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Moving Locations aka Jumping Off a Cliff!!

1213 Views 9 Replies 5 Participants Last post by  crackerjackshack
We have finally decided that we have maxed out here in our basement, so we secured commercial property today. We are profitable and do enjoy a broad client base, but I still feel a little like we've jumped off a cliff, so I would appreciate all the advice I can get.

First, we are not planning on opening a retail store at the current time. We have lots of connections in town, so we know we'll have walk-ins whether we advertise as retail or not, but we do enough contract work and have a large enough clientele that we do not see the need to set up a showroom. Our plan is to maintain the business as a manufacturing-type facility for at least the first year and possibly beyond.

First, I have a question about setting up the space. Since we will have more space than we need starting out, I'd like to arrange our equipment/desks/supplies/etc. so we won't have to continually rearrange as we grow. We are running 4 single head machines, have minimal inventory, a large work station (5x9) and a swinger heat press. I'd love it if anyone would be kind enough to email me or post photos of your shop - or at least describe the layout. We will have 1,200 square feet, and it's literally a blank slate.

Second, I have a question about insurance. Since we have not had customers on our property here at home, I'm sure we'll need general liability insurance once we make the move. Do most of you also carry product liability insurance as well?

Third (and this is mostly directed at people who have already made the move from home to a commercial location) I'm curious if there are any expenses that you did not expect or consider that you wish you had. We've accounted for the usual: utilities, internet, trash, etc. but I want to be sure we're not missing anything.

Any other advice would be welcomed!
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Invest in a good alarm system... good luck, hopefully soon we can open our T-Shirt Shop and Art Supplies Store ( Graffiti supply shop ).
I don't have any of the answers you need - but I just wanted to say congratulations on the move!!

Thank you! I've attached 2 images of how we think the work flow will continue and grow, based on what we're already doing here at our home shop. I just want to be sure we haven't missed anything.

I've sent it to my mentor at the SBA, but I would love it if someone in our business would take a look as well. I'm open to suggestions and comments.

The first image is the 1,200 sq. ft. space utilizing the equipment we currently have or will be acquiring when we move in. The second image is how we visualize the shop when it's used to its potential.



My advice would be to have a attorney that specializes in commercial real estate review the lease before you sign it. Once the attorney is satisfied with all the terms and wording (they will most likely recommend some changes in the wording, all part of negotiating the lease), make sure you understand it all as well before signing.

As far as extra expenses, who pays for what? Maintenance to the air conditioner, walls roof, etc? Who pays for the insurance? (on the building, not your business), who pays for the property taxes? These are all common expenses that many times are charges to the tenant. If there are other tenants in other parts of the building is there any common expenses, such as, parking lot cleaning, snow removal, electric, etc. These are often charge to the tenant with a percentage of sq. footage. They will most likely call it CAM (common area maintenance). Are there any management fees added to the rents? These are all things that should be addressed in the lease.

Also it is a buyers market in commercial real estate right now, take advantage of that. It is not uncommon to ask for and receive the first three or even six months for free. In some cases even some cash if you need to do any remodeling to "make ready", before moving in.

One more thing as far as the lease. If you are getting a good rate and plan on staying there for many years, ask for options to be added to the lease. That way you can lock in the option to extend the lease while the economy is slow and rents are lower. You could for example ask for three three year options with a predetermined rent which would give you the control of the property for an additional nine years after the initial term runs out.
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Thank you so much for all the advice. Our motivation for moving our shop is two-fold: we need more space and the space that is currently available is adjacent to my daughter's school. It's a 1,200 sq. ft. space that we negotiated for $300 per month - which is an absolute STEAL! The building itself is about 6 years old, so that should help with repair/age issues.

It is in the same small town where we have lived for over 20 years, and since I used to teach at the school, we know almost everyone in the community and have already had orders coming in just from people hearing the news about our move. I have 2 former students who currently lease space in this same center, and they give high marks to both the landlord and the building itself. I have seen their paperwork for their current expenses - water, heat, air, etc. and feel comfortable moving forward.

We negotiated the space with the contingency that if we paid our rent in one lump sum annually we are locked in at the $300 per month rate for the next 3 years, but have the option to opt out of the lease on our anniversary date if we need to before that 3 year term is up. Our thinking is that locking in the low rent will alleviate the worry about what's going to happen after the first year - and it also gives us an out each year should we need it.

I didn't think of having our attorney look at the lease, but I could certainly do that.

My biggest worry is what to do with this big blank slate now that we have it! We currently run 2 single head machines and 2 TOL home machines (should we need them) so purchasing a multi-head machine is top priority once we get in and get our footing (probably during year #2). I would like to start out with a shop floor plan so that we can just add what we need to add as the need arises. I don't want to spend time constantly rearranging everything and figuring out efficiency by trial and error. If you look at the floorplan in the files I attached to my last post, I'm wondering if there is anything we forgot to add that will be necessary when we open our doors.

I know there will be things we will have to do once we're in there, but dotting as many of the "i's" as we can before we get there would make for a smoother transition.
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$3.00/ sq ft is a great deal. Because you have done so well for yourself is all the more the reason to try and add a couple of three year options with small bumps of about .50 each. If after three years your business is going great (lets hope so) and the economy is back on track the landlord is likely to think you are making a killing and just might demand a large rent increase. If you negotiate the options now you will control the property for a long time at your option.

Even though the building is only six years old, I wouldn't assume anything. It is better to get in writing exactly what you are or aren't responsible for ahead of time so at least you are prepared. You need to know if the roof leaks, or if the compressor on the air conditioner dies, who is responsible. You don't want to be surprised with a few thousand dollars in repairs that you weren't prepared for. If he is going to require that you are to be responsible for things like the heating and cooling, I would have it agreed upon for him to have the air/heating unit inspected (at his expense) before hand and for you to receive a copy of that certification of good working order. Maybe even ask that if the unit dies withing the first six months he will be responsible and you will assume responsibility after that. If however the landlord is responsible for the air unit (or things like that) require in writing (in the lease) a time limit for the work to be done. You don't want to be without air in 95 degree heat for a month while he drags his feet.

It sounds like you have yourself a very good deal so overall things like this probably won't be an issue. I know to most many of my suggestions might sound like overkill, but the reason a person should put everything in writing when leasing a property is to be properly prepared for those times when things don't go as expected, even if they might be unlikely to occur.

It really sounds like a terrific opportunity, I am thrilled for you. I know it is an exciting thing to go through. Don't let any of the new stress get to you, but instead relish in the experience, the excitement and the fun you are going to have. I wish you the best!
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Thank you so much. You bring up very valid points that I will certainly pursue. Just going through this process is a little intimidating, but certainly necessary for our growth. Thanks for the encouragement!
Where do you live? In Portland, Or, a bathroom cost $300! Rent is expensive here even in a down economy. A 1500 square ft rents for about $2000-3000 for an industrial building. Anyhow, good luck on your move and as the others have said invest in a nice alarm system and get good business insurance.
I know. The rent is just CRAZY cheap - and it's very close to my daughter's school so she can just walk to the shop when school lets out. Not to mention that I have a very sharp HS student who also works with me and can just waltz over after school!

When I asked my former students a few months ago what they were paying for rent (one is a hair stylist and the other is a dentist) I nearly fell out of my chair when they told me!! I was expecting about $1K per month. The location is very good (for a small town) and the simple fact that my dd and top notch student helper can just walk over after school is an added PLUS.

We don't move in until Sept 1st, so we are in the process of securing insurance and getting our ducks in a row this week and next. It's a big move for us....one filled with lots of different emotions that's for sure.
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