How badly do you need a lease?

Managing start up business Australia

A young couple who I have known for a long time was managing a start up business in Australia, specialising in the personal services industry.  They came to me recently and asked me for my thoughts on renting a sub-tenancy that was available in a near city Brisbane suburb.

Their desire, like that of many other entrepreneurs, is to have a place they can call home; a base to travel to and work from; a fixed address for their marketing.

The upside is that it is on a very busy road, which means that with effort, their offering could be visible and attract some walk in customers.

The downside is that the area does not contain the right demographic for the services offered.  This match is vitally important to attract local customers.

If attracting local customers is not the prime aim of moving into this property, then what is the real purpose?  When I asked that question they said that they hoped to pick up referrals from the primary tenant who operated a complementary business.

Experience has taught me that if I asked the same question of the primary tenant, it is likely that the answer would have been the exact opposite.  That is, he is advertising for a complementary sub-tenant in the hope of attracting referrals from them.

Mmmm…. the problem is not solved; it has doubled.  As is so often the case, no discussion on this point has taken place and the transaction would have proceeded on hope only.

Making a major financial commitment to a lease or sub-lease just to have a fixed address to put on cards and brochures is a very risky strategy, particularly if the money is borrowed.

Doing it in the hope of attracting walk-in customers and referrals from a co-tenant doesn’t reduce the risk at all.

When managing start up business in Australia, it is a much safer strategy to let customer demand drive the need for a permanent premises, rather than make a big financial commitment and relying on hope alone to attract them.

In the case of the young couple, it would be more cost effective when starting up a business to consider other options such as working from a home office, renting rooms by the hour or day as required, and offering a mobile service.

Check my other blog site and learn how the (not so secret) secrets of Aikido can be applied to whatever is important in your life.

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Until next time!


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