Friday, April 22, 2011

Buy or Lease...The Latest Dilemma

Numark Gallery | Sale or LeaseImage by DavidSC78 via FlickrMy 'other life' is that of a professional 'purchaser' - actually the term changes with the wind, buyer, purchaser, procurement specialist, supply chain manager... Regardless, those skills are extremely helpful to a small business - I've done business planning, supply chain planning (getting the goods here), contract negotiations - hopefully that means great prices on yarn :)

As of Wednesday, my doctor put me on a week's 'rest'...so what do I do? I'm contemplating whether I should buy or lease a retail space for the yarn store. For the last year, I was looking at buying, just so I controlled the monthly costs (ie mortgage), and built equity into 'my space' over time. Unfortunately in the area I'm looking, nothing 'for sale' has been a good space for yarn & coffee. Then someone suggested that it may be worth considering a multi-unit small building that is for sale or even building one .

However, there is a lot to be said about leasing too. Many successful yarn stores wish to only pay rent rather than own. They manage startup cashflow in that they don't have a downpayment to make, and leasehold improvements (fixing up the space) can be negotiated into the monthly rent over the course of the lease (ie pay it back over 3-5yrs). My issue with this option is the changing numbers on an annual basis - you negotiate the lease (going rate varies $10-$15/sq foot), then each year the operating/management fees change - another monthly cost...

Many variables. Ownership involves sacrifices with the biggest payback. Renting frees up the cash for a better startup.

Different strokes for different folks.
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