Starting a new business requires numerous resources. The entrepreneur starting the business must have a business plan. They may need to negotiate contracts with vendors or highly-specialized employees. They also frequently need facilities at which they can operate their businesses.
There are two main ways for an organization to secure appropriately-zoned commercial premises. The first is through purchasing property. The second is through a commercial lease. Entrepreneurs often struggle to choose between those two options and may be anxious about which choice is best given their circumstances.
How can those starting new companies decide if they want to purchase or lease commercial space?
Every situation requires unique solutions
The intended scale of the company and its initial startup phase, the best locations for running the business and even the capital accessible to the entrepreneur can influence decisions about whether to rent or buy commercial property. There are benefits and drawbacks to each option.
In some cases, renting is the most expedient and cost-effective solution. Entrepreneurs don’t end up trapped at a property for years that may not suit their company’s needs. If their business fails, they don’t have to worry about covering the cost of the remainder of their lease. If the company is wildly successful, they can move to bigger facilities or a different neighborhood without waiting for years.
However, leasing means accepting restrictions imposed by a landlord. It also means paying rent monthly instead of accruing equity. A commercial space can quickly become one of the most valuable assets in an organization’s portfolio.
Owning outright means having total control over how to use and develop the property and the potential to profit off of reselling it or renting it to others in the future. For those planning larger businesses with multiple investors, purchasing facilities might be the better option.
However, every entrepreneur typically needs to consider the various stages of business development carefully based on their unique business plan. Purchasing too early could lead to overextension and financial struggles.
Having guidance during the business planning and formation process can limit the risk involved in starting a new company. Legal assistance can help entrepreneurs make the best choices given their ambitions. An attorney assisting with business formation can also help with the process of negotiating a commercial lease or evaluating commercial properties and preparing bespoke offers.