Isn’t that the best feeling….the start of something fresh and new. You’ve decided to take the next step in your dream of owning your own business. You’ve taken the necessary steps to create your business, i.e. you’ve registered with the state, hired an accountant (and hopefully an attorney), created contracts and begun marketing to find your clients or customers. So now the biggest question is will you lease space for your new endeavor or will you buy space.
That question can seem a little premature and a lot overwhelming early on in your business venture. But the reality is you should have a 3, 6, 12, 36, 60 month plan. You should know before you file papers with the state where you intend to be in the next 5 years and if you don’t it is time to move a few steps back. Now I don’t mean you need to have it mapped down the last minute what you will do and when, but you should have an idea how sustainable your pan is before you get to the place of launching your business.
So while the question of lease vs. buy is overwhelming it should be something you consider. The factors you want to think about are:
- What is your source of income. Do you have a bank loan, investors, or are you living client to client. If you have a loan or an investor you may have more options than someone who is living client to client.
- Do you plan to buy into a franchise? If you do, those agreements may limit whether you’re able to buy or lease and you want to consider if there is a limitation how that may affect you in the long and short run.
- Can you find a space that is big enough for you in the next 3-5 years as you expand and grow or if decide to downsize. If you can find that space and feel comfortable making the long term leap, buying may be the best option for you. If you need flexibility, then a lease with flexible terms will probably be a better fit.
- What is the real estate market like in your area….are you in Miami and there is a gym on every corner or are you in Washington, PA where there is one gym in the whole town. This may seem like a bigger problem than just space, but in this context, the market will dictate availability. You may not have many options for buying or leasing a space that will accommodate your needs when building your gym. You may be priced out of the buying market because of over saturation or a landlord may be unwilling to allow you to move into a space that is too close to another facility.
- Flexibility of Use. Will the landlord allow you to customize the space to your needs. I’m not talking about paint and wall hangings, but will they allow you to take down or put up walls, change flooring, and install fixtures as needed. If not, then you may want to buy to completely customize your space.
- Who will pay for these renovations. In case you didn’t know it can cost a lot of money to customize a space to your liking. It also takes time. Both of these factors should be built into your overall plan.
So now that you’ve considered some of the big things, is it better to rent or lease? That is a question that only you can answer for yourself. You want to speak to your accountant to figure out cashflow and find a realtor you can trust to show you space and help you to evaluate the market. Finally, talk to your attorney to review either the lease or the contract for sale to ensure you’re not missing anything major before you take the next big step.
Best of all have fun and dream big….the sky is the limit.