Finding the Optimum Small Business Location, Location, Location

small business buy vs. lease location

Locating your small business and three perspectives on buying vs. leasing

 

Locating your small business

For small businesses that depend heavily on customer traffic for success, choosing the right location may be more important than choosing a name. Aside from customer exposure, some factors to consider include:

Image: Is the location consistent with the image you want to protect?

Zoning: Is the area zoned for your type of business?

Competition: Are surrounding businesses complementary or competing?

Potential employees: Does the area offer a labor pool you could draw from?

Suppliers: Can suppliers find you easily?

Safety: What is the crime rate? Will your employees feel safe alone in the building?

Affordability: Are rents in this location consistent with your budget?

Condition: Is the site ready to be occupied or will renovations be needed?

Accessibility: for Vendors and Customers

Three perspectives on busying vs. leasing

 

Article 1: Considerations for that important lease vs buy decision

At some point almost every small business owner asks, Should I lease or buy building space?

It’s an important question without an easy answer.

You must compare the benefits by considering:

  • Cash flow
  • Flexibility
  • Location
  • Market fluctuation
  • Income taxes

To thrive, you must maintain a positive cash flow. If you buy, you’ll make a large cash down payment of the purchase price, anywhere from 10% to 25%. Because buying real estate ties up large amounts of cash, it may make better sense to invest in your business and lease needed space.

Flexibility is another consideration, and leasing typically provides it. This is the main reason start-ups and small businesses in growth phases usually lease. More stable businesses, where flexibility is not as important, can consider buying.

The main advantage of purchasing is that you end up paying out less in the long term than you would have paid if you leased the facility. Moreover, if you purchase, you get the benefit of any appreciation in the value of the property.

Read the full article: Lease Or Buy Space?

Article 2: Comparing the small business economics of leasing vs. buying

There are many factors every small business owner needs to consider when getting ready to make the decision whether to buy or rent a small business facility.

Comparing the Economics of Leasing vs. Buying

The main advantage of leasing a business facility is that your initial outlay of cash to gain the use of an asset is generally less for leasing than it is for purchasing.

However, perhaps the main advantage of purchasing is that you end up paying out less in the long term than you would have paid if you leased the facility. Moreover, if you purchase, you get the benefit of any appreciation in the value of the property.

How do you reconcile these factors?

One way is to do a mathematical analysis of your net cash flows that would result from leasing and from purchasing.

Ten Factors to Consider When Making the Lease or Buy Decision

What factors should you consider when deciding whether you should buy or lease a business facility?

1.  You want control of the property.

Maybe you intend to make substantial additions or renovations to the property. Or you decide to change your business hours or change something else about the way you are doing business. If you rent your facility, you may have to get your landlord's permission to make these changes. If, however, you own the property, there will be no one looking over your shoulder (expect maybe the zoning board!) to question your moves.

2.  You can consider the long-term cost.

A lease may sometimes beat out a purchase in terms of cash flow, particularly in the early years. But over the long haul, a purchase is usually cheaper because a landlord, in addition to paying all of the costs associated with purchasing and maintaining the property, will attempt to build in a profit for himself. You can avoid paying this profit premium by buying, rather than renting, the property.

For some businesses, such as certain retail and service businesses, location is all important. If you have established a winning business location, you don't want to lose it because of a rent escalation or because the landlord just wants the property for another use. If you own the facility, you won't have these worries.

Read the full article for more on  Factors 3 through 10

The main advantage of purchasing is that you end up paying out less in the long term than you would have paid if you leased the facility. Moreover, if you purchase, you get the benefit of any appreciation in the value of the property.

Read the full article:  To Lease or To Buy? Issues Relating To Both In Today's Market

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