02/ 01/ 2005
by Karen Kroll
Sales are up and your bottom line is in great shape. But if you can’t meet demand because you and your employees are working on top of each other, it may be time to move. Consider these points before settling in to new digs.
1.Keep it a business decision.
With some businesses, location is key. When the offices of Donald Brockley, D.D.S., burned to the ground last summer, he decided to rebuild in the same area around Butler, Pa., but move three miles away. The reason? “There’s growth in the area, and it’s all within the radius of our patients,” says Keikilani Hewlett, his wife and business manager. However, if you don’t need a certain location to attract customers, you’re better off putting money into your business, rather than a specific ZIP code.
2.Calculate your space needs.
Total up the square footage needed for each employee’s office or cubicle. Then, add about one-third to allow for traffic flow and the common areas such as the hallway, says Tim Rikkers, vice president with Burnham Real Estate in San Diego.
3.Figure out what you can afford.
While there’s no hard and fast rule, rent often runs about 40 percent of a company’s fixed costs, says Rikkers. If you’re thinking of buying, your bank typically will look at your debt service coverage by comparing your cash flow (which is income plus non-cash expenses) to your debt payments, says Ed Francis, chief lending officer with Hancock Bank in Baton Rouge, La.
4.Enlist the help of a legal pro.
Leases typically are written to the landlord’s advantage. For example, many leases address potential tenant defaults, but are silent on remedies if the landlord defaults, says Richard Barrett-Cuctara, senior counsel with Cowles and Thompson in Dallas.
5. Don’t go solo.
A real estate broker who knows the local market is well worth it, says Steve Iverson, CEO of Streamload Inc., an online file storage firm in San Diego. In March, Streamload’s broker helped Iverson nab offices that fit the company’s needs, yet also were available short-term. Given the company’s anticipated growth – within the year, Iverson expects to add about six employees – he was leery of signing on for longer than a year. “Working with a broker was pretty critical,” he says.
