Simplicity - the contract can usually be agreed quickly and without expensive solicitors' fees.

* Cost - some councils provide subsidised workshop units and business centre offices.

* Flexibility - as your needs change, you can usually take more or less space.

* All-inclusive - the licensor usually takes care of maintenance, rates, and most insurances, though the cost is sometimes recovered via a service charge.

* Services - reception, typing and fax and copying facilities are often part of the package provided.

Disadvantages include:

* Lack of security - you have no legal right to stay in the premises, if the licensor has given you proper notice to leave. The licensor is also free to increase the license fee at the end of the licence period.

* Lack of choice - offices and workshop units are widely available, but the supply of other premises on licence is limited.

* Lack of flexibility - practical or legal restrictions may stop you from altering the premises.

* Neighbours - other licensees can cause problems, and tend to change frequently.

2. A lease gives you less flexibility, but more security. You agree to occupy the premises for a fixed number of years. You may be liable for the rent for the whole period of the lease, even if you vacate the premises early.

Advantages include:

* Choice - most business property is leased.

* Security - you have a stable base, with the right to stay there for the length of the lease, usually three to 25 years.

* Alterations - you can spend money on improving the property, usually subject to obtaining written consent from the landlord.

* Incentives - a landlord may offer incentives to take up a lease e.g. a rent-free period.

Disadvantage include:

* Ongoing liabilities - as your business situation alters, you may need to move on. In most cases, a lease can be passed on to a new tenant, but you may still be responsible for the rent, and other costs, if the new tenant fails to pay up.

* Fees and time - buying a lease can be expensive and time-consuming. Legal advice is essential.

* Bad landlords - some fail to keep premises clean and maintained, and fail to fulfil their side of the agreement.

* Extra restrictions - these may be written into the lease and could threaten your business

* Rent reviews - most leases allow the rent to be increased periodically e.g. every three or five years, in line with market rents.

3. When you purchase a property, you buy the premises outright and acquire the freehold.

Advantages include:

* Control - you own the freehold.

* Stability - with a fixed-rate mortgage, the schedule of mortgage repayments and interest is negotiated once and for all.

* Customised premises - you can alter and improve the premises as much as you like, to suit the needs of your business.

* Investment - in the long term, if you buy the right property at the right time, you could make a good profit.

* Image - owning the freehold is usually a sign of a strong, well established company.

* Security - owning your premises is always a definite advantage when negotiating with your bank manager.

Disadvantages include:

* Cash drain - can you afford to have so much money tied up in property, or should you keep it for running the business?

* Risk - property values can sometimes go down, as well as up. Properties may also be costly to maintain.

* Fees and time - finding and buying the right property can be time-consuming and involves paying legal costs.

* Responsibilities - you have to manage, maintain and repair the property yourself.

The choice of the most appropriate premises for you will depend upon all of the factors listed above. Business Link works with you to build an understanding of what your business wants to achieve and can help identify the most appropriate premises and, if appropriate, assist with the identification of funding to ensure you achieve your objectives.

Call Business Link on 0845 600 9 006 or email info@tees.businesslink.co.uk to see to see how you can get the most from your business.