Starting a business

[Matthew White]

Chris Smith and myself and well as possibly a few other partners have talked about starting a wellness clinic or massage therapy and personal training place. Well, seems to me that in this current econimc dilema that places would be cheaper to buy or lease, but the prices seem to by skyrocketing. We looked at a building today that they wanted $2400 a month for and I had previously had in my head maybe $1200-1500 a month. We have an appointment to talk about possibly buying it, but we are both sure they will ask for something rediculous! Has anyone else run into any issues with finding a property or building within their budget? Or what to look for?

Thanks ahead of time.

[Brandon Campbell]

the downside to a poor economy is commercial property rent rises to make up for the extra vacancys of businesses closing, Theoretically it should go down but at first it sky rockets due to the owners trying to make up for loses. It will be a bit before they drop, as most owners have steady income still. IM sure there are some dropping prices now but in reality the economy is bad, but not as bad as the media makes it seem sometimes. Residential property is taking a big hit, commercial is sticking in there in most places.

Buying a commercial place sounds more promising as the owners could get the fees off their hands and make a quick buck on it. Nothing sucks more then paying taxes and utilities on a vacant building.

[RyanWilson]

Buying commercial property, IF you know you're going to be around to use it, is a good thing. However, I do know that in my area, you typically need 20% down on commercial property to finance it (unless it is bank-owned or in foreclosure where you can get special-circumstance financing), so if it is the same where you are, that might be the make-or-break point if you need to have something like, say, $40k to put down ASAP on it. Many people don't plan on needing such a large down payment on commercial property, so they end up renting instead. Also, if you do consider buying, beware any "baggage" that comes with it in the way of delinquent taxes, contractor leins, etc. that might be hiding in the background from the previous owner who may owe to other people. That all becomes the new owner's responsibility once they take it over if it hasn't been squared away, and the last thing you want is to take on someone else's problems.

If you do go with renting, now's a good time to try and bargain, particularly if the space has been vacant for quite some time. Not to mention, if you have funds to make a go of it for quite some time with your business (i.e, not expecting to have any reason to pack up and close in less than 3 years), most landlords will give better incentives based on how long of a lease you sign. We shaved $50/month off and got 2 months free on a 5-year lease vs. year-to-year, which is going to save us nearly $8k by the time we're up in 2 years. You can haggle on things like early payment as well - if we turn in rent even 1 day early, it knocks another $10 off the total (which isn't much considering our overally rent, but hey, it buys coffee for the week :D)

Either way, you're at an advantage at this point. Figure out in the long-term what's best for you and base it on that. Partners do complicate things, so they usually make renting the better option in case people bail out on you, but if you can afford the building, then it's never a bad idea to buy if you know you'll be keeping it occupied (or, if you don't mind being someone else's landlord down the line).

[Chris Henry]

Matt are you out of the Navy now?

[Matthew White]

Thanks for that guys! Really put it down for me.

Chris, nah, I re-enlisted for 3 years, the orders I was supposed to get to be an instructor in VA disappeared with the navy's downsizing, so I got shore duty in Bangor, WA for 3 years. If we start a business that does well enough I will probably get out after my 3 years is up and just do that, also depends on the economy. If I do decide to stay in I'll be working on an officer package, but plan to try and stay in the region that I'm at. Basically I started seeing an good paycheck from the navy, and the economy started sucking about the same time, so I made the wise decision to secure my future. Can't compete without and income right?!

[Jay Hagadorn]

I'd say the first thing you guys should do is figure out what you want to do.

Secondly, once you figure out what to do write a business plan.

If you think it's financially feasible and you are willing to take the risk move forward.

Then go to the state of Washington and file a business license. File for a tax ID# with the state and feds.

Then look for a location...:BL:

[Matthew White]

Thanks Jay! I'm not all that business savvy myself, so it does make sense to start all the paperwork.