Location and tenant requirements

Posted On Monday, 14 May 2001 02:00 Published by eProp Commercial Property News
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Finding the right premises is an important consideration when setting up a small business.

Jo SchwenkeJo Schwenke, MD of Business Partners, a specialist investor in small and medium-sized businesses, says it is about finding the appropriate site for your business. If the nature of your business means that you will have clients visiting you, you will need something that looks good - perhaps in an office park, where there is parking for your clients.

However, Brian Kirchmann, CEO of the SA Property Owners' Association, says that if you are going for a suburban business node, it is important to look at the state of its infrastructure. He says you must be in an area that is well planned with water, sewerage and electricity systems that can cope with the influx of commercial activity.

It is also important to look at the state of the management of the building or office park. This, says Kirchmann, you gauge by little things: is the building neat and clean, and if there is a patch of grass or greenery, has it been tended to?

"The first impression will tell you a lot," he says.

However, if your business involves a service which goes out to customers, you have the luxury of working from home - which cuts costs and means tax deductions.

If your business involves distribution or light manufacturing - where customers are unlikely to come to the premises - the biggest concern is finding affordable space.

Schwenke and Kirchmann suggest such businesses look at city centres, which are reasonably cheap because of the flight to the suburbs.

The challenge is to get premises that are the right size and price, and aligned to budget forecasts.

Schwenke says start-up businesses must think carefully about when they need the premises. The timing is important as you do not want to be paying rent if the business is not yet up and running.

She does not advise start-up business owners to buy property.

"In the beginning, I suggest spending energy on running the business. Let the business settle down first, and maybe look at real estate in three to four years' time."

Kirchmann says buying property can be a good thing if you find a small place at a reasonable price in an area that will grow - say a house on an arterial road. "It's not a bad idea if the property is going to show capital appreciation, but many small business owners feel they are not in the business of owning property."

Another thing to consider, says Kirchmann, is where staff are travelling from and whether there is transport infrastructure to ferry them to work smoothly.

Too often premises are chosen because they suit the business owner, he says. "Staff are better motivated if they don't have to sit in traffic for an hour or two."

When it comes to retail businesses and restaurants, location is everything. Callie van der Merwe, a partner at architectural firm Design Partnership, says you have to find a site and design that suits your patrons.

The position of the premises - whether in a mall or on the street - must make your business noticeable and inviting to customers.

However, it is important not to spend more than you budgeted on renovations and decor, he says. There is also no point in having state-of-the-art design if your customers do not care about this.

Schwenke says it is important to understand what kind of business you have: a destination or passing-trade type of business, or a mix of both.

A hair-dressing salon, for example, is a mix: once customers find a hairdresser they like, they will keep coming back, no matter where the salon is situated. But the initial connection is often made by someone passing by a salon, and deciding to try it out.

Finding the ideal location for your business is important, but it must also be something that you can afford, says Schwenke.

"If you are a hairdresser, you need to look at how many hair cuts you need to make the rent and profit."

Next week: Choosing company form and setting it up.

Last modified on Thursday, 22 May 2014 19:02

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