Before you get to the stage of signing a lease, write a business plan. This needs to cover the following.
◆ Why you are going into business.
◆ What your personal goals are.
◆ What you want to achieve from the business.
◆ Why it is going to be a success.
◆ Why people are going to buy your products.
◆ Why your business will survive and thrive when so many others do not.
If you need to borrow money to set up the business you will have to write a very full and professionally presented business plan for the bank. This should include details of:
◆ the company structure – sole trader/partnership/limited company;
◆ what the business will do;
◆ the market size and potential;
◆ competitors;
◆ suppliers;
◆ cash flow forecasts;
◆ projections of takings and growth;
◆ a complete résumé of all the people involved;
◆ your qualifications, experience and the strengths you will bring to the proposed business;
◆ the proposed premises;
◆ any plant, machinery and vehicles;
◆ your assets and financial needs.
Be realistic
Calculate how much money you need to earn for the shop to break even and how much money you need to earn to live off. There is no point saying you can live for £50 a week when the mortgage on your house is £1,000 a month.
When writing the cash flow forecasts you will be able to enter accurate figures for the likes of rent and rates once you have found your proposed location, but will have to estimate how much you will be spending on telephone or stationery. Remember that the more your turnover goes up, the more you will spend on things like carrier bags and probably wages, but your heating and lighting costs for example will remain the same.
Turnover ratios are available for some types of business such as grocery and menswear shops. This means that if £x of stock is held in a shop floor area of y square feet, then turnover can be expected to be £z. For most types of business, however, you can only guess.
понеделник, 30 ноември 2009 г.
неделя, 29 ноември 2009 г.
Rent deposits
Unless you have been in business before, prior to taking possession of the shop, most landlords will require you to pay a deposit of six months’ rent (plus VAT if the landlord is VAT registered) in addition to the first quarter’s rent. If you are going to beVAT registered you will be able to claim all the VAT back but remember to include it in your setting up budget as it must be paid in advance.
The British Property Federation (BPF), which represents the UK property industry, has been campaigning for flexible leases and a fairer rents regime. As a result, there is beginning to be a move in rental payments from quarterly to monthly in advance. The BPF is encouraging landlords to sign up to its Commercial Landlords Accreditation Scheme (CLAS), which highlights landlords committed to offering the best service. Landlords can sign up to it via www.clascheme.org.uk.This should be raised with any prospective landlord as part of your lease negotiations. Flexibility has always been possible if the landlord is desperate to find new tenants, such as during an economic downturn, but even on my current shop, the lease of which was negotiated prior to the credit crunch of 2007, I negotiated six weeks’ rent free to help with the fitting out. All fitting out was done within two weeks and I had four weeks rent free to earn the first quarter’s rent.
The British Property Federation (BPF), which represents the UK property industry, has been campaigning for flexible leases and a fairer rents regime. As a result, there is beginning to be a move in rental payments from quarterly to monthly in advance. The BPF is encouraging landlords to sign up to its Commercial Landlords Accreditation Scheme (CLAS), which highlights landlords committed to offering the best service. Landlords can sign up to it via www.clascheme.org.uk.This should be raised with any prospective landlord as part of your lease negotiations. Flexibility has always been possible if the landlord is desperate to find new tenants, such as during an economic downturn, but even on my current shop, the lease of which was negotiated prior to the credit crunch of 2007, I negotiated six weeks’ rent free to help with the fitting out. All fitting out was done within two weeks and I had four weeks rent free to earn the first quarter’s rent.
събота, 28 ноември 2009 г.
Premiums and other charges
A premium (or key money) is a sum of money charged by the previous tenant, payable by the new tenant for the right to take over an empty shop for the remainder of the lease.You get nothing more for your money than that. Premiums were routinely charged in the late 1980s when the economy was booming but fortunately, this practice does not seem to have been resurrected since and I am not aware that premiums are currently being charged.
Another practice that was commonplace in the boom-time of the late 1980s was the need for prospective tenants to make payments to property agents just to ensure that they were sent details of properties that were available to let. Those who were not in the know about this did not receive any mailings. I do not believe in subscribing to such practices but suspect that some agents (who have not sent me information on shops I know to be available) still operate in this way.
Another practice that was commonplace in the boom-time of the late 1980s was the need for prospective tenants to make payments to property agents just to ensure that they were sent details of properties that were available to let. Those who were not in the know about this did not receive any mailings. I do not believe in subscribing to such practices but suspect that some agents (who have not sent me information on shops I know to be available) still operate in this way.
петък, 27 ноември 2009 г.
Rental charges
Rent is a complicated calculation. It is charged at so many pounds per square foot, but not every square foot of a shop is worth the same value. The front part of a shop, looking from the window inwards, is the most expensive part.The rent for a shop that is wide but not very deep, will cost more than the same sized shop next door, which is narrow but goes back a long way.
If there is an upstairs sales area, the rental for this area will be less expensive than that downstairs.
The value per square foot varies depending on which part of the country and which town the shop is in. It will also vary depending on which part of town and the exact part of the street.
If there is an upstairs sales area, the rental for this area will be less expensive than that downstairs.
The value per square foot varies depending on which part of the country and which town the shop is in. It will also vary depending on which part of town and the exact part of the street.
четвъртък, 26 ноември 2009 г.
Length of lease and rent reviews
Shop leases have traditionally been for 25 years or more but following the recession of the early 1990s, this has tended to be cut to shorter periodssuch as 12 or 15 years.You might even be lucky and agree one for six years. The period of your lease will probably be split into three or five year periods, depending on the length of the lease. At the end of each of these periods you will be subjected to a rent review. Most leases specify an upward-only rent review, meaning that even if other rents in the area have fallen, yours will rise, or at best remain the same. If your landlord is pushing for a rent rise above inflation, it is worth employing the service of a commercial property surveyor, who will charge in the region of 10% of the finally agreed rent.
At the end of my first leases, the landlord tried to push the rents up from £7,750 and £9,750 to £9,500 and £14,000 respectively. Having failed to negotiate a more reasonable figure myself, I employed a commercial property surveyor to negotiate on my behalf. The process took over 18 months, cost me £1,750, involved both shops being re-measured (one was found to be smaller than it had previously been!) and resulted in new rents being agreed at £8,000 and £10,250. These figures were less than the £8,500 and £10,500 I had originally offered to pay!
At the end of my first leases, the landlord tried to push the rents up from £7,750 and £9,750 to £9,500 and £14,000 respectively. Having failed to negotiate a more reasonable figure myself, I employed a commercial property surveyor to negotiate on my behalf. The process took over 18 months, cost me £1,750, involved both shops being re-measured (one was found to be smaller than it had previously been!) and resulted in new rents being agreed at £8,000 and £10,250. These figures were less than the £8,500 and £10,500 I had originally offered to pay!
сряда, 25 ноември 2009 г.
Taking on a licence
A licence is also a legal agreement, but one which can be terminated at any time by either the licensee or the landlord.This can be an advantage if your plans are short-term but it does not give you any long-term security. A licence will be issued for example:
◆ on a shop that is available only for a short period of time, eg if it is earmarked for re-development;
◆ for an indoor market stall, which is not a permanent trading location but the licence gives you the right to the same location on the market, each week of your licence;
◆ for most small storage units, such as lock-up garages.
◆ on a shop that is available only for a short period of time, eg if it is earmarked for re-development;
◆ for an indoor market stall, which is not a permanent trading location but the licence gives you the right to the same location on the market, each week of your licence;
◆ for most small storage units, such as lock-up garages.
вторник, 24 ноември 2009 г.
Taking on a lease
A lease is a legally binding document that entitles the tenant to trade at a specified address for a stated period of time. If you leave during that period of time, then you (the tenant) are still responsible for paying the rent. If you can find a new tenant, who is acceptable to the landlord, then you should be able to assign (hand over) the lease to the new tenant, who will take over paying the rent for the remaining period of the lease. Legally, however, you (the original tenant) are still liable should the new tenant, or any subsequent tenants, stop paying the rent. This is the standard type of agreement for renting a shop.