New business owners don't have a lot of the green stuff. You're either raiding your savings, taking bank loans, or borrowing from family and friends. Usually you are doing all three.
You must find space elsewhere if you can't run your business from home. It's a wise decision to have a budget in hand when you are looking for that perfect spot for your facilities. Yet many new entrepreneurs fail to budget for their location before setting out to look for the spot.
Why You Need A Financial Roadmap
A site budget is simply a small portion of your overall start-up financial plan. People have a tendency to raid the piggy bank to get things they want but do not necessarily need. Spending on a business location is no different. A good money management plan helps you focus on
- Space must haves vs. wants
- Prioritizing competing needs for your space
- Keeping it real by identifying over/under cost estimations
- Preventing you from overspending
Business Location Budgets Save You Time
The time spent on controlling your spending is well worth your effort. You have just knocked out a major portion of your start-up planning. Often small business owners will pre-determine a location by using a personal "gut" feeling. They may like a particular area of town because of the trees and wide streets or they see a lot of nice cars in parking lots or available space is so close to home they can walk to work. Having a spending plan narrows your search because you won't spend time looking in areas of town you initially can't afford. You know exactly where you should be looking.
A great deal of thought goes in to a location financial plan. Your usual options are renting vs. buying. The option you choose should financially benefit your business in the short-term, say two to five years. Then establish the following:
- The pros and cons of renting and purchasing
- How much can you afford to spend on a location
- Do you anticipate having to make improvements?
7 Steps to Setting a Business Location Budget
- Write down how much you can afford to spend on the new location. Include the down payment if you are buying or the lease security deposit and the maximum amount you can pay for your mortgage note or lease.
- Write down how much you can spend on improvements/build-outs either upfront or monthly note. Improvements are things such as plumbing and electrical upgrades; build-outs are more space planning - cubicles, offices, conference room.
- How much you can spend for real estate agents, lawyers, accountant, or other consulting people, if needed.
- Estimate how much money will be allocated for operating licenses and permits, build-out inspections, etc.
- Call your local utilities and get estimates for security deposits and hookup fees. These can vary with location your city.
- Estimate annual property tax. Your County Tax Assessor/Collector or Treasury Department/Department of Revenue should be able to help you if you have a specific property address or legal description of the property. Many times you can do this online.
- Get estimates for insurance. You will probably need at a minimum general liability (casualty) and property (building structures, inventory, etc.).
Setting a good business location budget can be hard work, but is something that small business owners should not overlook. A little effort on your part up front can save you a lot of time and money in the long-term.