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Thursday, September 29, 2011

Signing a lease for your store

Once you are sure that you want to rent a store space, you'll have to sign a lease.  When starting a small business like a stained glass studio you will want to make sure you are making an informed decision as to the type of lease you sign.

NNN - Triple net is one type of lease you may hear about when out shopping for store locations.  With a lease like this, you will be not only paying your rent but part of the building owner's taxes, insurance and maintenance fees for that space.  You will notice that most of these spaces that are rented with NNN are more expensive to rent than others.  They also tend to be located in strip malls.

Just keep in mind that you don't need to fix up your store front, especially to make it look amazing inside, just to sell stained glass art or any other product.  The more you put into the building that you are only renting, the more money you are wasting, since you will NEVER get that money back.  

Unless you own a building already, we also suggest renting a store location before ever buying one!  

So it is better to rent a location that has walls, floors, even a bathroom already in place.  When you hear the term Vanilla Shell, it refers to a brand new building that is open and needs to be finished.  In that case, if you can work out a deal with the building's owner, for him/her to install the interior, without you paying anything, it would be advised.  If you are to personally pay for the interior, we suggest you not rent that location since you will never get back that money.  In this economy (or any economy) you want to spend the least amount of money on expenses like these.

Yes you can negotiate leases.  They are not set in stone.  You can negotiate the amount of years for the lease, typically property owners will ask you to sign a three year lease.  It is possible to sign a one year lease or even a six month lease, if you ask!  Another possibility is for you to ask the landlord to give you the option of ending a lease early without any penalties.  That means, if you must close your store before the lease expires, that you do not have to continue paying lease on an empty store until the end of the lease.  

Make sure that any negotiations agreed upon between you and the landlord are put in writing in the actual lease agreement!  Also you should always sign a lease agreement!  You need to be protected legally just as much as the landlord.  Be sure to ask your landlord what is included in your rent.  Typically water, and garbage are included but not always.  If you live in a snowy area, parking lot plowing may be included as well.  Further more, it is advised that you get insurance for the contents of your store and that your insurance covers injury to customers in your shop as well.

In conclusion, pay close attention to your lease and try to negotiate any part of it that you don't like or agree with.  Walk away from a bad deal, it might take some time, but eventually you will find another location that you will like.  Just remember that you really don't want to put out a lot of money in the beginning when you are just starting out!  Save that money to pay rent, business expenses and run your store in the beginning when your store is just becoming established.  You might have seen businesses move into an area, spend a lot on improvements and other non necessary items, only to see it fold quickly.  It's safer to start slowly, and work your way up.  There are many expenses that ARE important to new business, like advertising, signage, inventory and others that you don't want to skimp on because you either overpaid on your lease, or made too many expensive improvements on a building that you don't even own!  Think about it, be careful and frugal, it will help you immensely in the long run!  Hope this helps!


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