Monday, August 9, 2010

Studio Owner Buzz: Negotiating a Lease

Studio Owner Buzz is a series of posts on useful tips for Studio Owners. Costume catalog reviews, business tips, and more. Click here for past SOBuzz articles
Most studio owners got into the dance business from their love of teaching and of dance, not their love of contracts, business management and administrative details. However, being a studio owner also means being a businessperson and often that means negotiating with business people who have been in business much longer than you and will not be afraid to throw some punches.

My first year of owning my own studio, I was 22 and had no official "business" experience. Walking into a meeting to "negotiate" a lease with my future landlord, I might as well have been a lamb being brought to slaughter. I had no idea what I was talking about, and probably came off nervous and lacking experience... which I certainly was. Sure I had done my research, but that's not the same thing as actually negotiating. I ended up signing the lease for 2 years more than I had wanted to, but got more square footage out of the deal so I felt somewhat accomplished.

But you! You're smart! And are doing even more research so you can learn from my mistakes and be ready to negotiate with the big dogs.

First, let's learn about commercial leases.
Read more after the jump

Commercial Leases
This is just a summary - I suggest reading these articles for more in depth coverage of what can make up a commercial lease: Commercial Lease ( | Commercial Leases (

Most commercial leases are quoted at annual price per square foot. So if your 2,000 sq foot space is $30/sq foot, you will be paying $60,000 per year. Divided by 12 months, you will be paying $5000/month.

On top of this, the lease can require the tenant to pay additional fees like a common area maintenance fee, school and property taxes, utilities, building repairs, grounds maintenance, and others specific to your location.

Negotiating The Lease

Tip 1: All terms are negotiable
Don't forget this! The biggest mistake tenants make is not asking for enough! If you never ask the question, you will never know the response. Ask for a reduced rate. The landlord might not go for it, but might offer 13-months for the price of 12-months. Ask if the landlord would renovate the space for you before you move in? He might offer to paint it or put a sign up for you. Or if you're handy or know someone who is, ask if the landlord will give you a discount if you renovate the space yourself.

Tip 2: Check out the lease length
Landlords like long-term tenants! The more years you are willing to lease for, the more concessions the landlord will be willing to make. But be careful! You don't want to get stuck in a long-term lease if the property is in a bad location or is not working. First-time leases are best kept to 2 years or less. Also review the lease for the terms for renewing. Some leases will have terms that say the rent will significantly increase at the end of the first year lease period.

Tip 3: Research supply & demand
Look around to see the number of vacancies there are in your landlord's property. Most landlords will own a whole building or set of buildings and rent out parcels. The more vacancies, the more likely he or she will be to concede on the price.

Tip 4: Try to Think Ahead
If you don't have enough classes to fill the studio at all times would you consider sub-leasing? Even if you're not thinking about it now, you will want to include this in your lease agreement.

Tip 5: Read, read and read again!
Before signing the lease, read it over. Yes, it is boring. Yes it may be 30 pages long. But you don't want to miss something that will cost you money and time in the future. If the legal jargon is too confusing, ask your lawyer, your accountant or a real estate agent to look it over for you.

Good luck! Next time we will cover "How to Spot a Bad Lease"

Required Reading: Negotiate the Best Terms ( ,, Women in Business, Lease Lessons (

No comments:

Post a Comment

Related Posts Plugin for WordPress, Blogger...