Startup Business

by | Mar 7, 2023 | Commercial Real Estate Tips

Is Your Business a Start -Up?

Important steps to note if you are starting up a business in Central Texas

Are you a start-up business looking to lease a warehouse , retail or office type property? If so, this article addresses the important points you have to consider. Let’s just start with the basics. What is a startup? A startup is a business that has no track record. It can be a new idea for a business or an existing business where a person breaks out on their own.  Sometimes an individual feels they have a better plan than their employer. The phrase “build a better mousetrap”.Commercial Real Estate Lease

 

Key Starting Points for a Startup Business

There are key starting points for a startup business. To be seriously considered in a tight commercial real estate market we will review the bullets below.  Be prepared to have your homework done. If you contact a professional commercial real estate broker, you will be asked some qualifying questions. If you are not asked qualifying questions, you probably are not going to represented well. Efficient and Effective representation is critical to your success in obtaining a lease. If you do not have the bullets covered below, then a search is futile and just an exercise.

 

 

 

 

. Business Plan

Do you have a completed business plan? Did you thoroughly think thru the ins and outs of your new business? Is it on paper? In order for an idea to work it has to be more than “I want to do this”.  All good business plans have these elements to them.

1. Your bio- who are you, what makes you special?

2. What is the value- add that you bring to this new venture?

3. Your experience? Have you ever been involved in this type of business?

You can find a business plan template via MS Word.

Forecasts are incorporated into your business plan. This includes gross profit , expenses , profit margins etc

 

Capital = Cash

A tenant must show financials. Regardless of whom you are or what you have done. There is always a credit app and financials to be provided. Broker’s call this “proof of funds”. How much should you have? Well it depends on the lease and how much it will cost you monthly.  As a rule of thumb, you should have a minimum 2 years worth of rent available. Rent does not include utility costs or your FFE (furniture , fixtures and equipment). you may require capital to cover TI costs (tenant improvements)  in addition to rent. As an example (2023) if you want to lease a 5000SF warehouse, rent will run approximately $7000 per month.  Based on this example, you would need at least $168,00.00 cash in the bank. Providing financials, would show you can cover the rent for 2 years. Is that all you can cover? So ideally, it should be more than just the 2 years of rent.

Start up business Lease parameters

  • PG, or Personal guarantees are required for startups
  • If you cannot personally guarantee your lease, is there someone else that can?
  • Tenant improvement capital. It may be a portion, it may be 100%, it may be zero.
  • A Lease term that shows you are committed to the business. Startups with a 3 yr outlook , are not considered serious ventures.
  • Your minimum term should be 5 years
  • .You must have your business entity created. In addition, is it registered with the SOS. (Secretary of State)
  • Your lease will require you to pay a security deposit + the first full month’s rent in advance. Security deposits are calculated based on a tenant’s financial picture.
  • Lease Negotiations – your broker should have expertise to negotiate beneficial terms and conditions.