Buy or lease? A Business Owner’s DilemmaMay 15, 2015 12:00 am
This past February, I authored an article for the Rhode Island Small Business Journal entitled: Buy or lease? A Business Owner’s Dilemma.
One of my friends is a successful small business woman. She’s struggling with a big decision and one that many small business owners face at some point, “Should I continue to lease or look to buy my building?” It is a big challenge for business owners, and many struggle to determine the correct course of action. Conversely, leasing does create business risk that needs to be considered, especially as your business matures.
Location and Portability
Depending on your type of business, your building and its location may not matter. My friend’s business is very retail-oriented. While the business is relatively young, its home has been in the same location for quite some time. Her clients have grown accustomed to the location, and she’s spent time and money upgrading the facilities even though she only rents the space. While it’s difficult to quantify, I personally believe the space she occupies is part of her corporate brand, and moving could potentially affect the success of her business.
My friend’s business requires a large amount of space, so if she was forced to relocate, she may find it challenging to find a space suitable. Determining how portable your business is and identifying how much your current location factors in to your overall sales is important and something you need to consider when deciding whether buying or continuing to lease is right for you.
As we spoke, it became clear to us that she could potentially be forced to move in the near future because the building owner had approached her about selling it. There is some concern that if she passes on the opportunity, the current owners would seek other buyers, and then where does her business fit into the dialogue? Her lease expires next year and she worries that the new owners may force her out. She felt herself leaning towards buying.
Financing and Titling
One must consider which entity is buying the building and how to finance it. My friend’s landlord offered to do seller financing, whereby the building legally changes hands and the previous landlord acts like the bank…
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