Attention, new businesses! If you want to lease commercial space, you need a business plan. At this point in my career, I don’t even know anymore if I’m more surprised when a new business actually has a business plan or when they don’t. Needless to say, it’s frustrating and alarming how many do not; frustrating because a business plan is table stakes for leasing commercial space and alarming because leases have very real legal and financial ramifications in the case of default. I require a business plan before I represent any new business for 2 seemingly contradictory reasons: self-interest and altruism.
If a new business doesn’t have a business plan a landlord will not consider leasing to them, period. No lease means no commission. When you work on a contingency basis, time is money. Brokers must thus allocate time accordingly to the deals that have the greatest possibility of closing. No business plan equals no deal equals no money equals no time.
If a new business hasn’t invested the time/taken the first step, why should anyone else?
As a broker and particularly a CCIM, I hold myself to the highest ethical standards when it comes to representing my clients. I could not in good conscience allow a client to lease space if they are not prepared to do so. As I stated, most landlords will not even consider leasing to a new business if they do not have a business plan; however, even in the case that one would, I could not allow a client to be taken advantage of like that, because that’s what it would be. The only case in which a landlord might consider such a deal would be one in which the tenant had sufficient funds to pay for the tenant improvements, in cash, and personally guarantee the lease. As rare as it would be, this would be a situation where the landlord would not care if the tenant defaulted because they could go after their personal assets.
The purpose of a business plan is NOT to “check off the box.” Its purpose is to provide a framework for how a business will make money. Its purpose is to protect the business owner from the potential pitfalls associated with the capital expenditure and personal liability inherent in any entrepreneurial venture. Its purpose is to provide a roadmap to success. A business plan is the navigation app to help get you to where you want to go as quickly as possible, all while avoiding traffic, cops, and road hazards.