Part of making a business plan is understanding all formulas and equation involved in doing your business. Aside from the resources, product manufacturing, and sales. One important element in your business is the rent that you will be paying for your retail space.
It is important not only because it is part of the capital that you will be investing in your business but also because it is part of the requirements when applying for a loan from the bank.
Regardless of these reasons, it is important for you as the retailer to fully know and understand what makes up the rent that you will be paying. It also gives you an idea if it’s wise to get that retail space or if there’s a better option that you can choose.
Here we will analyze and dissect everything that you have to know about retail space rents so you will be enlightened and capable of having the right decision when doing business.
The first tip that you have to consider is doing a comparison on the available properties around the area where you want your store to be opened. Usually, there is an average price per square foot on most areas. Now, you can try to compute its monthly rent by multiplying the total square feet to the price per square feet then divide it to 12 (months).
Suppose that you were able to get a price per square foot, it is safer to give an allowance by increasing it a bit on your business plan in case of last-minute adjustments.
But take note that aside from the raw rental price, there may be other lease terms that you have to settle with the landlord. You may be met with a couple of demands that may add up to the monthly rent though you can bargain for it so you can achieve an agreement with a favorable deal.
Along the additional costs that may be passed to you by your landlord as part of the lease agreement is the maintenance costs for common areas and amenities such as the parking lot, lighting, etc. The landlords may also pass along the cost of the property taxes for the space as well as its insurance premium. This will protect them from damage to the space while you are leasing it. The cost of this premium can be passed along to the lease.
It is common to have all of these costs passed on to you. It is called a “triple net” lease. So, you have to make sure that you check everything about this condition as may add a significant amount to your base rent. Be fully aware and only sign if it’s manageable for you because otherwise, it will just cause you some trouble.
It is also important to calculate the estimate possible rent increases along with the other fees and utilities. Rate increase should be clear to you along with its frequency. It should also be well-documented to prove that both parties fully understand and agree.
You can also consider other alternatives to this such as finding a temporary space or startup incubator areas which are far cheaper when opening your business. It could serve as a testing ground if you will be able to infiltrate the market within that area so there won’t be huge losses when your business flops.