How much do you pay in rent? Is it time to move?

We all know and may have experienced the effects of the recent decline in real estate. Our homes and neighborhoods have dropped significantly in value. You can no longer refinance or sell your home, many are lost to foreclosure, and there seems to be no end in sight.

However despite all of this, many businesses still pay outrageous rent rates. The business owners themselves may be seeing their own real estate portfolios taking a dive but they dare not challenge their current rent rates. We are currently working with clients whose monthly rent amounts to over 40% of their monthly gross revenue. There is no way a business can survive with 60% of gross revenue and still be able to pay vendors, staff, and cover other overhead… it is simply impossible

Yet the idea of forcing a negotiation or rate deduction with the landlord sends clients running for the hills… I don’t understand it

While I acknowledge the power and control a landlord can have over a business and it’s owner, in the end a business owner must manage by the numbers. If your rent rate if based off of revenues and projections from 2006-2008, you are likely paying too much. Your revenues have likely dropped drastically and you cannot survive long term under these new conditions.

Bottom line, force discussion with your landlord, workout your lease arrangement. What do you have to lose? Explore what the market rate is in TODAY’s market and don’t pay a penny more per square foot. If your landlord won’t budge, then its time to move. With the real estate decline came an incredible amount of vacant property, both residential and commercial… If your landlord won’t with you to find a reasonable rent rate based off of today’s economy and revenues then someone else will.

Do not make this an emotional decision. Manage by the numbers. Long term success of the business is far more important than your relationship with your current landlord.