How To Open A New Premises

Expansion is a natural part of every successful business’ life cycle. Along with the likes of increased product offerings, broader market reach and increased investment, one of the fundamentals of business growth is the expansion of business premises. That could be the extension of your current base, a move to a bigger and better location or the opening of other premises alongside your current one.

Whatever your expansion plans are, opening new premises is a process that must be planned and executed carefully for it to be truly effective. Of course, it’s an exciting time for your business, but there are several important aspects related to your new business premises that individually and cumulatively determine the success of your operation – and getting these right or wrong will ultimately have a significant impact on performance.

With asset-based lending being a fundamental part of what we do, we take an active involvement in the opening of new premises via the means of asset finance. Below, you’ll find our guide to successfully moving to new premises, including a detailed run-through of the factors you need to take into account ahead of, during and after the move.

What are the reasons for opening new business premises?

Understanding the reasons behind opening new business premises often boil down to the individual goals of the business in question. Indeed, your own reasons for expanding (or, in some cases, reducing) your presence will depend entirely on your own business plan and long-term vision. However, there are a few core reasons why virtually all businesses make a move:

• Expansion and growth: the primary driver behind most business relocations, businesses often look to open new premises to accommodate their requirements, which can differ vastly depending on the industry concerned.
• Access to new markets: if your company’s business plan is to attack new markets and increase reach, you need a platform to do it from. As we’ll discuss later, location is a huge factor to consider in any business move.
• Reduction of costs: with rent and lease costs representing a huge operational expenditure, relocation can be done primarily on an affordability basis for a business.
• Reorganisation or consolidation: in some cases, a business’ facilities can become outdated against its requirements or company image goals. Likewise, looking the other way, a business may feel it has too much space and is overpaying unnecessarily. The former represents a reorganisation, while the latter is a consolidation.
• Lease expiration: in some cases, the expiration or renewal point of a lease may encourage a business to look for a more competitive rate elsewhere.

Depending on the nature of the industry you’re involved with, the above reasons can represent different angles of attack. For example, expansion and growth for a manufacturing business may mean opening a larger production base, while for a retail enterprise it could mean a bigger shop. Truly understanding the reasons behind your projected move should be considered an essential facet of your initial planning, as those reasons should and will dictate the type of new premises you look for.

Some initial considerations for new office premises – creating your business plan

Just as your wider business will benefit greatly from a structured and detailed business plan, a move to new business premises warrants its own plan too. Outside of budget and funding, which we’ll get onto shortly, there are a number of key considerations to look into ahead of a potential relocation, all of which will play a part in determining the scale and direction of your move.

Cyber presence

Before you start drawing up building plans, pay considerable thought to the impact of your online presence and the potential to expand into cyberspace as an alternative to a physical relocation. Of course, this is a hugely industry-dependent consideration, but with the recent and exponential acceleration of e-commerce – particularly during the pandemic/lockdown period – a move in the cyber realm may be just as productive, whilst being much cheaper than a bricks-and-mortar investment.

Location

Location is one of the most important factors behind any move. For any start up, and indeed any business generally, the importance of being based near your target audience/key suppliers cannot be stressed enough. A restaurant must see good footfall in a prime commercial or residential area, while a manufacturing business will save on logistics costs by being closer to its primary suppliers.

It’s common-sense stuff but a factor that mustn’t be forgotten. Location also plays an intrinsic role in the financing of the move, as a business looking to relocate to a prime location will have to consider its budget and funding options. And one more factor to consider with relocation – competition. A move to a new territory may see you encounter competitors you didn’t previously have. If you don’t anticipate their presence, you may find your new market difficult to break into.

Inventory

A new location needs the appropriate stock, and with that requires a cognisant adjustment of your overall inventory management and spend. Among the many factors involved with moving to new premises, don’t forget your new, adjusted inventory requirements come opening day.

Cash flow

As an alternative lender, we’re all too aware of the importance of cash flow to a business, particularly in the start-up market. When opening new premises, it’s essential you have your cash flow accounted for, particularly if you anticipate a slow period while you establish your new base. If you don’t foresee this happening organically, then look to alternative funding methods to see you through.

Replication of processes

Regardless of the industry, you’re in, if you’re trying to establish a brand and a standard attached to that brand, you must understand the importance of consistency in your processes. If you’re opening a second location, it’s imperative your new business premises carries the same ethos, systems, and processes as your current one, so think about how you will successfully implement them.

Staffing and training

Just as you’re looking to implement the same processes, you’ll likely also be looking to retain the same culture among your people. If you are relocating with new manpower at the helm, ensure your recruitment and staff training programmes are up to speed with the rest of your processes to ensure proper infrastructure behind the scenes.

Promotion

If you’re moving to new office premises, you perhaps needn’t worry too much about the local paper coming down to take a photo. However, if your move carries a direct commercial focus with it, you must consider ways of raising awareness of your brand, particularly in a new market.

You can aid your relocation marketing efforts through a variety of means:

• Updating your own website
• Expanding your search marketing and geo-targeting
• Utilising local directory listings
• Promoting through social media channels
• Creating events
• Email campaigns

Longevity

Last but certainly not least, you must consider the long-term sustainability of your new business premises. While you might be thinking about suitable space right now, are you also thinking about suitable space for the future? How do your new facilities align with your wider business plan – does a long-term lease complement those goals?

When considering moving to new premises, it’s easy to look ahead, but not too far ahead. It’s essential you see the bigger picture for your business when signing up for a new space.

Funding a move to new premises in the UK

For all the other considerations that come with a move to new premises in the UK, undoubtedly the biggest concern in any business owner’s head will be the fiscal demands behind it. As we’ve already established, you not only have the outright financial commitment to consider behind any new premises licence application, lease agreement or purchase, but you also have the likes of cash flow, inventory, and staffing deliberations to ponder on as well.

Likely one of the biggest challenges facing you as a business owner ahead of a move will be to find a suitable balancing point between your entrepreneurial ambitions and the financial limitations of your business. If you do find yourself compromising on either the location or ownership of the premises, we at Nucleus Commercial Finance can provide you with the necessary asset finance. Likewise, you can seek other forms of alternative investment, too – angel investment, for example.

Ownership options when moving to new premises

Looking at ownership formats, there are three which are most often utilised in the UK, each with its own benefits and limitations. Here’s a quick run-down of all three.

Licence

• Acquiring property on licence offers business owners maximum flexibility.
• You will only be required to pay a small deposit and minimum legal fees, thus making it the cheapest option when it comes to setting up new premises.
• The flexibility in terms of altering the premises according to requirements is quite limited, but the responsibility of maintaining and repairing the premises rests solely on the landlord.
• It doesn’t offer much security to you as a business owner, as the landlord only needs to give a short notice period for terminating the agreement.

Lease

• Leasing offers you greater security but less flexibility. Compared to a licensed property, the tenure of a lease is more secure – generally set between three and 25 years.

• The increment of rent on a lease is pre-determined and then reviewed at fixed periods, which has its own advantages and disadvantages. For example, if the real estate market performs well, fixed rent increments offer a lot of scope for savings. On the other hand, if the market falters, the rent would be higher than that prevalent in the market.
• A property that you have bought on a lease can be altered, but only with the due permission of the landlord.

Buying a new premises

• Usually, you’ll only be looking to buy new business premises when you’re looking to make a long-term investment or have a large cash reserve.
• The benefits of owning an office space are quite similar to that of owning a house. It places no restriction whatsoever on the duration for which you wish to occupy the premises. Also, you don’t need anybody’s consent to alter the premises.
• Even if you no longer operate your business from the office space you have purchased, you can earn money by renting it out to other businesses. In the event your business faces cash flow troubles, you can always sell the premises or use it as collateral to generate positive cash flow.

Can we help you open new premises?

At Nucleus, we help countless businesses achieve their expansion goals through asset-based funding. Utilising the credit base of a traditional lender but the speed, flexibility and transparency benefits of alternative lending, we’ve fast become one of the UK’s most popular SME financiers.

If you’d like to know more about how our support can help you facilitate a move to new premises, why not contact us today?