Most small business start out by leasing space for their business. By leasing, you avoid using up precious working capital and you have more freedom to move if you decide down the road that another place would be better.
When deciding where to locate your business, begin by analyzing your specific needs. Real estate professionals are fond of saying that the three most important factors in choosing a business space are location, location, and location. For certain types of retail stores and restaurants, this may be true. For example, a sandwich shop requires a location with a high volume of foot traffic. Or maybe you'll benefit if you're near other businesses that are similar to yours; restaurants often like to locate in a restaurant district.
But for many other businesses, where you're located doesn't matter much. For example, if you repair bathroom tile, run a computer-based information search business, import jewelry from Bali, or do any one of ten thousand other things, it won't help you to be in a high-visibility, high-rent district. Chances are your business can efficiently operate in a less pricey area, where you can negotiate a lower rent and the landlord is likely to be far more flexible on other lease terms as well.
After you've analyzed what you need, it's time to begin searching for the right spot. Go to the neighborhoods where you might like to locate; spend a day or two driving or walking the streets to see what may be available. Don't just look for vacant space. A store, office, studio, or workshop that's good for your business may be occupied by a tenant who is going out of business—or moving to larger quarters in a few months. There's a lot of turnover among small businesses, and you may get lucky.
Because some of the best opportunities come to light through word of mouth, ask friends, associates, and other business people if they know of available space. Business owners—particularly those in the part of town that you're interested in—may know of businesses that are moving or going out of business long before these vacancies are announced. And if you get there early, the landlord, relieved that he or she can avoid a period of vacancy and uncertainty, may offer you a favorable lease.
For-rent ads in newspapers and online are an obvious place to look. If the selection there is limited, call a real estate office that deals primarily with business space. The agent's fee—usually, a percentage of the rent that you'll be paying—is generally paid by the landlord. If your space needs are special, consider hiring an agent to search the market for you. But if you follow this somewhat unusual approach, you'll probably have to pay the agent's commission.
Excerpted from Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo).