Bill FitzPatrick .com HAGR Action Principles® Daily Email Courses Blog Podcasts Resources Columns Store About Bill Contact Info Donate

Seeds For Thought Choose your business location with care. The more common the item, the more important the location. The inner city may present excellent opportunities. Success is often in direct proportion to investment. Perseverance often pays long term positive dividends. Locating Your Business     Unless your business is one of the few that can be home based or Internet based, you'll need an outside place in which to conduct your business.     Choose your business location with care because the odds are that you'll be spending a lot of your future time there.     You'll need a shop, café, store, boutique, workshop, farm, restaurant, salon, outlet, warehouse, studio or gym in which to peddle your wares or perform your service. You need some form of real estate. And, finding real estate suitable to your endeavor can often be a critical component to the overall health and ultimate success of your business. Correct real estate decisions can make your business easier to run. Poor real estate decisions can make your business life much more difficult, sometimes impossible.     After personnel and inventory costs, real estate can be the most expensive line item in your budget.     You have a number of factors to consider when selecting commercial real estate for your business. Among these factors are: size, physical condition, location, price, lease terms and overall flexibility, given current market conditions.     Within reasonable parameters, you seek to choose an appropriate size facility. You want to find a comfortable working environment. You might be able to run a tailor shop in 400 square feet but maybe you could squeeze into 350 and anything over 600 square feet would be a waste. You might need up to 1,400 square feet for a karate school, bookshop, dance studio or sporting goods store. And, you could use every inch of 40,000 square feet for a general furniture store, indoor flea market or antique exchange. In your specific case, before you go looking at space, you'll want to know the minimum size you must have to operate, as well as the maximum size space that you can afford.     Since most commercial spaces are leased by the square foot, size becomes an important cost consideration. You don't want to lease more than you need, but if your business plan calls for expansion, you don't want to invest in one site and then quickly outgrow that site and put yourself in the position of having to start re-introducing a new home to your customers.     In some inventory-heavy businesses, a split site can be a consideration. Simply, you'd have two sites. One site would be a smaller, high profile expensive location where you sell. The second site would be less expensive warehouse space for storage of your inventory.     Most commercial space is quoted by an annual dollar amount per square foot. In other words, a 1,000 square foot store with an asking price of $18 per square foot would cost $18,000 per year or $1,500 per month. This price per square foot may or may not include the costs of utilities, water, taxes, insurance and other real estate related expenses. It is very important to ask about extras and for you to factor in the final cost of the space accordingly.     The physical condition of the space you are considering is very important. Improved commercial space can range from "raw" to "turnkey." Raw space can mean you're renting just a floor, ceiling and four walls. You provide the rest. And, the rest can sometimes incorporate very expensive extras such as having to install your own heat/air conditioning system, rest rooms, handicapped access, etc. And, in many leasing situations, many of the improvements that you make stay with the property after you leave. The improvements become the property of the landlord.     The opposite of "raw" is "turnkey." Turnkey means that everything is in place for you to start in business immediately, you only have to "turn the key." For instance, you might be buying a space for a restaurant, which formerly housed a restaurant and is ready to go. Or, you might be buying an existing business that is still in operation.     However, most space offerings will fall somewhere in the middle of "raw" and "turnkey" and, obviously, the condition of the space, the utilities included and how fast your business can be up and running should bear some resemblance to the price per square foot being quoted. You should also note that in most commercial leases, as part of the negotiations, the building owner may offer you from one to several months of free rent, called "start-up" months, to help you get your business rolling, and consequently your income flowing.     In almost every real estate investment book that you read, you'll see the oft quoted phrase that the three most important things to remember about selecting real estate are "location, location, location."     However, the importance of location is often misunderstood.     To be successful, every business doesn't have to be on Rodeo Drive in Beverly Hills, on Fifth Avenue in New York or on Newbury Street in Boston. Sometimes, quite the opposite is true.     Many fine business opportunities abound in the inner city. Neighborhoods abandoned by major retailers and service providers can be fertile fields from which to reap honest profit. The big businesses may have left an area, but the people haven't and these people often lack adequate transportation to the local malls and must rely upon a new strong breed of young urban entrepreneurs for their consumer needs. Some risks of operating in economically deprived areas are real and some risks are just perceived. The inner city opportunities are there and you must assess the pro/con factors for yourself.     In selecting a location, you must determine how important foot traffic is to your business. If you are in an "impulse business" selling things like costume jewelry or t-shirts to the general public, then a high profile location is of primary importance. No offense is intended, but people aren't likely to go out of their way to buy your t-shirt if the same t-shirt can be bought in a hundred other closer shops.     On the other hand, if you are selling high tech-mountain climbing equipment to a select group of adventurers, or you are selling rare musical instruments to a select group of collectors, then these people will probably be willing to invest the time in finding your out-of-the-way location or will be willing to wait for you to ship them the specialized/unique items they request by mail order. In these instances, the location of your business becomes a secondary consideration.     In general, the more commonplace the item or service is that you are offering, the more important the location becomes. While the more unique or specialized your product or service is, the less important the location becomes and the more important your website becomes.     Location must also be considered in the general context of advertising. The more visible your location, the less advertising may be required to generate sufficient traffic.     In some situations, most often mall locations, you may be able to, or required to, sign a percentage lease. With a percentage lease, you would pay a base rent together with a percentage of your sales. With a percentage lease, you and your landlord work in partnership with each encouraging the other to succeed.     In dealing with real estate matters, as with most other aspects relative to your business's success, you will fall back on your research. By conducting extensive and continuing research into successful ventures similar to your planned operation, you should find your own answers to many real estate questions.     A real estate broker knows real estate. He or she may know nothing about the fishing bait and tackle business.     A business school professor knows general business concepts. He or she may know very little about the tree farming business.     A banker knows lending. He or she may not have heard about opportunities for profit in the field of holistic medicine.     You have to find the people who do have answers. You have to be able to evaluate their responses. You have to be able to adapt the specific information to suit your objectives. Andrew Martin, Investor     This was it. Andy had something to prove. He had to prove to himself that he could persevere. OK, this was the battleground. If he didn't succeed now, he was entitled to start doubting himself. Insurance? He gave up. Computers? He gave up. Now, he wanted to give up selling residential real estate. What would he be doing next? Selling and giving up on cars, rugs, furniture? What's the difference?     It doesn't really matter what you sell. You've either got it or you haven't. You've either got the nerve to make the hundred calls and take the ninety-eight rejections or you haven't. If you have the nerve, you have a way to succeed.     It took Andy most of the next seven weeks to inventory the 272 investment real estate buildings in Newton. Everyday, he was at the Town Hall at 8:30 AM when the office opened and he was there at 4:00 PM when the office closed. He went over the tax and assessment records for the town. He noted the property address, the number of units, the owners' name and the owner's address, if different from the property address. He recorded the type of zoning and the land area of the parcel. He wrote down the assessment for the land and the assessment for the building. He noted the taxes.     After recording data on over 80 buildings, Andy decided that he should have had a separate sheet of paper for each property. He started his record keeping over from scratch. When he was half way through the first 80 for the second time, he wished that he hadn't used blank flimsy notebook paper but instead had created a form and used card stock. Andy made up a form and had the form copied onto card stock at the local print shop. With the full sheet card form, he started over for the third time.     All day he did his research and each evening Andy returned to the office at four and stayed until nine, concentrating on rentals. Rentals have a quicker commission payback than prospecting for listing or sales. And rentals could be done at night.     Finally, he was done. Having catalogued all the multiple dwellings in Newton and all the commercial buildings and all the industrial properties and all the developable land, Andy felt very good about himself.     He three-hole punched his card sheets and bought six loose-leaf binders. He had one book for two and three family houses. One book was for buildings with four or more apartment units. Another book was for office/professional buildings. The next was for retail and retail/apartment buildings. Finally, there were the books for industrial property and developable land.     Throughout this project, no one in the office was paying much attention to Andy. So, Andy, figuring that he was entitled to at least a little pat on the back, wanted to tell Mr. Taylor that his work was completed.     Andy lugged the six books into Mr. Taylor's office. "Well, Mr. Taylor, I'm done with the research."     Mr. Taylor looked up from his desk and seemed somewhat surprised as he asked, "You're done already, Andy?"     "Yes, sir."     "Well, let's see."     Mr. Taylor randomly opened to one of the sheets in the "Newton, Four Units Plus," book.     Mr. Taylor quizzed Andy, "Andy, tell me about 337 Washington Street."     "Well, sir, the information is right there." Andy pointed to the specific page in his book.     But, Mr. Taylor shook his head, "No, Andy, I can see the information you have here. Tell me about the property."     Somewhat exasperated, Andy took the book from Mr. Taylor and began reading, "Well, it's on Washington Street..."     Mr. Taylor raised his hand and interrupted what seemed to be a parroting exercise, "Andy, what you have here is information that I could get by searching the town records. In fact, every Christmas, I send a poinsettia over to the women in the Assessor's Office, so I don't even have to do the searching. I can just call up the Assessor's Office and ask for Alicia Downs and she'll do the searching for me."     Andy wanted to defend himself. "Well, Mr. Taylor, you won't have to do the searching any longer; just ask me."     Mr. Taylor didn't seem suitably impressed. "Yes, well Andy, you've obviously done a lot of secretarial work here but I'm not sure that you've learned very much. But, you do have a basis for learning. Let's look at this 337 Washington Street. Who owns the building?"     Andy looked, "Well, I have that information right here, Francis Brimmer?"     Mr. Taylor stood up and started to pace, "OK, Andy, tell me about Fran Brimmer."     Andy read from his sheet, "Well, the tax bills are sent to him at 14 Summer Street in Newton. So, I presume that that's his address."     "You said, 'he.' Do you know Francis is a he?," Mr. Taylor interrogated.     "No, I don't."     "Do you know that 14 Summer Street is a home and not an office building?"     "No."     "Do you know if Fran Brimmer owns any other property?"     "No."     "Do you know if Fran Brimmer is a responsible property owner?"     "No, I don't."     Mr. Taylor sat on the edge of his desk and paused a moment before continuing, "Andy, I'm not trying to be hard on you. I just want you to realize what you don't know, but what you must know, before you can attempt to solicit Fran Brimmer as a client."Mr. Taylor continued, "OK, what do we know about Fran Brimmer? We know that he or she is probably an absentee owner, an investor. Go to 337 Washington Street. What observations can you make? Is the property in good condition? How are the windows, the foundation, the siding and the roof? Is the property well maintained? What about the lawn, the hallways, the mailboxes or the parking area? What about the tenants? Are they at home; are they at work? What kind of cars do the tenants drive? What's your overall impression of this property? A fixer-upper? Average? Excellent? Condo potential? Room for expansion? Who, in your opinion, would buy this particular property?     "If it needs work, perhaps a contractor? If the property is in above average condition and appears to require minimal management, perhaps a professional person would buy. If the tenant situation looks tricky, perhaps there is someone willing to take the time who has the financial resources to turn the property around. If the building looks well laid out, perhaps a condo converter would be interested. What's your general estimate of value based on the comparable listing you've seen?"     Mr. Taylor concluded his important lecture to Andy, "Ask yourself questions. Learn something about 337 Washington. Learn something about Fran Brimmer. Then, now or at some point in the future, you may be able to work with Fran Brimmer to maximize his or her investment. Or, you may be able to sell the building for Brimmer to someone suited to maximizing the building potential. Or, you may be able to sell similar buildings to Brimmer. I don't know what you'll be able to do and at this point, it is apparent that you don't know either."     Andy seemed a little crestfallen. "Mr. Taylor, you mean that I should do this observation work for every one of these buildings?"     Mr. Taylor wanted to make sure that Andy was getting the point, "Here we go again, Andy. You should do this work for every building which you expect at some point to sell. If that's every building, then, yes, do the work for every building. You have a blank side to every one of these sheets. Fill the blank sides with information. And, it wouldn't be a bad idea to take the office's Polaroid camera and take a picture of every building and paste the picture to the card. Or, do this whole project on your computer and scan the photos to your records."     Andy had a look of an inmate who had just been denied an expected parole, "Well, Mr. Taylor, I guess I'll talk to you again in about another six months."     Mr. Taylor held out no sympathy. "Andrew, don't look at this as a chore. Do you want to be just an investment property salesperson? Fine, all we'll do is add "investment property specialist" under your name on your business cards. Or, do you want to be a successful investment property salesperson? If you want success, then you have to invest. This work is an investment and this investment will pay you back handsomely in future, if you take it seriously. You're at the crossroads; you decide which path to take. You can work for something special. You can work for your financial future and mine, or you can do crossword puzzles and answer the phone for me. I need both types of people. You decide for yourself whom you will be."     As Andy returned to his desk, it was apparent that most of the office had overheard the conversation. Ann Brown, the crossword lady, gave Andy a sympathetic look as if he had just done a whole lot of work for nothing. Mr. Edgers didn't look up from his paper. Don Nardo seemed to feel a little sorry for Andy, even though Don realized the importance of the work that Andy had "just started."     Don spoke up. "Andy, Fran Brimmer is a man. He owns a second property on Washington. He also owns one on North Main Street and two other properties in Dover."     Andy was buoyed by Don's comment. "Have you worked with him, Don?"     Don nodded. "I haven't worked with Fran in about ten years. The property he bought on North Main was my listing. Might be worth your while to see what he's up to these days."     "Thanks, Don."     Well, miracles do happen. For the first time, Don appeared to be taking Andy seriously as a person. Who knows? Maybe some day, Don would even treat him as a colleague.     Over the next six months, Andy did not have much time for reading newspapers and doing crossword puzzles. He spent all of his free time doing drive-by observations and taking notes. And, things were starting to click. He learned about good neighborhoods and bad neighborhoods and about good buildings and bad buildings and good tenants and bad tenants and good owners and bad owners. And he learned about all the gradations between good and bad.     All Andy's research started to pay a dividend in boosting his rental work. As he learned about buildings and he rented apartments, Andy started to feel confident about advising building owners about rent levels.     He could tell one owner, "Let me save you some money. Your asking rent for this particular apartment might be a little too high. This could mean that you'll either end up not renting the unit and losing a month or two in rent or you'll have to take a poorly qualified tenant and worry about getting your rent every month. Here's what the market says the rent should be for that apartment..."     He could tell another owner, "Let me make you some money. Your asking rent for that apartment in that neighborhood is too low. At the rent I'm going to suggest, I can still get you a top-notch tenant. Here's what the market says the rent should be for that apartment..."     And, having impressed the building owner, Andy knew enough not to let the opportunity for future significant profits pass. "Mr. X, I'm handling rentals at night but my full time job is as an investment property broker with Taylor Realty. Would you ever consider selling this building? Are you in the market to make any further investments at this time?"     Andy was beginning to understand a bit of the art of salesmanship. And he was beginning to understand a bit of the investment property business. Most real estate investors were first and foremost business people. Would they sell? Yes, they might be willing to listen to the right offer.     Would they buy? Yes, they might be willing to look at a property if the numbers worked.     So, Andy started to get a perspective on real estate. If you were in residential sales, you sold houses. The average homebuyer remained in his home for seven years. So, on average, every seven years, you'd have an opportunity to deal with that buyer again. However, on the other hand, investors were usually not as emotionally attached to their properties as homeowners. Investors wanted to make sound investments. Investors want to make as many sound investments as possible. Rather than one deal in seven years with homeowners, it was conceivable that you could make seven deals in one year with the right single investor.     The pieces to the puzzle were beginning to fit. Don Nardo had helped Jack Sullivan buy and sell numerous properties over the years. He was still working with Jack. And, now the second generation of Sullivans were to become Don's investors, starting with Danny.     During the next six months of observation research, Andy was averaging two rentals a week, which paid him about $400 each, and he had two small investment properties listed. He had spoken with fifteen Newton investors who had outlined their investment criteria for Andy. Andy had one investor almost ready to make an offer on a six-unit building.     Things were starting to take shape. Lesson 21 Resources Go to Lesson Twenty Two

© Copyright 1994-2008, American Success Institute. The Action Principles® is a registered trademark of the American Success Institute. We are a nonprofit research, publishing, and educational corporation headquartered in Natick, Massachusetts.