• Calla Norman

How to Negotiate a Lease for Your Small Business


Lauren, owner of Baked True North in Pittsburgh, Honeycomb alumna

One of the most common obstacles that we hear from small business owners that they’re facing is the difficulty of finding a place to lease to establish a brick and mortar business. Then, once you’ve found a place, how do you know you’re paying the right price?


Here are some tips on how to negotiate a lease for your business, and how you can pay for it.


Know your budget, then expect you’ll need more


Especially considering that construction costs are rising (as is the cost of everything, thanks to inflation), when you’re formulating your budget for your location, it’s a good idea to tack on a bit extra. Building out a space is often unpredictable, and it doesn’t hurt to have a bit of padding for those unexpected costs that come up. Plus, having a bit more in your budget that you think you’ll need will put you in a more comfortable position to negotiate your rent.


Don’t pay base rent - negotiate down!


Landlords often request a base rent that’s 10 to 15% more than the market price for a lease, expecting businesses to just go with it. Always have a plan to negotiate the price down until you can come to an agreement with the landlord. Next, we’ll discuss a few points that you can use to help get a lower price on your space.


Have multiple locations in mind


Having multiple retail locations in mind for your business can really help your negotiations, because you can always walk away from a potential space if you have a backup. Plus, you can weigh the pros and cons of each different space depending on your needs, and use that as leverage for your negotiations.


Negotiate Tenant Improvement Allowances


If your space is going to need a build-out, one way you can get lower rent is by negotiating the costs of the buildout into the lease. Especially if the space needs a lot of work, if you’re willing to do it, the landlord will probably cut you a deal. One way of doing this is a Tenant Improvement Allowance. Essentially this is an agreement that makes your landlord reimburse you for any build-out costs.


Have an idea of where you’ll get the money for rent


Now that you’ve formulated a budget, have a space in mind, and what it might take for you to move into the space, do you know how you’re going to fund it? Many small business owners seek out bank loans for entering into new spaces, but bank loans are hard to come by for small businesses these days - especially newer businesses.


One way you can fund the first few months of rent, the buildout, and other costs of entering into a new space is to crowdfund a loan from your community! Baked True North, a gluten free bakery that’s soon to open a storefront in Pittsburgh, did that with their Honeycomb campaign last winter, and raised $172,950 to make it happen.


With a Honeycomb campaign, you can get your customers and biggest fans to invest in your business - meaning, you pay them back, plus interest, and get to keep all the equity!


Furthermore, when you run a Honeycomb campaign to move into a new space, getting people to invest in your business also gets them excited about your next steps. You’ll have a line of people already waiting to get in on your opening day!


Smart funding for smart small businesses


Now that you have the tools to negotiate a lease for your business, you can be confident in your next steps for your business. Why not let your community show their confidence in you by allowing them to invest in your business? Learn more about Honeycomb Credit crowdfunded small business loans by filling out the form below.