First Impressions Matter: Get the Retail Space You Want

May 30, 2012

I hate to admit it, but I get frustrated looking at the poor quality of the offers to lease that come across my desk. I know that I am not the only landlord who feels this way.

With the banks absent from the small business lending market for several years where can you go to get the startup money?

Friends and relatives are one source and the landlords of the space you want to lease are another.

Actually, there has never been a better time to ask landlords for a major portion of your start up costs. They, the landlords, are sitting on a substantial amount of vacant retail space and are creatively looking for ways to bring new businesses into their shopping centers.

I have never seen a time in the last 35 years when landlords were more willing to invest most, if not all, of the cost of the tenant improvements for start up businesses. Landlords have been practically begging for credible start up entrepreneurs to lease their space to.

So what has been the hang up? Most of the proposals are just not credible. These proposals are often slip shod and tend to provide very little detailed information about their business or their owners.

Below are 5 things you can do which will make you stand head and shoulders above 90% of the competition. I guarantee that you will be taken seriously and the odds you will get the financial help you want from the landlord will go up dramatically.

First, let me take a moment to give you some insight into how landlords think. As a group, most of them started just like you, with an idea and not much money. Having started that way they understand your position and are sympathetic to other entrepreneurs.

Most of them have gone through tough financial times themselves at some point in their business life and are willing to give you the benefit of the doubt. They are looking for reasons to say “yes”.  It is up to you to give them those reasons.

Here are the five things you can do:

  1. Write a bio of yourself. Tell who you are and what you have done. Don’t worry if you do not have experience, it definitely helps, but it is not a deal killer. Focus on all the reasons you and your store will succeed.
  2. Give them a copy of your business plan. This will show you are serious, that you have researched and studied your market, and have a plan for success. In your plan talk about the obstacles or problem areas you see and an give explanation about how you will address them.
  3. Prepare a three year income/expense operating proforma. Make one for worst case, best case and expected case scenarios.
  4. Write up a study on your competition. Talk about all your potential competitors, about what they are doing right and about how you will differentiate your business from them. Having competition is not bad. Competition means there is a market for the product you are going to be selling.
  5. Put together a start up budget. This is different than your operating proforma and it should cover just that period of time leading up to opening your doors for business. Things to include in the budget:
    • Tenant improvement costs
    • Equipment and fixture costs
    • Sign costs
    • Municipal permit, impact fees and license costs
    • A source and use of funds section

Finally, put it all together in a sectioned and labeled binder.

It will look impressive and the recipients will believe you know what you are doing. The most important thing is that you will believe you know what your are doing too. That is what will get you the lease on the terms you want.

Leave a Comment » | Build-out, Entrepreneur, Planning, Retail, Site Selection, Tenant | Permalink
Posted by Gary Simning

How To Avoid Tenant Improvement Cost Over Runs

June 22, 2011

For the small business owner few things are more frustrating or gut twisting than getting halfway through a project and having your contractor give you a change order for unexpected items that totally blows your budget.   You are left contemplating where to get the money to finish your store and get the doors open.  As you scrabble for the money, the store sits partly finished for weeks, or even months, and valuable time is lost.  You can’t walk away from the store because you have committed everything, and you’re obligated to a long-term lease. You are “caught.”

How do you avoid this trap?

Select a good quality contractor who has been in business for many years and is licensed and bonded. Contracting draws to it many people with little experience organizing and managing projects.  The only requirements to obtaining a general contractor’s license is to pass a test and pay the fees. The ease of getting a license draws people who maybe talented as framers, but who do not have a clue how to organize, manage, budget the work and payments to the sub contractors. Longevity in the business means a lot. Contractors generate a lot of their business from referrals, and they only get referrals if  they have satisfied customers.

Many people find a contractor in a way that I do not recommend.   They simply put out their plans to bid.  This requires plans to be complete and ready to submit to the city, or plans that have already been submitted to the city and been approved.

I prefer to select a contractor before the plans are drawn and have the contractor team up with the architect in the design phase. The architect brings creativity and knowledge of codes and structural issues. The contractor can bring the same things, but with practical hands on knowledge of what happens during construction. Using both of them in the design phase will generally catch problems that could or would have come up during construction.

I have found my best contractors by word of mouth. Ask for referrals from leasing agents, developers and business owners.

Select the contractor from interviews and after you have checked with the state licensing board and better business bureaus for complaints. Rather than bid the project, I prefer working on a negotiated contract basis with a contractor that will open up his books and give me a detailed line item budget.

If the project will take longer than thirty days, progress payments to the contractor and his sub contractors will have to be paid.  These payments should only cover  the work completed at the time of the payment.  An amount of money (retention amount) generally 10% should be held back from each payment pending completion of the project, receipt of a Certificate of Occupancy from the city, satisfactory evidence that all the sub contractors have been paid, and complete lien releases have been given to you.  The retention is your insurance policy for getting the contractor and the subcontractors to return and repair the “pick up” items that occur on every job.

Planning and using the right people at the right time is the key to a successful store opening.

Leave a Comment » | Build-out, Tenant | Tagged: , , , , , | Permalink
Posted by Gary Simning

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