Choosing premises for a growing business you cannot yet size

Aug 29
3 min read

Updated: 2 days ago

Introduction

A business needs more space. A unit is found, it is affordable, it fits the current operation with a little room, and a five-year lease is signed in a fortnight because it was available and the alternative was staying put.

Eighteen months later the business has outgrown it, cannot expand within the building, and has three and a half years remaining on a commitment that now constrains everything. Premises decisions are made quickly, committed to for years, and are among the least reversible things a small business does. A bad hire can be corrected in months; a bad lease runs for years.

1. Choosing premises for a growing business means sizing for a business that does not exist yet

The central difficulty.

You are committing on a projection. Being too small stops growth; being too large costs money every month. The two errors are not symmetrical, and being slightly too large is usually the cheaper mistake. Empty space costs rent; insufficient space costs the growth you cannot take. Empty space is a monthly cost you can see; forgone growth is a cost you never find out about.

2. Model three scenarios rather than one

Better than a single forecast.

What the business needs if it stays flat, if it grows moderately, and if it grows well. A property that works in two of the three is a far safer commitment than one that works only in the expected case.

3. Prefer flexibility over the perfect fit

The most useful principle.

A break clause, a shorter term, an option on adjoining space, or a landlord with other units. A slightly less ideal building with room to adjust generally beats a perfect one with no exit.

4. Work out the total occupancy cost

Rent is not the number.

Business rates, service charge, insurance, utilities, maintenance obligations, fit-out and the cost of moving. Businesses compare rents and are surprised by a total that is substantially higher.

5. Check the practical constraints properly

Where operations fail.

Access for deliveries, parking, power capacity, floor loading, ceiling height, water, waste, and whether you can operate at the hours you need. These are expensive or impossible to change afterwards.

6. Confirm the permitted use

Before signing anything.

Planning classification and any restrictions in the lease need to permit what you actually intend to do. Businesses sign leases for premises they are not permitted to use as planned, and discover it afterwards.

7. Think about staff and customers

Frequently secondary and shouldn't be.

Whether staff can get there, whether parking exists, and whether customers will visit. A cheaper location that loses two experienced employees has not saved anything.

8. Budget for the fit-out and the disruption

Routinely underestimated.

Adaptation, equipment moves, downtime, and the period of reduced output while everybody adjusts. This is frequently a larger figure than the annual rent difference between two options. It is also the figure most often left out of the comparison entirely.

9. Take advice on the lease before you sign

The terms are negotiable once only.

A property solicitor reviewing the lease is a modest cost against a multi-year commitment, and the points worth negotiating — break clauses, repairing obligations, service charge caps — can only be raised before signature.

Ask what happens if you need to leave early. Assignment, subletting and break rights are the whole of your flexibility, and a lease that permits none of them means the commitment is genuinely for the full term whatever changes in the business.

Conclusion

Recognise that you are committing years ahead on an estimate, and structure for being wrong.

Model flat, moderate and strong growth rather than a single forecast, prefer flexibility to a perfect fit, calculate total occupancy cost rather than comparing rents, check access, power, loading and operating hours before committing, confirm the permitted use covers what you intend, consider whether staff and customers can actually get there, budget properly for fit-out and disruption, take legal advice before signing, and establish what your exit routes actually are.