Rent or Own
Unless one has unlimited funds, when starting a new business, most owners will begin by renting office space. That certainly makes sense when launching a business. However, a solid plan to eventually transition into facility ownership should be an important part of your overall business strategy.
Hindsight is always 20/20, and as I look back on my fifty-plus years of small business ownership, always renting was one of my biggest mistakes.
If I had it to do all over again, I would begin by renting, but with no more than two- or three-year leases. After two or three years—once I felt confident that I was building a solid, profitable business—I would start the process of buying a building. In doing so, I would carefully consider the locations of both customers and employees and look for a building that was as close to the center of that area as possible. Once that area was identified, I would do a deep dive into its long-term suitability. Is the area safe? Does it appear likely to remain safe in the future?
Next, assuming your business is growing, the size of a new building becomes an important issue. Estimate how large your business might be in ten years and what size building would be required to house it at that time. If your cash flow allows, purchasing a building of that size—with the intention of renting out any unused space on short-term leases—can be a smart business decision. Doing so not only prepares you for future expansion but also provides rental income to help offset your loan payments.
Owning your own building can benefit you in many ways. It eliminates unexpected and costly relocations, and moving a business can be a major financial burden. An old-school saying, which I still believe holds true today, is: “Three moves are as expensive as your building burning down.” Renting until you grow into the full facility provides extra income in the meantime, and the biggest advantage is that your building will likely increase in value—becoming a significant part of your investment portfolio.
Keep reading our blog, or if you want to Wright Your Business immediately, book a 15-minute Google-Meet meeting to explore the possibilities.
