The Real Estate Realities of a Small Business
Some of the most successful companies in the world – Amazon, Apple, Microsoft – started in a family garage. But as a side-hustle transforms into a full-fledged business, entrepreneurs often face the tough question: Where —literally, where—do I take this next?
Knowing how and when to move your business from an informal setting to a true base of operations can be daunting. The considerations are countless: commercial real estate costs, building amenities, accessibility, location within your central business district or office park, foot traffic, even parking. There’s no denying the process can be intimidating.
If you and your small business are grappling with where to go next, here’s what you should consider.
Where will your business thrive?
The perfect location looks different for every business, driven in large part by what its clients and customers will best respond to: office space, a boutique or small storefront, a workshop, or even an online marketplace.
A good starting point is to determine whether your business’ primary footprint should be a physical location or online. In a recent Bank of America survey of more than 500 small business owners, we found their top three concerns when determining the best location for their businesses are:
Customer service
Employee needs
Community needs
65% of business owners we surveyed said they have a physical location. However, they also reported significant challenges with their current location due to high utility costs, property taxes, and ensuring sufficient space to operate.
Of the business owners that primarily run their businesses online, half reported that a virtual format is more cost-effective and is the easiest way to reach their target audience.
So, you’ve got to ask yourself: Which model makes the most sense for my business, while also delivering the best service to my customers?
When do you make your move?
Whether you opt for a physical- or digital-first business make sure to consider:
The Real Estate Market: If real estate prices in your area are soaring or rapidly fluctuating, purchasing real estate may not be the best decision and you may want to table a planned expansion until prices settle. Pricing should also factor into your decision on whether to rent or buy. Once you’ve answered that question and have budgeted accordingly to pay for a physical space, it’s smart to establish a timeline that feels realistic.
The Economy: With shifting economic conditions, including cooling inflation and high interest rates, some entrepreneurs are undoubtedly questioning if now is the best time to invest in location. In fact, 20% of the business owners we recently surveyed said interest rates are making them more likely to not have a physical location. Be sure to evaluate all relevant economic impacts to ensure you’re maximizing the value of your business’ footprint.
The Cash Flow: Confirm that your cash flow is in a good position to comfortably establish your physical location or digital capabilities. If you’re unsure where to start, SCORE provides a very useful cash flow template that can help you manage your business’ expected revenue and expenses.
How do you make your move?
It’s not all scary – once you’ve determined what makes sense for you, it can be exciting to jump in and take the next step.
If you realize you’ll need additional financing to move forward, start by looking into what’s available to you. There are numerous options out there to help make your dreams a reality, like lines of credit, Small Business Administration (SBA) loans or real estate loans, depending on your needs.
And if all of these questions and considerations sound overwhelming, maybe it’s time to take a step back and evaluate your business plan. Banks, including Bank of America, provide myriad resources and advice that can help you navigate the ins and outs of business ownership – whether you need help starting your business or have determined you need a physical location but don’t know where to begin.
There are so many outside forces that can influence where, when, and how you choose to structure your business. With a solid plan in action, you’ll have more clarity on the footprint that works best for YOU, so that you can focus your energy and attention where it’s needed most: growing your business.
Uptrend Financial
10mo"Thank you for sharing this insightful article, Lori. The debate about the necessity of business rental expenses in today's digital era is a common one among business owners. In my view, now more than ever, having a physical presence is crucial. There's simply no substitute for the meaningful client interactions that can happen in person. It's where trust is built and lasting relationships are forged."