How to Choose a Location for Your Business
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowCongratulations—you’ve decided to open a business or franchise, or maybe you are expanding your business to a new location. Indianapolis is a fantastic market to do this—a metropolitan area where retail leasing is still financially feasible for small businesses. According to CBRE’s Indianapolis Retail Outlook report, retail sales for Indianapolis are expected to grow at an annual rate of 4.8% over the next five years.
One of the most significant decisions you will make in opening your retail location is your lease. My career has been focused on retail—leasing, property management, development, and acquisition— so when it comes to retail leases, I’ve seen it all. Below you will find my advice when it comes to choosing your location, negotiating your lease and ultimately, being a good tenant.
- Traffic Wins. If you want to open a traditional retail store or restaurant, don’t pay less for less traffic. It’s easy to believe that lower rent provides a safer financial environment for your startup. In reality, you should try to determine the best place for your business to succeed and many times, that means being in front of the most potential clients. Ask yourself these questions: How many people will walk or drive by your location and what percentage of those people will take an interest? What percentage of those people could become clients?
- Crossover Customers Are Key. Pay attention to the other tenants in a shopping center. Could their clients be potential crossover clients to your business? How many marketing dollars could you save if your potential clients are already in the area? Have you noticed how home furnishings stores tend to be close to each other or how restaurants tend to cluster?
- Understand Tenant Improvement Allowances. Not only is it critical you understand TIA, but you also need to do the math on these to ensure it’s a good option for your business. A tenant improvement allowance is an amount a landlord is willing to spend so that the tenant can retrofit or renovate the space. When funding the buildout for your location, you may get a better interest rate through a bank. Your landlord is not a bank, so it won’t charge you bank interest rates; it will typically be higher. Your landlord will also incorporate this money into your lease. In most cases, you won’t be able to pay down this part of your lease payment. If you have a bank loan and business is great you can pay it down, maybe redeploy those funds to a second location. Look for a vacancy with a buildout you can incorporate into your design. This approach can save you significant money and your landlord will likely be more flexible in terms of rent and duration of the lease.
- Choose Your Partners Wisely. Be selective about your landlord and property management company — then build a strong relationship. During the interest and negotiation process, be sure to continue to evaluate the follow-through and their work style. Once you sign the lease, you’ve also signed up to work with your landlord and their property managers for the next several years.
- Be honest and upfront with your landlord and property manager. When cash flow is tight, or an unexpected issue arises, communicate right away. The sooner you bring up issues and the more honest and transparent you are; the better off everyone will be. In most cases, your landlord will work with you, and ultimately, they want you to be successful and stay in that location. Your landlord is on your side.
I am cheering for entrepreneurs to succeed and love seeing new ideas and franchises explode here in Indianapolis. I truly hope you can take these tips with you, open your business and make your entrepreneurship dreams happen.