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Know Your Financials Before You Start Touring New Office Space

Updated November 30, 2017

No matter the nature of your business, failing to prepare for any significant decision is almost certainly preparing to fail. To that point, when your business is evaluating new office space for your organization, the decision that can significantly impact the success and longevity of your culture and company.

In order to make the process as efficient and effective as possible, specific preparation for your office tours will best prepare you for the process and significantly enhance your chances for success. While we have previously examined how to prepare for office tours, examining your financials ahead of time is another key step in allowing you to conduct your search for new office space in the most informed and realistic way possible.

Plan for Today and Tomorrow

When looking for new space, you need to consider your organization's current and future needs to determine the most suitable term of the lease. Carefully examine what you can afford and how long that affordability will last. This also entails a realistic projection of growth in terms of both revenue and staff to better understand if a particular space will still fit your budget and team two or three years out.

Pay Attention to the Finer Points

Moving into new office space obviously includes more than just your lease. A number of other cost factors need to be included in your projected budget to minimize the impact of unforeseen expenses. Since every property is different, prepare a set of questions for your tour that will allow you to make a fully formed decision. Often times, parking, furniture, internet and other line items can significantly impact affordability.

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Cash Is King

Although it might seem like a given, examining cash on hand is too frequently overlooked and puts organizations in the unfortunate position of feeling cash-strapped just after a move. Make sure you have enough to pay the first month’s rent as well as any security deposit with enough leftover to handle additional expenses without draining your accounts.

Financial Pasts Matter

Moving into new office space is stressful for an organization and for the landlord. They, too, are exposing themselves to a new source of risk that could impact immediate and future success. Therefore, you must be able to show a financial history that demonstrates the ability to absorb the cost of the new office space lease as well as any ancillary expenses without threatening your cash flow and financial stability.

Prepare and examine your P&L, tax returns and balance sheet to make sure you can provide the necessary assurances and ability to perform under the office space lease.

Craft a Plan that Works for Your Business

Although it is rare it is rare for anything to be truly “non-negotiable” in commercial real estate, the financial aspects of a lease are as close things get. You will need to provide some agreeable level of assurance to your new owner that you can consistently pay rent in a timely manner, especially in the landlord favorable market like we have today.

Once you have organized the items mentioned in this post, take the time to set a plan with your commercial real estate advisor to better understand what constraints or opportunities your financials may provide you in your search. For example, if you have a short or unsustainable financial package to show for your business - very common in startups - you can sometimes work around this by providing an extra security deposit or personal guaranty of the lease.

Remember, nothing is set in stone but working collaboratively with your advisor from the beginning will help make sure you identify realistic options for your business.


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