A couple of weeks ago, I delivered a keynote address to a number of small business owners in Park Ridge, NJ, in association with CableVision’s Optimum Business and Bloomberg Television. The audience was very engaged with my message, resulting in a lot of great questions. I was happy to learn that my new friend, Janet Guda, with Network Solutions, took some pretty darn good notes and posted them on the NetSol blog. Below is the opening paragraph and a link to the rest. Thanks for the luv, Janet.
Monthly Archive for July, 2011
This is the second of a two-part series on leasing commercial real estate for your small business. Last time we talked about how to start the due diligence process of narrowing your search down to two or three options. Let’s wrap this up by focusing on the final steps.
In the first stage, you built a comparables spreadsheet and started populating it with basic information for each property, like square footage, base rent, notes, etc. Now we’re going to finalize the expense picture by identifying who pays for what.
There are three classic lease structures: net, net-net and triple net. But the leases you’ve been reading won’t actually say “net lease.” The type is determined primarily by how expenses are allocated.
- A net lease means the tenant pays the base rent and possibly some or all of the utilities. This is the simplest and most common lease, and the easiest to evaluate. Be sure to ask how much to expect incremental expenses to be, so you can build that into your comparison.
- A net-net lease has the same elements as the net lease, plus the tenant will typically have some maintenance and replacement expenses, as when an air conditioning compressor goes out. Like the net lease, estimate what these extra expenses will be for comparison and budget purposes.
- A triple net lease means the landlord is merely making the building available, and all expenses associated with that availability are obligations of the tenant. This includes insurance and property taxes, plus all maintenance and replacement. These are long-term leases, such as 20 years.
Of the different properties you find that work for you, it’s likely that one will be offered as a net lease and another as a net-net. The net lease base rent will be higher, because maintenance, etc., is not included in the net-net lease base rate. This is where your spreadsheet pays off, because it reveals the total annual lease expenses for each property, regardless of the lease structure.
Every property has maintenance, grounds keeping, utilities, insurance and taxes that someone has to pay for. So don’t sign a lease until what you’re responsible for is spelled out, in plain English, in the lease. Also spell out who is responsible for getting the work done.
Just like in the 1st grade, when negotiating a commercial lease, there are no dumb questions. And let your attorney look at the lease before you sign.
Don’t sign a commercial lease until you know the total annual expense. Good luck.
Two things are sure with regard to social media and businesses: 1) as a way to connect with customers, social media is here to stay; 2) social media will evolve into an essential, customer community-building tool every successful business - large or small - will use.
“Social media” is the technology that makes online community building possible, not the community itself. It allows for the creation of, and service to, online communities, where dialogue and interaction among community founders and members are possible. While the term “social media” is handy, it would serve businesses well to think of it as “building online customer communities.”
There are two primary examples of these communities:
1. A company’s profile and “fan page” on sites like Facebook, Twitter, etc. Your company can build communities with these public platforms, which are free, but have limits.
2. Communities founded and hosted by your company and oriented around relationships with customers and prospects. This type of community is established when customers subscribe to one or more of your channel offerings in order to receive information. There is now new technology emerging that helps you create a Facebook-like social media platform that you host, which I predict will become the next killer app.
A channel is a syndication tool or method of content delivery and service to a community. For example, real simple syndication (RSS), a blog, email marketing, including an email newsletter (ezine), a text (SMS), and Twitter are channel tools, through which businesses serve their customer communities.
A website is a very important part of your online presence, but it is not a very effective community-building tool. However, a website can become a platform from which you launch and serve customer communities. Think of your website as the living room where you entertain new friends and social media communities as the den you share with close friends.
There is one critically important thing for a founding company to understand about both of the online customer community types: The company cannot control community behavior. Members - customers and prospects - control the conversation in the community. The founding company can only create and influence the community by establishing and demonstrating community values.
If value is the threshold of a community relationship, values are the foundation. Get started building online customer communities.
On The Small Business Advocate Show I’ve talked quite a bit about building customer communities and social media on my radio program. Click here to see and listen…
One of the annoying things about being a citizen of the United States is also one of the things that makes being an American so great: our political process.
But with regard to the annoying bits, perhaps the most irritating is what seems like very little relief from presidential campaigning. It’s as if the occupant of the White House is always campaigning, while the opposition party starts its run against the president at least two years before the election.
It seems to take the first year of the opposition party’s effort to unseat the president just to eliminate the also-rans - who never were serious candidates - during which time the serious players hone their campaigning skills. By the year of the election, there are usually a small handful that duke it out during the primary phase until finally, one is victorious and gets the nomination.
So here we are in that opposition party phase and in most polls, former Massachusetts governor, Mitt Romney, is currently seen as the Republican front-runner. Since there are at present upwards of a dozen Republican hopefuls - too many to list - we decided to see how Romney stacks up at this moment against President Obama, so in last week’s poll, we asked, “If the Presidential election was held today, who would you vote for?”
There are many political experts who think Romney cannot beat Obama in the next election, but based on our respondents, these experts may be wrong. A little more than 60% of our sample said they would choose Romney over Obama at this time. The numbers for the president looked bleak, with only 14% saying Obama should get a second term. Those who said they were “Undecided,” came in at 24%, which could also mean that they would have chosen another Republican candidate if we had listed them all. We’ll keep polling you on this topic as the Republican field narrows over the next year.
As you consider who will lead the U.S. government from 2013-2016, please consider supporting the candidate that is the most favorable for small business. Because, as you’ve likely heard me say before, what is good for your small business is good for America - and the world.
This is the first of a two-part series on leasing commercial real estate for your small business.
In most markets, one of the sectors that a small business can get a good deal on these days is commercial office and retail space. Whether you need more room or a better location, now is probably a good time to think about finding and negotiating for those new business digs.
But just in case you’re a little rusty on where to start the process, let’s focus on the initial steps of commercial real estate leasing fundamentals that will help you find and compare leased space that works for you.
1. Don’t stop looking until you find at least two or three places that work. The extra shoe leather will pay negotiating dividends later.
2. Don’t sign any lease until you know the entire expense picture, including maintenance, which we’ll cover next time
3. Avoid emotional attachment until after you’ve negotiated lease terms you can live with. At this point, the only emotion that should enter into your decision is whether customers will get excited about the location. Love is for lovers - this is business.
4. Ask for a pro forma copy of the lease as soon as possible and read it. Commercial leases are like belly buttons - each one is different.
5. Create a comparables analysis in an electronic spreadsheet that allows you to compare the details of prospective properties. The basics include: leased square footage, unit lease price, incremental expenses (including maintenance), lease term required (how many years), plus pros-and-cons notes about each property. The notes will come in handy later if you need a tie-breaker when you’re making the final decision.
Since every leased space is different in size and price, here is a handy rule of thumb to help you start the elimination process. Ask the agent or landlord for the unit lease price - $8, $14, etc. - which is the price per square foot of the space per year. Multiply those two numbers and then divide the product by 12 to get the monthly base rent. Use this only as a quick tool to compare properties of different size and unit price.
Taking these numbers and your preferences into account, by now you should be able to get your list of prospective properties down to a manageable list.
Now is a good time to look for a good deal on commercial space, if you know how.
In the next column we’ll wrap-up this project with the rest of the financial analysis and lease details, including types of commercial leases.
With the intense debate going on right now in Congress over the U.S. deficit and the debt ceiling, we’d like to know what you think.
Click on the question and give us your opinion - it will just take a few seconds and you’ll immediately see the current results of the poll.
Have more you’d like to say? Leave us a comment.
Want to know how the debt ceiling debate impacts you? Click on one of the links below to listen to my conversations yesterday with John Harrison, Founder of Aspire Financial Advisors and author of Making Mammon Serve You: A Biblical Manual for Money Mastery .