January 10, 2020

The period right after New Year’s is one my favorite times in the business year as people come off the holiday break rejuvenated, motivated and ready to put new plans and initiatives into motion.  For some that means launching a new business line, expanding an existing business, or in some cases, starting a completely new business.

In fact, this month marks the 19^th anniversary since I launched my commercial real estate practice from my home.  In many ways I feel like my practice is still in start-up mode, but that is hardly the case.  In these ensuing years since I started my journey as a business owner, I have had the privilege to work with countless entrepreneurs to execute on their dreams. As you would imagine some have been more successful than others.

Recently, I met a young entrepreneur that signed a sublease with my client but then decided she didn’t want to give us the security deposit and first month rent, as she had agreed to in the lease, until she moved-in.  After a week of trying to help her understand why it is done this way, and politely reminding her that she already committed to this in the signed lease, she then told me she had “changed her mind” and was not moving in.  Leading up to that point I had been extremely impressed with how professional and squared away this young woman appeared.  But in the end, I was blown away by her recklessness and cavalier attitude; dismissing the legal commitments she had made with a fully binding sublease document.  So, I have a few thoughts for new or aspiring business owners that might be looking to lease for the first time in 2020.

The first thing to remember is that there is a certain amount of responsibility on you as the tenant to “prove yourself” to the landlord, and show that you will be able to meet your financial obligations under the lease.  And how do you do this as a new or young business?

1. Have organized financials. Use QuickBooks or similar software so that a landlord can clearly see revenue streams and any positive financial trends that would help them see your ability to pay the rent.  Being a new business is no excuse for not having an organized financial statement.  If you are start-up and pre-revenue then you should have your revenue projections for the first three years with some additional documentation to support your revenue thesis.
2. Have a business plan. This is an absolute must if you are just starting out for the very first time.  I am shocked how often people call our office about leasing space for a new business but they don’t have a business plan.  Come on people!    This absolutely screams to the landlord that you are not very serious and that they shouldn’t take a chance on you.  A well thought out business plan can show the landlord your road map to profitability and help you make the case that you are a chance worth taking.
3. Be ready to show your tax returns. When the landlord requests to see your company’s financial statement and tax returns you need to show it to them.  If you are a new business and your company has yet to file a tax return yet, everything you are telling the prospective landlord might be BS.  Releasing your personal return shows the landlord what assets you have and your history for earnings and success.  Remember, you are trying to build credibility with the landlord.  If you refuse to share any of this financial information with the landlord, they only have one option– to assume that you don’t have the money or track record that you claim, or that you are hiding something from them.  In both of those scenarios any reasonable landlord should be fearful of leasing to you.

Young business owners, please take this advice to heart.  This is not an area where you can “Fake until you make it.”  You need to have a business plan, keep organized financial records and be willing to show your tax returns because all successful, serious business do the same.  So, why not start now.  Good luck and Happy New Year!

More advice:

Why Hire a Professional Commercial Real Estate Broker?

Leasing Commercial Space: Five Easy Steps to a Smooth Transaction