Monday, September 11, 2006
Rent or Buy Your Space?
To rent or to own? That is the question. Off the bat, renting the best location puts one over owning the second best site because the right location often spells the difference between boom and bust. Renting also has its benefits, especially for starting entrepreneurs. Buying a business location from the start also entails heavy capital outlay and high costs of construction and repair. In contrast, renting has the benefit of having a landlord take care of all repairs.
Take the case of Suzanne Escudero. At the start of the millennium, she was wringing her hands over having to decide where to put up her Figaro franchise outlet. Armed with a shopping list given by real estate brokers, she combed old and new buildings in the cities of Makati, Pasig, and Quezon in search of the perfect location for her coffee shop. She eventually settled on new building on Sgt. Esguerra St.,more popularly known as Bohol Avenue.
Escudero, whose lease contract has been in effect for more than five years, explains her choice: "It's near my house so I can easily monitor the staff and the business," she says. "Best of all, it's very near the top two television networks in the Philippines. Media people work long and unpredictable hours and they are always in search of a good cup of coffee."
But Escudero wanted to buy her own place. "I felt it would give me a sense of security. But starting my own business made a huge dent in my savings that I did not really have any choice but to rent," she explains.
She even thought of taking out a bank loan, but eventually she and husband decided against it. "We felt we already had too much exposure on the store. We decided to wait until we had enough money to buy our own property."
Ces Yuzon, another start-up entrepreneur, agrees with Escudero's decision. "It's more practical for starting entrepreneurs to rent, rather than own, their place of business. Unless of course they are lucky enough to own one in the right place." This director of a newly formed company that imports and distributes a food supplement says before you buy real property, the business should be up and running, and earning.
Unlike Escudero, who operated a service-oriented establishment, Yuzon's choice of business site did not require an area with high foot traffic because it would only be used purely as an office and storage facility. But like Escudero, the Yuzons searched for a suitable office space in various parts of the metropolis. They finally decided to open an office in San Juan "because we realized that it was the most business-friendly place in Metro Manila."
It was a good thing the Yuzons were able to process and secure a business permit sooner that five- and 10-day waiting time in other cities because they needed to establish an office-warehouse immediately to accommodate the arrival of their imported product, Fibre Health. "Any delay would have cost us money, that's why we were pressured into opening our office as soon as possible," she says.
In San Juan, she was able to register her company, Subang Daku, three days after filing her business permit application.
Another thing going for the Yuzons was the reasonable real estate prices in San Juan, which were a lot cheaper than the P650 per square meter lease rate for office spaces in Makati.
Yuzon explains their decision to rent: "It just makes more sense to rent first rather than buy your business site. You have to plan and select the right location with an eye toward making it a part of your investment." But the plan is forward-looking. In their case, they intend to buy their office space probably in five to seven years. "Not only would it be a good investment, it can also be used to reduce the company's tax liability," she adds.
Owning your business site must be part of the goal. "Personally, I consider owning my business location as a measure of psychological success. It's like announcing to the whole world that our company has arrived."
SOURCE: Entrepreneur Philippines
Your place or mine?
Owning your place of business is ideal, but if you're just starting, it's wise to rent your location first until you have the money to buy the property.
By Lumen P. Balboa
Tags: Entrepreneur Essentials
Posted on 2:34 PM | 0 Comments | Email Story To Friends | Subscribe Via Email
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