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Growth Goals: Upsizing to new business premises

POSTED: 28th April 2015
IN: Guides
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With many UK SMEs looking to grow in 2015, what should small businesses consider before upsizing to new premises?

undefinedAccording to the Federation of Small Business’ latest Small Business Index, SME confidence increased to +28.7 points in the first quarter of 2015, representing an 11.1 point increase on the previous quarter.

“The Small Business Index shows that lower business costs are enabling employers to hire new staff, showing the substantial impact small firms are having on growing the UK's economy,” commented FSB National Chairman John Allan, reflecting on the findings.

While increased hiring activity is undoubtedly positive news for the economy, it also means many SMEs may be facing capacity issues in their current location and looking for new premises to house their expanding workforce. To support these businesses in their growth journey, Aldermore underlines some of the most important factors to consider before relocating.

The cost of moving

Primarily, whether renting or buying, firms need to be realistic about what they can afford to pay in rent or mortgage repayments in particular paying attention to whether rates are fixed for a set period or tied to interest rates. This calculation should also take a number of other on-going costs into account, including service and maintenance charges, business rates, security costs, utility bills and insurance premiums,  all of which may increase when moving to a larger space.

There are also several short-term costs to be considered when  relocating, from hiring a removal firm to covering the cost of a solicitor and accounting for potential lost hours of business during the move.

Choosing a property

Finding the right property can be a time consuming process, but having a deadline in mind will give the business a clear timescale to work to. A commercial property agent will be able to advise on the range of properties available on the market, and give an indication of what the business’ budget will provide.

Firms should consider how they are likely to grow in the future in order to choose property that will accommodate their needs for years to come, also considering whether the location is accessible for clients and employees.

Rent or buy?

For some firms, renting is likely to represent the most feasible option, providing greater flexibility to leave the property if the business expands or contracts. Typically, lease agreements will be signed for a minimum of three years, with the option of a break-clause should the business wish to leave, but more flexible license agreements are also available, usually lasting up to a year. There may be restrictions on what changes the business can make to the building and the fixtures within it, so it’s worth checking the specifics of the contract carefully if any adaptations are necessary.

By contrast, buying is more likely to suit companies in a steadier phase of growth that can better-predict their needs on a long-term basis. Purchasing a property will usually require a larger up-front investment to cover deposits and fees, but will represent an asset that may accrue value in the future. This option is also likely to give the business greater flexibility to remodel the space as they see fit.

Managing the move

Recent research conducted by E.ON revealed that 78 per cent of SMEs have put off moving premises due to the perceived stress of the task, forcing them to stay in premises which no longer adequately fit the businesses’ needs. 28 per cent of respondents cited time and money costs as the biggest challenge when moving, but a further 27 per cent admitted they just didn’t know where to start. By creating a week-by-week schedule for the move well in advance, SMEs can minimise disruption to the business during the moving process and reduce these common stress factors.

As the move nears, employees should be given clear instructions on their role in the process with a consistent system for labelling and packing up items, as this will prevent important resources from being misplaced in transit. Though it may be tempting to rely on the workforce to handle the move, bringing in a professional removals firm with proper training will mitigate against the legal risks of personal injury for employees and property damage through miss-handling.

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