How To Decide When To Get Business Premises?
The decision to get premises can seem daunting. Without fixed premises, you may feel that your business doesn't seem as professional as your competitors. Or that customers are less likely to buy if they can’t see your merchandise in person first. Perhaps you've got to the point where working from home no longer suits you.
But premises also require a large front payment in the form of a deposit and rent. And monthly rent, rates and utility bills become ongoing overheads for which the business is liable from the outset.
Meanwhile location independence is growing in popularity with some online business gurus positively encouraging you to become a laptop entrepreneur and "work from anywhere."
It’s no wonder that business owners struggle with the question of whether they should get premises or not. The right answer to this question will depend on what's right for your particular business, for your customers and for you personally.
The Example Of The White Company
The White Company started life in 1993 as a simple 12 page mail order catalogue which founder Chrissie Rucker mailed to everybody she could think of. Only when sales had increased sufficiently did Chrissie open her first shop.
When she opened her first US store in June 2017, Chrissie followed the same cautious approach. She launched their American website first in order to test the market and find out what the US market responded to. She discovered that the US market is very similar to the British market, and this gave her confidence to start opening a store opening programme.
The White Company adopts an omni-channel approach, retailing through its mail order catalogue (it sends out more than 10 million copies a year), its 56 stores and its two UK and US e-commerce websites. In this example, the three channels work in synergy with one another.
Businesses That Don't Necessarily Need Commercial Premises
While the majority of businesses do need premises to operate from, whether these are offices, workshops, factories or storage facilities, there are numerous examples of businesses that have successfully launched and scaled without premises including:
Web developers and graphic designers;
Pet grooming services;
Mobile cafes and street food vans;
10 Questions To Ask Yourself
If you’ve got to the point in your business where you’re wondering whether it’s time to take on premises, here are 10 questions to consider:
Have you established the viability of your business, and proved you can generate consistent sales?
Have you plotted your business growth trajectory?
Do you have a steady stream of repeat/ retained customers to provide the regular, reliable income you need to pay rent, bills and other office overheads?
Are you taking on employees?
What sort of image do you want to convey?
Could you continue to work from home and hire meeting space to constrain overheads for a while longer? Or would a shared workspace like WeWork give you access to the facilities you need e.g. speedy broadband, meeting rooms without the liability of a leasing a space?
What other businesses operate in your area? Do these complement your own? Will you be first to market? Are there too many competitors?
Is this in the right location for your customer base? Does it have good footfall? What are the transport links like?
Does it have the option to sub-let if required?
Once you’ve signed the lease can you get out of it if your business suffers a downturn?
Prepare A Cash Flow Forecast
If the time is right for you to get premises, be sure to prepare a cash flow forecast. Your cash flow forecast will tell you if, and when, you can afford to take on premises. Build out a weekly cash flow forecast, and use this to identify whether there are any cash dips ahead. Plug these cash gaps first, and make sure you have a reliable sales pipeline before going ahead and getting premises.
Join The Conversation
Question: Do you have any advice for a business looking to get premises for the first time?. I love reading your feedback so please do take a moment to share how you’re going to use this in the comments box below.
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I’m Denyse Whillier, a Sussex and London based business coach and consultant. I work with responsible business leaders to build profitable and successful brands that do good, make money and help to change the world. I draw on Built To Succeed™, my proven success system, developed during my 8 years in the trenches as a CEO, to help my clients to achieve their goals
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