Setting up your business premises
Updated 24 May 2019
Your business premises are much more than a pretty shop window. The place from which your business operates can make the difference between a flourishing enterprise and one that flops.
So why is choosing the right HQ so important? The key is to find the one that best suits your type of business, your mode of working, your staffing needs and many other factors besides. Here’s what you need to think about when seeking somewhere for your business to call home.
- What kind of business premises do you need?
- Where should your business be located?
- The specifics of your premises
- Buy, lease or license?
- How much will your business premises cost?
What kind of place do we need?
Just as your own home must feel special to you, your business also needs a place that suits its nature, character and brand. To put it another way, the type of space you choose should be guided by what your business does and what you need to achieve with your premises. Do you need a workshop to create your product? A high-street space to sell your wares? Or a quiet office space with computer desks and meeting rooms?
Where should business premises be located?
Your location may be one of the most crucial things to get right – or it may not matter much at all. To find out how important it is for your business, and to choose the ideal location, ask yourself these questions:
Where are my customers? If you interact with your customers directly, for example in a physical shop, research where most of your existing customer base or potential customers will be.
Where are my competitors? And do you want them close by, or far away? There are some benefits to being in a cluster, but you may prefer exclusivity.
Where are my suppliers? The closer your suppliers, the more you may be able to reduce costs and improve efficiency. Long-distance supply chains usually mean higher costs and more risk.
Where are my employees? Make sure there is a good pool of talent within commuting distance, particularly if you need people with specialist skills or qualifications. Sometimes people can work remotely, but this isn’t always practical.
What are prices like? As with homes, commercial property prices vary greatly by area. Can you qualify for grants or other financial incentives by having your premises in a certain area? Similarly, don’t be tempted by cheapness alone – if the area is unsuitable for you, it may be a poor bargain.
What facilities do we need? Think about your daily activities, and the needs of your workforce. Is it vital to be near a railway station? Do you need to be near a post office? And is the environment suitable? (For instance, you might not want a restaurant with a view of a breaker’s yard.)
What image do we need to project? And where will help you create that image?
Are there benefits to setting up in a particular area? You might be near an enterprise zone, which can give you tax reliefs and other benefits, potentially saving you tens of thousands of pounds.
What about the specifics of our premises?
Every business is different, and you’re likely to have your own preferences too. Once you know what you’re looking for, a commercial property specialist can help you find the ideal premises.
Space and layout
You can work out how much space you need by calculating the space for all current and the new employees you anticipate joining, so that you don’t outgrow the premises too quickly. It’s worth taking into account space-saving measures such as hot desking or flexible working. Regular rectangular open-plan spaces are the most efficient and flexible, but private offices are quieter. Don’t forget any additional space you need for storage, equipment etc.
It’s important to think through who will need to access your premises and when. Some premises offer 24/7 access, some are on the ground floor, some have multiple entrances. Make sure you check the access provision for people with limited mobility.
Appearance and comfort
The comfort and style of your premises is really important, both to give your visitors a good impression and to ensure the health and wellbeing of your employees. For example, having plenty of natural light has been proven to improve productivity and reduce sick days.
Once the space is yours, what are you planning to do with it? It’s easier if the property already has planning permission for the use you intend for it. If you mean to use it for another purpose, you may need to obtain new planning permission. If your area of business is covered by regulations, you should also check if you need any new licences.
Should we buy, lease or license our business premises?
You have three options for acquiring your business premises: you could take out a licence, rent the place, or buy it. Each method has its own pros and cons.
A licence is the most flexible option, but offers the least security. Most licence agreements allow either you or the landlord to terminate the contract at any time, at short notice. However, licensing is usually also the cheapest option, with minimal upfront costs, so is a popular option with small businesses and start-ups.
Leasing / renting
A lease gives you more security than a license, but require more commitment and more money upfront, which means they offer less flexibility. Most leases are between three and 25 years, but it’s often possible to negotiate a break clause. They often include restrictions on the use of the premises and the alterations you can make, so legal advice can be helpful.
If you have the cash to spare, buying your premises outright can be a good long-term investment. This is obviously the most costly option, and the least flexible – but it does give you the freedom to adapt the premises to suit your business. Buying will usually require you to take out a commercial mortgage, which has tougher application criteria than a residential mortgage, as well as fewer deals to choose from. Seeking independent mortgage advice should make the process much easier.
Working out the cost of your business premises
The cost of your premises will be one of the decisive factors in your choice, as it will have a significant impact on your projected overheads. At the same time, be sure to consider the bigger picture. Saving money with ‘make-do’ premises could improve your bottom line in the short term, but proper investment in really suitable premises could be your best bet in the long term. Remember too that you'll have to pay business rates, so factor these into your costs.
Your accountant is the best person to consult on most of these issues. They will also be able to carry out a detailed cost-benefit analysis to inform your decision.
For more financial guidance to help get your business moving, read up on the many benefits of business accounting.
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