This is a conversation that keeps popping up at the moment. I think it’s really important and helpful to understand that everything is negotiable, especially in financially uncertain times such as these.
I’ll try and outline how to make this work to your advantage in any negotiations you may have.
I wanted to sell a hairdressing business at the back end of the last recession in 2012/2013, with a lease due to expire in early 2014. I was advised by my lawyer, accountant and the sales agents that it would be a challenge to sell a business without a lease, particularly given the economic climate.
The management agents were a large property and commercial agency business in London. I was based in the West Midlands as a sole trader. They argued that I would not have a business to sell unless I took out another long lease to sell on to prospective buyers and threatened that I would have to hand the keys back at the end of the contract in 2014.
I did not want to be financially tied into a long lease should I find a buyer for my business in the event that, for some reason, the tenant defaulted on lease payments. It is often not appreciated that in such circumstances, the landlord can legally chase the leaseholder for outstanding rent.
I wanted a clean break. I looked around our high street and saw empty shops and big supermarket chains which had closed. However, we as a business were still standing. I was an excellent tenant; in 10 years I had never defaulted on my rent, insurance or any other incidental cost that came with the building and any legal obligations written into my lease.
I held my nerve, refusing to sign a new long-term lease and continuing to run the business on a month by month rolling contract whilst putting the business up for sale.
I made it clear to the first buyer that they would have to take out a new lease themselves and in order to do so, they would have to negotiate this directly with the property managing agent.
They did take out the lease themselves and I sold a business that I could financially and emotionally walk away from. The landlord was happy as he had a new tenant on a 15-year contract!
My point here is that everything is negotiable – but first you have to know what is non-negotiable for you and your business.
So, ask yourself:
1. What do you need in the next 3/6 months to financially survive and then thrive? All things being equal, where would you like to be in 2/3 years’ time with your business?
2. Look around you. What can you see and understand about your local environment that your landlord can’t? Extensive local market knowledge is the ace up your sleeve and you should be prepared to use it.
3. Don’t be too proud or greedy – being a good negotiator means knowing when you have got a good deal. I understood that realistically I could have sold my business at a higher price if I had sold it with a lease already in place. It would have made the process simpler, more straightforward and more attractive to any potential buyer. However, a clean legal break was my non-negotiable so I was prepared to compromise on the sale price.
4. Understand the consequences of any action you take. Could you simply move your business and set up or trade elsewhere? How long would it take you to build your business back up again?
It’s important you don’t make emotional decisions on your financial future. Look at the facts, the figures and the realistic potential for growth that come with each scenario.
5. For me to take out a new lease in my name at that particular time was a non-negotiable and I was prepared to walk away from any deal that did not deliver it. However, I also understood that I had a viable business on a high street that was starting to slowly recover. Equally, the property agent had 10 years of knowing I was not only reasonable but also that I was tenacious and would not back down where it really mattered to me.
6. Every business and every individual has an ace up their sleeve – what is yours? Be prepared to use it to get a deal that works for you and your particular circumstances.
Take three seconds to take three deep breaths and give yourself three viable options. Understand the potential consequence of each route for successful negotiations.
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