Finding The Right Location For Your Business – At The Right Price

In this post, I am going to detail my experiences finding the right place for our business at the right price.

We found it, and last week, we signed the lease. We are remodeling and moving in over the next six weeks.

We’ve been planning to move from our home to a commercial bricks and mortar operation for years. The most perplexing question we had was:

How do we find the best possible location at a price that will allow us to grow?

The problems we faced:

High Taxes

Several years ago, we almost opened a traditional retail book store, and we wrote this post on negotiating rent. 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.”

How we solved this problem:

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.

Over Leveraged Commercial Property Owners

During the real estate boom, investors bought up properties under the false assumption that real estate couldn’t drop in value. Many made these investments using unsecured debt. During our search we found several owners sitting on vacant properties, but unwilling to negotiate a reasonable price.

In one instance, the owner had purchased an entire corner of a busy intersection. It included four buildings which all sat vacant. When we investigated, we learned that the owner had purchased the property at the peak of the boom planning to flip it to a national retailer. When the economy went sour, so did his plan. Christine and I and others tried to make an offer that would generate income for both us and the owner, but were flatly refused. Being over leveraged gave the owner no room to negotiate when tough times hit. I wish him the best, but the properties are still sitting vacant today.

How we solved this problem:

We had to be patient and keep looking. We sought veteran landlords who are likely to own the property outright, who have been through economic downturns and understand the current conditions, who have seen successful startups rise from the depths of a recession, and who understand the power of building long term business relationships.

Cities Are Bulldozing Low Rent Areas

In recent years, affordable commercial property became harder to find. Cities like to pick off older low-rent properties with eminent domain, bulldoze it, and replace it with new high rent/high tax property. It is another case of shortsighted greed. To grow, our economy needs low tax/low rent commercial property to serve as incubators for bootstrapping entrepreneurs.

How we solved this problem:

Persistence. After a while, we didn’t bother looking at the new developments, and focused our search on older areas. And the recession helped. While in recent years we’ve watched old retail and industrial parks knocked down and replaced, right now, there is almost zero commercial development.

Last Minute Lease Changes

For whatever reason, be it mistakes, disorganization, or outright chicanery, the lease terms you verbally agreed upon are different the day you sit down at the table, ready to sign. My father-in-law, who has negotiated dozens of commercial leases over his lifetime warned me about this. It is standard procedure – expect it. These last minute changes are NEVER in your favor.

How we solved this problem:

Don’t sign the lease. Walk away and keep looking. Think about it. Imagine, at closing you said, “I looked the lease over, and I made a mistake, it’s more money than I can afford,  and much of the square footage isn’t useful, so I adjusted the rates down 20 percent, and I need you to cover the utilities, so I wrote up a new lease for you to sign today.”

Leasing Agents Didn’t Help

I talked to at least a dozen of them. Some of them were great… others… not so much. But none of them represented us. They each offered a few properties out of hundreds of possibilities. Some gave us bad information, but mostly they gave us incomplete information.

How we solved this problem:

We had to do the search ourselves. We found property on Craigslist and other websites. The property we eventually rented was a property I drive by every day but I didn’t bother calling. I thought it was out of my price range based on information leasing agents had given me. One day, I decided to call, and the leasing agents were wrong, we could get 3000+ sq ft, at a price we could afford. Never quit searching and never accept the word of experts without finding out for yourself.

Keeping Costs Down

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. When I first started calling leasing agents, I didn’t think this was possible. For a comparable space, agents were asking for 2-4x the rate we eventually negotiated.

It isn’t trendy, or hip, or pretty, or posh. But it’s functional and affordable

And we’re cleaning it up

We are going to remodel, knock down some walls, put in a new floor, and paint.

And it’s a great spot for a 4 year old to ride his bike.

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11 thoughts on “Finding The Right Location For Your Business – At The Right Price”

  1. That is awesome, Steve! I like how you share this whole thought process behind the way you did things. And yeah, I don’t understand the people that would rather leave their places empty (possibly waiting for higher offers?) than making some money. It’s even more important if they got those properties at the peak of their price because they would have a bigger loss to make up for.

    Glad to see things working out!

  2. Congratulations! Steve and Christine! We are happy for you and wish you more outstanding success. You sure enough did your homework.

    What a wonderful service you could do by teaching this to new entrepreneurs.

    Gail ‘n’ Ron

  3. Thank you for sharing your experience, Steve. There are many about-to-be-entrepreneurs who can benefit from your story. Whether they are looking for store-front space, as you started out doing, or looking for the space you eventually found, the process of actually leasing space can be daunting. Good luck to you and Christine, and to!

  4. Hey mate.

    Congratulations to you and Christine!

    Keep us posted on your progress.

    Don’t get emotional about real estate and be prepared to walk away if the lease is no good for you.


  5. Hi Steve & Christine! I am also one of the millions of people looking for a profitable business these days. But there are just a lot of factors that need to be considered in putting up one. Sometimes I feel like business is not for me at all. But with the things you shared in this site, it encouraged me more that I know if I work on it, someday, I might be able to land on a good business and be the boss of my own. Thank you for sharing these things to us. Best regards & more power!

  6. Love the post and the story. It’s like I can’t wait until the next post. My thoughts on the matter was ask for the world. All they can say is no. I worked as a fire inspector and had a lot of inter action with owners. I met a few who negotiated two to three months rent for the build out. A guy in the same strip mall didn’t get it because he did not ask. Second always check the auction for used equipment sales and buy for some times 5 cents on the dollar in this market. Best of luck. P.S. So many books ,so little time. Have a great year

  7. This is going to be an interesting learning experience for you. I’ve opened 3 retail stores… small businesses. And I’m done with that. All you need is a single break in and the insurance goes through the roof. I always picked lowest rent properties on HIGH TRAFFIC streets. Then you get to deal with the city and what they will and won’t let you do for signage. Then every single local charity in existence wants something from you. Be in the year book, sponsor the little league team. Then the customer will nickle and dime you to death expecting a discount because you are a small business… but they wouldn’t ask for that at Best Buy! Then the shoplifting teams hit your place and you don’t have the staff to deal with them. It just goes on and on and on. Add to it the paperwork and tax nightmare and the constant worry of protecting your investment. Driving up to the store at 10 pm to see if the silent alarm was actually triggered or just an error. I can tell you this. I wish you well, because you have truly taken on a challenge.

  8. Congrats on making the big leap! It takes guts to take that kind of step in this environment, and I for one salute you and will be watching your progress. I might even suggest you videotaping a segment called “Pimp my Store” as you fix the place up!

  9. Hello , We are from Ibiza- SPAIN. We think like you.!!!
    Congratulation to be honest whit your life. Its fantastic. We want a change in our lile but we dont no.
    A big hug
    Maria and Juan

  10. Congratulations on your new location and thank you so much for sharing what I write at Twitter. Check out my latest post for a fast, inexpensive way to get high quality incoming links to your Web site and make your business really easy to locate online.

    If I can ever be of assistance do feel free to ask. I share everything I have learned while growing businesses from incoming links to usability to increasing to traffic to improving conversions.

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