Originally published in The Frederick News Post
By: Rich Terselic
The simplest location for a new business is the entrepreneur’s home. While there are clear benefits in terms of low cost and convenience, there are also complicating factors. For example, if a business involves things done on a computer, on the phone, or sales of products that need only be packaged and shipped, it may be readily done from a home location. However, there are limits as well.
Any business that impacts the residential character of a home may pose problems that would need to be addressed. For example, it would be inappropriate to post other than a business card-sized identification of the business name at a home and it may be necessary to seek approval from the local government for a zoning exemption. The latter would be the case if the amount of business-related traffic increased in frequency or character. If the number of persons or delivery service vehicles visiting increased materially, it may prove offensive to neighbors-triggering the need for a zoning change. Similarly, if a garage or carport adjacent to the residence were used in the business, a similar situation would result. Finally, if the business activity increased the hazards covered by normal residential insurance coverage, a different, more expensive, coverage might be needed.
If the “match” is poor between what a business needs to function and what a home location can accommodate, a commercial location becomes a must. For example, if a business needs to have clearly commercial identification (signage), as well as the capability of receiving modest to high levels of visitations by customers and delivery of merchandise, a commercial location becomes a “must.”
If a commercial location is needed, there are crucial implications. The first is that the geographic location and space configuration has the potential for meeting the needs of the business. For example, a coffee shop or bakery needs access to large numbers of potential customers. That can occur in a street location as well as in a building with many occupants. On the other hand, a repair-oriented business or specialty product seller may be able to locate off the beaten track.
The second implication of a commercial location involves rental conditions and possibly a lease. While some property owners may be willing to rent on a month-to-month basis, others may require a lease. Renting on a month-to-month basis involves the risk that if the business does well and establishes a customer following at a given location, if the property owner advises that a new tenant has been found and the current tenant must vacate, a clear problem occurs. On the other hand, if a lease is secured by the business operator, if expectations of success are not met and the decision is made to terminate, the operator may be faced with the financial obligation of paying rent for the full lease period unless a condition of the lease permits vacating without obligation.
The final implication involves cost. When I operated a business, a long-time business operator once asked me, “what does it cost you to turn the key of your shop every morning.” What he was asking related to the full cost of space. It includes not simply rent, but utilities, security, insurance, and other costs.
Please note, that this brief discussion of business location touches only the surface. SCORE Frederick’s mentors maybe are of assistance if a more detailed evaluation is required.
Richard Terselic is a certified SCORE Frederick mentor. He is an engineer and public administrator by training, and a federal government retiree. He owned and operated an auto parts business for more than 20 years.
SCORE is a nationwide volunteer network of 310 chapters dedicated to the formation, growth, and success of small businesses. SCORE Frederick provides free and confidential business advice and mentoring to entrepreneurs, start-up businesses, and to established small businesses in Fredrick and Carroll counties. SCORE Frederick also offers workshops for entrepreneurs and established businesses. SCORE Frederick continually seeks volunteers with small business and or management experience retired or working to become chapter mentors. For details visit http://www.scorefrederick.org or call 240-215-4757.