- THE MAGAZINE
“Home” is such an incredibly emotional word. With just a little contemplation, word-association phrases such as “peace, comfort, safety, pride, family,” and of course the ever-popular “mortgage” will all pop into your mind. But when starting up a small service business, “home” conjures up things like “convenient, simple, flexible,” and the ever-important “low overhead”!
Sioux and I ran out of our home for years and I have never regretted it. Eventually, however, many carpet cleaners should take that first tentative and very frightening baby step out into the real world of a separate, commercial location. The problem is most of us put it off for far too long.
A commercial, away-from-your-home location offers many potential advantages:
- Gains respect. No matter how stable and professional your company is, in the eyes of your employees (and many of your customers) running your business out of your home just seems a little fly-by-night. Plus, if and when it is time to sell your company, a classy commercial location will add immeasurably to the perceived value of your business in the eyes of a potential buyer.
- Family/business separation. Owning a small service business inevitably will impact your personal life no matter where you have your office; if you want the do the 9-to-5 thing, you are in the wrong line of work! But at the very least, locating your place of business away from your home forces you to separate the two. By the way, don’t fall into the trap that by keeping your business at your home you can spend more time with your family. You may be physically present at your house, but honestly, where will your thoughts and heart always be?
- Efficiency. Almost always, the residential environment becomes a compromise as your business grows. A properly structured commercial location will provide better workflow and more efficient logistics.
- 24/7 advertising. With a visible location in a high-traffic area, a one-time investment in your signage goes to work for you all the time and with no further expense involved.
- Zoning/neighbors. Sure, you can fly under the radar for a while. But as your company grows you very likely will be sticking out in your neighborhood like the proverbial sore thumb. It may just be the time to bite the bullet!
There are so many advantages to locating your business away from your home. But avoid the “ready-fire-aim” syndrome by looking at the big picture before you make the jump. And there are so many factors to consider. For example:
It will be much more than just signing a contract. Above all else, you must recognize that leasing/ buying a commercial location is all about much more than a simple real estate transaction. This move is a major business upheaval/ transformation that will either force you into becoming a truly professional operation or make your lack of managerial skills glaringly obvious for the entire world to scoff at. Therefore, you should…
Begin with the end in mind. So what, exactly, do you want to accomplish with this business move? Here are some serious questions to ponder before you start the process:
- 1. Do I want a “store-front” operation with full time staffing or just a location to store vehicles and equipment? A storefront offers the advantage of your company becoming a “real business” where your customers can visit and your employees (and you) can focus on business. But maintaining and staffing a commercial location after the simple luxury of running out of your home can be a major expense and/or headache.
- 2. What future diversifications do I want to offer? Moving your location is an expensive proposition so, within reason, try to buy or lease enough space for future expansion; when I bought my office/warehouse I purchased double the area that I needed initially and leased it out for several years until my business grew enough to justify the entire space, a much better strategy than moving again. So in the future, will you want to do in-plant processing of area rugs? What about contents processing of fire- and smoke-damaged items? Don’t forget to make sure the property’s zoning fits any future uses you have planned.
- 3. What about access? I cannot stress enough the joys of keeping your vehicles in a heated environment, especially if you live in the snowbelt. Wintertime carpet cleaning is miserable enough working on-site at the customer’s home without dealing with frozen-up machines too. So make sure your vans (and future vehicles) will fit through the location’s access doors. Also, don’t forget many chemical shipments will be delivered off a semi-truck with trailer; will delivery trucks fit in your parking area?
- 4. Consider appreciation and resale. Sure, I know right now you may just want a place to store your trucks. And of course you are going to be paying someone for this privilege. So if your credit is good and it fits into your long-range financial plans, why not become your own landlord? I bought my 6,000-square-foot warehouse in 1984 and paid it off 6 years later. And since selling my business 16 years ago, I have rented out that warehouse for a nice retirement income. If you are buying with a view to eventual resale, an entire host of other questions come to mind. What is the long-term prognosis for this area? Is it declining or thriving? Will your location/building appeal to a broad cross section of different companies? Are there any highway or street expansion plans afoot that could affect your property? Do your due diligence carefully before you put up your deposit.
Examine the cost. Recognize that a commercial location is much more than a one-line item in your P&L called “rent” or “mortgage payment.” Remember, most commercial leases are “triple net,” which means the tenant is responsible for real estate taxes, building insurance and of course all utilities! These overhead items are just the start, as many times you will also be responsible for maintenance of the physical plant. In addition, you will also have snow removal, landscaping care and parking lot maintenance. And of course there will be extra phone installation and monthly charges, plus the initial investment in additional office furniture and equipment (of course, you could go the Goodwill/yard sale/dumpster diving route like I did!) However, even with all these additional costs, your biggest headaches will not be financial.
Do you have the “management depth”? When you operate your business out of your house, you are running unseen by customers and even to a large degree by your employees. A commercial location commits you to consistently staffing it in a professional manner. Are you ready to give up the freedom and flexibility that your home setting provides? (Another advantage of running out of your home is you may have been operating “under the radar” of various government agencies. Be aware that your projected move may place you front and center in their view. On the other hand this may force you to clean up your act!)
Above all else, don’t do it for ego. I tell every Strategies for Success class the same thing: “Run your business based on the emotions of your customer, but never make business decisions emotionally!” Nowhere is this principle more valid than when facing a residential vs. commercial relocation decision. If you want to stroke your ego, go buy a Mercedes.
Don’t condemn yourself to a wrenching move and the ongoing overhead of a separate commercial location if you aren’t ready for it. On the other hand, as they said in the movie Field of Dreams, “If you build it, they will come.” This prophecy came true for me when I made the jump away from running the company out of my house. A separate commercial location made my business more efficient, much more valuable and, even more important, helped make my home life far less chaotic.