When your business grows, it’s a great thing. But your business can grow rapidly and without adequate planning, there may not be enough space to work efficiently.
There are several things to consider when deciding to expand premises, including whether to buy or to lease new premises.
Leasing commercial premises
Leasing commercial premises does not require the large capital investment necessary for buying premises. Once the lease expires you can leave the premises without any further financial commitment. If you decide to end or relocate your business before the lease expires, you may have the option to sublet or assign the lease.
However, security of occupancy extends only until the lease expires and your business may suffer losses from business disruption and loss of client base that often result if you need to relocate. Generally, leases commit the tenant to increases in rent despite how well their business is doing. Also, if you don’t have an investment in the property you don’t benefit from capital gains.
Buying commercial premises
In some cases it could be more cost-effective for a small business owner to purchase a commercial property instead of leasing it. Buying commercial premises is a major financial investment. However, depending on your individual financial and personal circumstances, you may be able to make such an investment.
Check out how we handled our growing pains and invested in new property through our Super fund here.
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