The challenges for businesses – of all shapes and sizes – are many. But key amongst these will be how to navigate through difficult and constantly changing economic conditions, and more importantly, how to keep your business flexible.
There is no easy answer, and for each business, there is a different solution.
Selecting the right premises – on the right terms – is absolutely fundamental for your business to survive and prosper in the current conditions. It is also one of the areas of business management that will have the greatest impact on maintaining optimum flexibility.
Put simply, you need to have an exit route. The ability to change the size and shape of your workplace is critical in assisting the development of your company, as is the ability to move out altogether when the time is right – not just when the lease expires or the long-term contract dictates.
Historically, business owners have been forced into major long-term leasing commitments on fixed amounts of space, with onerous break clauses and penalties and the constraints on their business have been clear. It is a bizarre thought that, like goldfish in a bowl, many companies just grow to the size or shape that their property allows them to – and no more.
Business centres, which cover a whole spectrum from fully serviced offices to managed workspace, have recognised the need for flexibility and have continued to grow and prosper even during the recession.
Why? Because they offer space in the way small businesses want to let space.
Business centres offer total flexibility; you can move, expand or contract at a moment’s notice. With transparent costs so there are no hidden charges for you to factor in (such as rates or service charges) and support services available, you are free to focus 100% on the development of your business, rather than the management of a property.
You can find your local business centre through the Business Centre Association.
License vs. lease
Many property companies and their agents advertise space on flexible terms but what does this really mean and are they truly flexible?
Flexibility is not just offering a choice of lease term or incorporating a break clause in a 40-page lease.
For small businesses there is only one real test of flexibility and that is the exit route. It means that if things go wrong you can downsize or move out, but more importantly, when things are going well, you can expand within your own timescale.
Most business centre operators will almost certainly be using a licence rather than a lease.
There are three things that distinguish a licence from a lease
- It is personal to the occupier
- There is the right to move the space occupied
- It is short term
So why is a licence better than a lease?
- It offers flexibility
- You can move in quickly (this could be on the day) rather than wait until a lease is drawn up and agreed. This will help cash flow.
- There are no legal fees therefore it is cheaper.
- A bond is taken and the cost of any repairs or arrears is deducted from this when you move or leave.
In summary, setting up and/or managing a business will always have its risks. Setting up and/or managing a business during uncertain economic times will have far greater risks – so the trick, in as much as there can be one, is to minimise the risk factors as far as possible. A long-term commitment on a property that ultimately could constrain your business, or is impossible to reduce should circumstances change, is, at the moment, an unacceptable risk. To put this in human resources terms, what company would commit to an employment contract – with a penalty for breaking it – for a minimum of five years?
Chartered Surveyors are well placed to advise you on the benefits of a licence agreement and assist you to source a property which is let on flexible terms. Find your local surveyor.
Download the RICS Small Business Property Guide for comprehensive advice on common property decisions and actions you may need to take - from acquiring a lease to challenging a dilapidations claim – along with vital property-related issues such as valuations, planning permission and the business rates system.
Tom Stokes FRICS is the UK's leading specialist in the development and management of Business Centres, Managed Workspace and Serviced Offices. Recently retiring from Evans Easyspace, a company he was Managing Director of from its start in 2000 until 2011. He has 40 years’ of commercial property experience and was a past Chair of the Business Centre Association where he is still active.