By Ben Gary
Starting and growing a business is an ambitious endeavor which requires a large amount of business acumen to pull off. There are many pitfalls that even the savviest entrepreneur may fall into without carefully charting the waters before setting sail. According to the Small Business Administration Office of Advocacy seventy percent of new businesses fail within the first ten years.
The problem of course is that these days are rarely stable. A company now must be nimble and flexible, which is directly at odds with the long term lease commitment, especially for the newer company. And since landlords are in the business of real estate, with few exceptions they almost always hold the advantage in lease negotiations. Here’s how to be successful.
While the reasons for this high failure rate are varied, the wrong answer to the question of “where do we locate or conduct our business?” is a common mistake many entrepreneurs make when starting and operating a business. The fact that so many things need to be considered in choosing a location combined with so many choices makes the mistake all the more common. Fortunately, a competent real estate advisor can help businesses create and execute a sound real estate strategy capable of creating competitive advantage that will contribute to business success.
Effective management of operating capital is crucial to any successful business and occupancy cost is typically one of the largest operating expenses businesses incur. In many cases, businesses are operating very inefficiently from an occupancy standpoint. Cornell University’s International Workplace Studies Program conducted a study in 2003 to show that the average vacancy rate for commercial office space from 8 am to 5 pm is between 50% and 70%. That is a lot of money being spent for dedicated work space that is not being occupied by company employees.
Give your business a better probability of success by recognizing the fact that space matters and turn a potential pitfall into one of your businesses biggest assets!
Ben Gary is an office services broker for CB Richard Ellis, the world’s largest commercial real estate firm. CB Richard Ellis currently represents 85 of the Fortune 100 companies.
E-mail him at Ben Gary