When you have an idea for a business you may need to find commercial premises to house that business and make your idea happen. Before you commit to a lease, it is imperative to give some thought to what will happen if the business plan does not work out as hoped.
A high proportion of businesses fail early on. The Bureau of Labor Statistics puts the first-year failure rate at 20%, and 45% fail within the first five years. What will happen to that lease you are planning on taking out if your business does not survive at least until it runs out?
Can you adapt things?
A first idea is not always the best one. Maybe your art gallery does not sell as much as hoped but you realize there is a huge need for good coffee in the area. If you could turn your premises into a cafe you could bring in the money and also display artwork for sale on the cafe walls. For this to occur, you would need to be sure that the lease (and zoning regulations) allow you to change the use to a cafe.
Can you sublet to someone else?
You’ve no interest in running a cafe, but you know people who do. Could you sublet the premises to them, allowing you to pay the rent and focus your time elsewhere on a different business idea? Or does your lease not allow subletting?
Can you cut the contract short?
Do you have to see the whole lease out or is there an option to leave early? If so, what would the penalty be?
Failing to understand your options before signing a commercial lease could leave you tied into a contract you do not want. Getting help to understand the limitations of the contract before signing is wise.
