5 Things to Consider Before You Open Your First Brick-and-Mortar

In the age of Amazon and online shopping, you may be surprised to learn that brick-and-mortar businesses are still thriving. According to a study by the Walker Sands Future of Retail, 58% of people between the ages of 18 to 25 prefer to shop in person than online.

Perhaps you’re an established e-commerce business and you feel it’s time to open up a physical location. Or, you’re a new entrepreneur ready to take the leap and start a brick-and-mortar from scratch. Either way, finding the right space is important.

There are many things to consider before you sign that lease. Factors such as size and must-have amenities, the neighborhood, your lease length and whether you’ll need real estate financing are just the beginning. And like any business decision, opening a retail location should be carefully thought through.

Here, we’ve broken down the basics to help you find the right space.

1. Understand the value

As we stated earlier, there can be a definite draw to opening a brick-and-mortar shop, but it’s important to understand your business before pulling the trigger. If you sell physical products, you’ll have to ask yourself whether your customers will benefit from an in-person experience, or whether an e-commerce shop does the job. For example, you will probably attract more people to your clothing retail store if your customers can try on the items first. Whatever line of business you’re in, consider what you can offer your customers in person that you can’t online.

2. Location and size

Your business’s location is everything. It’s important to consider the type of business you own as you decide where to set up shop. Will you rely on foot traffic? Is your existing clientele located in a specific neighborhood? If your company will rely on foot traffic—say a coffee shop or takeout lunch spot—try to nab a space near public transportation or lively attractions that naturally draw customers. It’s also a good idea to look at your neighbors. Will they bring more clientele to the area or will they monopolize on your business?

An important factor to consider when shopping for real estate is your community’s zoning laws. In every town, commercial real estate properties are zoned for specific use—so you wouldn’t be able to open up a restaurant in a building zoned for office space. To learn more about your local zoning laws, you should contact your community’s chamber of commerce. Before you sign a lease, be absolutely sure the space can be used in the way you envision.

On top of narrowing down a perfect location, you may want to take a look into your expectations of growth over the next few years. Finding a space that is too large could hurt your wallet in the long run, while settling for a small space may force you to relocate sooner than you’d like. Narrowing in on the right location and size may take some time, but it’s important to get it right.

3. Know your lease in and out

Similar to considering your projected growth, you’ll also want to consider how long you want to remain at the location that you choose. Negotiating a short-term lease with the option to renew is a smart move if you’re on the fence, especially since this is your first brick-and-mortar. This will give you a safety net if you outgrow the space, realize you need less room, or experience a decline in the neighborhood you’ve set up shop in.

If you can’t find a rent-stabilized place (these are relatively rare), it’s a good idea to try to negotiate rent increases that do not activate until your third year in business. This will give you two years to establish yourself, save money, and prepare for the rising rent.

Finally, watch for a lease agreement that seems like a one-sided deal for the landlord. The agreement should be fair and benefit your business. Red flags include a landlord’s ability to terminate a lease at-will, an “as is” rental or the inability to sublet the space if needed. Consider hiring a lawyer to review your lease before you sign.

4. Budgeting thoroughly

Sure, running an online-only company can save a lot of money, but sometimes a retail space is necessary for your business to grow. Renting a space is expensive, and keeping the premise up and running comes with costs on a regular basis.

When considering how to budget, look into whether or not the space you’re leasing will require renovations, how large of a staff you’ll need to hire, and how much you plan to spend on marketing. Additionally, there are fees that come with opening a brick-and-mortar business such as commercial property insurance that you’ll want to make sure you budget for.

5. Consider financing

It costs money to start a brick-and-mortar, but there are ways to find the funds to cover necessities. Finding the money to pursue a location may feel similar to the process of starting your business—you’ll have a few options and your decision will depend on what makes the most sense for your business.

If your savings account can handle a year or more of rent upfront, consider whether it’s worth using it to fund your real estate needs. This way, you won’t have an extra monthly payment to juggle and can focus on growing your business. But if you don’t have a robust savings account, consider financing tailored specifically for businesses who are looking to open a brick-and-mortar. If you qualify, a traditional commercial loan or a SBA Real Estate Loan can be a great choice. Though these loans can be difficult to get (owing to their stellar terms), if your company is doing well financially and your credit is over 600, it’s worth exploring whether an SBA loan can help you invest in commercial real estate

Opening your first brick-and-mortar is an exciting step. A retail space can allow you to grow in new ways and reach even more customers. Though finding real estate can seem complicated, it’s important not to get overwhelmed. With some hard work and detailed planning, you’ll be able to make your dream location a reality.

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This article was first published on September 11, 2018. It was updated on

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