For people making payroll, by people making payroll
For people making payroll, by people making payroll
Steve Olsen writes about finding the right location for your business. It’s an interesting piece with a lot of good advice, but this stood out to me:
Several years ago, we almost opened a traditional retail book store[...]. We never signed the lease. The rent was right, but the taxes were too high. In Minnesota, retail tax rates are out of control. In our case the taxes were 4x the rent. High tax rates keep small family owned business like ours out of the prime locations. The problem is, no one in government seems to care. When I recently mentioned the problem to a government official, she replied, “If you can’t afford the taxes, you can’t afford to be in business.”
This is a hard thing to fix. If you live in openly business-hostile states like Minnesota and California, this sort of thing is common. You can move to a more business-friendly place. But that’s a pretty drastic step. For a lot of new entrepreneurs, losing their networks of contacts and their knowledge of the local business environment might outweigh the advantages of a friendlier tax clime.
Steve continues:
We decided against renting traditional retail space, in high rent areas (for now). Even in a recession, when the landlords reduce rent to attract tenants, the government doesn’t budge on taxes. The only viable solution for us was to rent a location zoned showroom/industrial where the taxes are 1/3rd of traditional retail.
99 of the next 100 books you read on retail business will tell you the three most important things are “location, location, location”. Most people evaluate a retail location based on customer traffic, rent, appearance, parking, and the like. But you have to consider a lot of other factors when determining whether a business location is “good” or “bad”. A critical part of doing your homework before you commit to a business lease is finding out what sort of non-rent costs you’re going to pay to operate there.
Here are just a few:
Finally, don’t be in a hurry, and don’t fall in love with a particular business location before you know whether it’s going to love you back. Quoting Steve again:
In business you need to make more money than you spend. If you can’t do that, you don’t have a viable business. And if you need a bricks and mortar location for your business, rent/mortgages can wipe you out.
But keep in mind it has to be a win-win for you and the property owner and finding the right location is going to take time. We have been passively looking for years, and actively searching for over nine months.
Got good advice for locating and evaluating property? Did I miss something? Leave us a comment and let us know!
Popularity: 78% [?]
Posted: July 13th, 2009 at 9:21 am
Category: Finances, Marketing and Selling
Keith Says:
In 2004 when Ryan and I bought a building we considered this carefully. We have 2 acres that is in the county, though it is surrounded on all sides by the city. I made it part of the closing terms to have a letter from the city saying that they had no jurisdiction over us. That came in handy one day a couple years later when the fire marshal dropped by, looked around, and indicated we had some big bucks renovations to do. I asked him to hang on, went inside, printed that letter, and handed it to him. He smiled, wished me a nice day, and left. Wow, was I ever glad I had that letter!
Encino Office Space Says:
Good post. With the state of the economy now, office space for your business is cheaper than ever. There are great deals to be found for office space in prime locations. You just need to do some research to make sure you can find the best deal possible.
Chris Gattis Says:
In my experience, the worst problem business owners have to overcome in selecting a site is their own ego. Some think that a big building is evidence that they’re successful. They think it shows the community, the competition, or just the in-laws that they have made it big. Most times, all it does is drain resources and put the company at risk. I know many successful small business owners who do business out of dumps, choosing to put their money in their pockets and their employee’s pockets rather than throw it away on a non-performing asset. Now clearly, you need a location that properly supports your business plan. But that doesn’t mean finding the biggest and best place available. And unless you’re in a retail walk-in customer based business, the specific location you occupy will likely be more important to your employees than your customers. Great article!
ryan Says:
Chris, you really hit the nail on the head. In fact, our own egos are the worst problem we face in a LOT of decisions, business and otherwise. 
But it’s such an excellent point it bears repeating: your location should help your business, not burden it.
Thanks for the comment!
