Thinking ahead is vital when planning growth

Oct 17 2007 By Chris Hugill

SUCCESS in business will usually relate to being able to exploit new opportunities more quickly than competitors.

A business may be excellent at identifying these opportunities but finds it cannot react quickly enough to those due to constraints imposed by its physical location. How does this situation arise and how can it be avoided?

A typical experience for a new business is to start small in relation to people and premises and therefore keep overheads to a minimum. As the market changes, the business needs to make adjustments and, if successful, will eventually face a situation where it needs to expand rapidly.

A process of “shopping while hungry” in this kind of situation can lead to decisions based on immediate needs rather than on long-term planning. This may see a business taking additional space nearby to satisfy the immediate need to increase capacity, but it is the kind of thing that can store up problems for the future.

The initial buzz of having a small focused team communicating easily by reason of its proximity can then be displaced by a situation where there are a number of teams separated by location. Very quickly the owners of the business see the need to relocate to one site and the process is repeated as the business expands further.

Getting out of existing premises can be a tricky task, particularly where the business is pepper-potted around a number of locations. Often each premises will be held on a lease of different duration. Some may have clauses entitling the occupant to terminate early by serving a notice to break the lease.

Options to break can be fraught with difficulties. They will usually be linked to specific dates in the lease which may not have been monitored. Break options may also require strict compliance with obligations in the lease which may have been breached and cannot be rectified or which, if they can, will take more time than is available to do so.

Alternatively, where the lease has many years left to run, the business may have to negotiate surrender on expensive terms. The alternative of leaving redundant premises empty can lead to breaches of the lease and additional legal liabilities in addition to wasted rent and other expenses.

What happens if you have had the foresight to take additional land or a legal option over the land to allow for future expansion? The owners of the business can face difficulties where the expansion land is not actively managed.

Members of the public may not have been prevented from taking access and may therefore have acquired rights over it which may delay or prevent such expansion in the future.

These can range from third parties acquiring squatter’s rights or rights of way to the creation of public rights of way and the right to register a town and village green. Such problems can be avoided by a process of pro-active property management, and in dealing with issues in advance of the need to expand.

The problems outlined can be measured not only in additional expense and disruption but, even more seriously, in losing out to competitors who have managed such issues better and therefore have an ability to expand and exploit the opportunities which emerge.

Businesses cannot anticipate and plan every detail of their long-term strategy. However, the ability to react to unplanned opportunities requires pro-active planning and management of property assets.

Chris Hugill is head of regeneration at Ward Hadaway. For further guidance on any of the issues arising from this article, contact Chris on (0191) 204 4230.