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Your decision to relocate your business was well reasoned. Considered were the operation and growth trajectory. Analyzed was the best deal structure for the company – lease or own. You endured countless tours of the available commercial real estate that met your criteria. Negotiations and paperwork followed – and culminated in the lease or purchase of your new business home.
If you decided to buy – alright! echoed your rejoice when the title officer called with word your “recording was confirmed” – which meant you finally owned a building.
So now that you’ve moved – can the building make your business more profitable? Humor me as I build a case for profitability – you know – revenues minus expenses.
If you chose to buy a building:
Your “rent” is fixed. Expenses are generally lumped into three broad categories – the cost of sales, operating expenses, and miscellaneous. The amount of rent paid is an operating expense of the business. Whether the “rent” is paid to an alter ego of the company’s ownership or paid to an arm’s length landlord, matters. If the owner of the building has no relationship to the business ownership – his sole motivation is to collect as much rent as possible. At the expiration of your lease – expect an increase in rent. Conversely, if the occupant and owner are mirrors of one another – a favorable rent can be achieved. If the debt financing the acquisition is at a long-term fixed rate – even better.
Regardless of leasing or buying:
Employees are happier. Pride of ownership in your location causes employees to produce more – because they are happier. A private office, a collaborative work environment, clean lunchroom, ample parking are all intangibles that create a positive work environment.
The operation is more efficient. Lack of space or poor space utilization means you are spending time unproductively. Classically, we see this when products have evacuated the plant and are temporarily stored outside during operating hours. Paid are the people moving the stuff in and out – when they could be producing more goods. Also, by properly maximizing the height of a building, you may be able to occupy fewer square feet – fewer square feet – fewer dollars spent – more money in your hip pocket.
Customers can find you. If you can’t be found – you are invisible. The right location with close freeway access can boost your business – just because more customers will flood your doorway.