Need some business advice... lease negotiation, etc...
I'm putting this here in the hopes that there might be those among us DP'ers with more business savvy than I currently have (which isn't setting the bar very high!).
I'm actually considering starting a business in town SELLING GUNS. Mind you, I live in NJ and that by itself is no easy task. NJ is not known to be the 'friendliest' place in the u.s. of A. toward the sportsman/hunter/gun owner.
Never-the-less, I have hooked up with an old-timer gunsmith with extensive knowledge of the gun/legal-side of the business but my problems lie elsewhere.
I've never had a storefront before. I don't know the first thing to ask a building owner or real estate agent concerning a lease. Going rates here in northern NJ are still appallingly high. My feeling is that after the New Year, when the numbers come in from the dismal Christmas retail season, we will see that change as more and more local shops close up.
So what can I negotiate? Is there a percentage of the monthly rate that is negotiable? What can I get - or what should I ask for - for free? What about changes to the interior for my purposes? Does that come off my rent if it can be seen as improvements to the property?
I appreciate any help and ideas, fellow DP'ers...
Thanks in advance.
Done this many times !
I have done this many times from both sides,Landlord and Tenant.
Black ops and Jjames are right !seek some legal help with this but not a real estate agent.Home work is the key,study and understand a standard Business lease contract in detail and make notes of good and bad things you don't like about it or want changed.That way you are above the board on terminology and not at the mercy of the one you hired.
Here is a link to a standard Contract,print it out and study very well !
Good luck,ATruepatriot.
http://www.lectlaw.com/forms/f166.htm
"Study the past if you would define the future."
Confucius
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Last American Standing
You are getting some good advice on this thread and some really bad advice.
I would suggest you hire a top notch re broker who knows how to negotiate and understands what your goals are and your financial capabilities.
Also if you cannot sustain a business for around a year without profits from your revenue you may not be ready to make such a leap. Going to gun shows and flea markets may be the wisest way to start.
Clearly many leaving advice on this thread have NEVER leased commercial property. It IS your biggest expense. I lease a building now that cost me $7,500.00 per month from an A Hole optometrist. He wanted a lot more when my lease expired a couple years ago. I was paying $6,000.00 a month. He is always calling and visiting the store when I am not there to find out how business is. He knows he can leverage me and he does. I of course tell him not so good. Several years ago I even had him convinced I was going out of business so he would not raise my rent. It worked for a couple years. He finally figured out I wasn't going out of business.
I would like to move but I am better paying because of the loss of business from moving. I am in a bit of a trap. That is why you must be super carefull because if you do create a successful business you can not just pick up and move.
What's your business
(if it's not too personal to ask) that your rent is your largest expense? That's not my experience at all. My company leases space in an industrial park that represents ~17% of our total overhead.
Retail shop space seems to be going for damn near nothing- at least in the South.
I have a free standing 7,200 Sq Ft
building prime retail with large parking lot on a busy street.
Industrial park space is another type of commercial real estate entirely..
Also when you are in an existing lease with an existing business what space is renting for is NOT the biggest factor.
Landlords know you cannot just pick up and move. Sounds easy if you have NEVER done it but when you have a business built up over the years just not always financially the best move. So you end up paying extortion because you do not own the building.
EASY cowboy!
I feel your pain!
Trust me- It's not easy moving an industrial operation either. Our stuff is measured in tons and trailer loads.
I feel sorry for someone trying to start a business in this environment. Business at any level is tough right now.
Good luck to you.
Rent is an important expense
but it's only one of a cast of hundreds. Your rental payment will only represent 15-20% of your total overhead. It's all the "other stuff" that really adds-up.
Fixtures, insurance, permits, utilities, taxes, payroll, accounting, advertising, supplies (and on... and on... and on!) is what's tough to crack. And then you must invest in inventory (gotta have something to sell). The rent gets you an empty building- it's all the stuff you put in it that starts to multiply.
Commercial property is cheap right now (and getting cheaper by the day). It's a buyers market so don't be afraid to ask for anything.
Leases are legal docs and people tend to enforce them. Read every word and know what it means. A personal guarantee is just that. It's your personal (as in; backed-up by all the stuff at your house that you really, really like) guarantee that the lease will be paid on-time, at-terms.
Good luck!
Umm...
I run a retail business, and I have a few recommendations:
1. start small. I would go for a single room in the house where you live, and an add in a local newspaper (classified). This way you can get a feel for marketing your product.
2. consider a gun show/ flea market based approach. In my area (rural PA) you can get a daily space for $10-20/ day, and have hundreds or thousands of customers walk by each day.
3. keep your inventory low enough that you don't have an enormous theft risk. Guns are really valuable, and so thefts are a risk.
4. Get a concealed carry permit (or NJ equivalent) and always carry. if you wonder why, read #3.
5. When you have a lot of expenses (lease) you have to charge a higher markup, which scares away customers.
Have fun!
Absolutely Agreed
I run a small business out of my house. I have a full-time job as well.
1. Start small - Couldn't agree more. Why take a chance on an unexplored market by having a high rental lease?
2. Gun Shows/Flea Markets - Basically, get out of the box of "business 101" and start pushing your business. You don't need expensive ad materials. You DO need to get your name out, and nothing IMO is better or more credible than face-to-face word of mouth advertising.
3. Low Inventory - After you talk to your potential demographic in your area, you'll find out what types of guns they prefer. Keep only a minimum of those guns, and more importantly, find a way to quickly obtain the guns a customer requests.
Never say "no". If a customer asks for a specific gun that you don't have, reply with "We're all out at the moment. But, I can have that gun here for you by Thursday. Tell you what, give me your cell number and I'll call you the minute it comes in. And, if you like, if you have an e-mail address I can send you some really good pictures."
With this approach, you will be able to build a database of clients plus you'll really get to know your clients on a personal level.
You don't want to be a store owner. You want to be somebody's "gun guy".
With Freedom Comes Responsibility
I usually try to get a "step-up" plan for start-ups
Start at $1000/month, after 3 months, up to $1200 and so on until the actual amount they want. It saves you a bunch and helps get your business going. Or try to get the landlord or management company to help with initial marketing. Take your personal stuff home at night.
Explore Orthodox Christianity
That's a great idea. They are willing to go along with that?
I'm sure by January/February they will be, even if they aren't right now!
I may not know the truth, but I know when I'm being lied to...
I may not know the truth, but I know when I'm being lied to...
Right now they're willing to go along with anything that pays
It's a good time for good deals.
Explore Orthodox Christianity
A couple morsels of advice...
When reviewing the lease beware of a "guaranty" clause that commits you to pay the lease for X amount of months, regardless if your business is successful, or not. Try to get that removed.
Also, some places have a flat lease rate, others have what is called, triple net, or NNN lease.
The former is X dollars per month, the later is X dollars per month plus the net costs of property taxes, utilities and maintenance divided by the number of tenants.
Plus sometimes the lease will call for a 3 year lease, with a teaser rate the first year and higher prices the next. Just like loans.
Hope it helps.
"You are not what you think you are, but what you think............. you are".
-Earl Nightingale
Hire a tenant broker to represent you.
The best thing we ever did regarding office space was to hire a commercial real estate broker to find and negotiate our leases. In a nutshell, what they do is find spaces that fit your needs and negotiate them for you. We saved a lot of money on space and the broker fees are paid by the landlords. Basically what they do is create a situation where several landlords are competing for your business. Granted, we were not a startup and were leasing commercial not retail. But it's definitely worth a call to the large commercial brokers in your area. Stay away from residential real estate agents, they don't know this game.
.
Depending on where in North Jersey, you could pay up to $50 per sq foot in Hoboken, and as low as $3 in Paterson.
Leasehold improvements will be up to you, but you'll probably have to make it right before the end of the term.
The great thing is, you can probably get a discount and a short term rental if you tell the leasing agent you are trying out a concept. I think you can probably squeeze out a no deposit if you shop long enough
There are some places that will rent space to you based on your Net monthly sales, but they aren't going to accept your spreadsheets as proof of revenue, so you are looking at a sq ft lease.
Good luck, if you open one, I'll buy something from you
Agreed! That's why I'm going to wait till after the holidays...
...to start calling different places. I've got my eye on a few but I think the landscape will be different in January/February.
I may not know the truth, but I know when I'm being lied to...
I may not know the truth, but I know when I'm being lied to...
Last American, My advice
Last American,
My advice which, I caution you, is worth exactly what you will have paid for it:
No. 1: Find out who holds title to the property and what sort of reputation he, she, or it has as a landlord. If you can't find out or don't like what you hear, look for other space.
No. 2: Make sure the lease you sign gives you the right to inspect.
No. 3: Make sure the lease gives you the right to get your money back and walk the deal if the premises and all of its component elements (HVAC, electrical, plumbing, etc.) are not in good working order and in compliance with applicable codes.
No. 4: Make sure the lease specifies and you understand going in all of the financial obligations that you will be taking on - in addition to the quoted base rent. Many retail leases provide for additional rent calculated as a percentage of sales. Most commercial leases require the tenant to pay ad valorem taxes that are assessed against the property, insurance premiums, and the cost of maintenance and repairs. Try to negotiate a gross lease (the landlord pays these expenses of ownership), instead of a net lease (these costs are passed on to and paid by the tenant).
No. 5: Make sure the lease provides remedies for the Tenant in the event the Landlord fails to live up to its contractual obligations. These could include the Tenant's right (after notice) to terminate the lease, or take whatever action is necessary to set things right and then deduct the cost of doing so from rent subsequently accruing under the lease.
No. 6: Find out who holds the mortgage on the property and insist that your landlord have that lender sign off on and deliver to you a "non-disturbance" agreement.
No. 7: Remember that, as a potential rent-paying tenant, you have tremendous negotiating power in the current real estate market.
No. 8: Go talk to a good real estate lawyer before you sign anything or give money to anyone.
I trust that I have not offended anyone's tender sensibilities with the above, admittedly off-mission, comments.
Good Luck, Last American!
Theo
TheoVanG
The best advise you could get is from other *local* retailers.
Any time you spend talking to them will be well worth the effort. Not the existing gun shops perhaps, but certainly all the others.
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http://www.youtube.com/watch?v=jgqxFHMqlxs
My 2 cents
Lets assume you lease the building and you are successful for many years.
YOU COULD END UP IN BIG TROUBLE VIA YOUR LEASE. HOW?
A landlord loves a business that is successful because he/her has you by the short curlys.
The landlord wants the MOST you should want to pay the LEAST.
Landlord wants:
Triple Net - You pay taxes, maintenance, and utilities.
Long term lease - 5 or more years sometimes.
A % of your gross or net revenues.
I would negotiate a short term lease with a clause that allows you to get out if business fails. I would also have a clause that you can renew the lease over a period of years for a reasonable amount.
I would avoid paying a % of sales - period. Unless you are in a huge mall that spend millions advertising per year there is no cause for paying a piece to the landlord.
Paying triple net is OK if the aggregate terms are reasonable. If you do have to pay taxes demand that you pay them to the county directly - writing the check in their name and letting the landlord mail is fine.
Think long term - think what if I am successful and will be in business for the next twenty years. Also think what if the business totally fails and I need out of lease after one year.
Get a option to purchase at a pre-agreed price.
Know that all the improvements you make to the property will legally be owned by the landlord. lol - No, you will NOT get a credit for making "improvements" to the property.
Please get some help when negotiating the lease I believe you need it based on your questions.
Just my 2 cents.
that is a lot of negotiation for a start up.
If he is successful, and the landlord jacks his rate, he can just move to another location easily with more negotiating power. It's not a like a gas station which changes owners, people will follow the business where it goes. Also, if he is successful, he will have a client list and can just send out a mailer.
Really?
He can just move?
People will follow?
Send out a mailer?
Your joking right?