Step #14 of my Top 20 Tips for Small Business Start Ups is a big one, because few things can tie you into a huge financial commitment faster than a property lease. The question is simple: is this a business you can run from home, or do you need to look at premises? The answer shapes your costs and your risks substantially but may also impact how customers see you.
The golden rule: don't tie yourself into big financial commitments before you've even got started. Start as lean as you can, even if that means freeing up your garage or shed for a while for your stock and equipment. Then move up when you’re confident the business has earned it.
Work out what your business actually needs
Before you decide, get clear on what you need physically. Ask yourself:
• Do customers need to visit you? A treatment room, a shop or a showroom is a very different proposition from an online service.
• Do you need space for stock, equipment or deliveries?
• Do you need a particular environment? A commercial kitchen, a workshop, a quiet space for client calls.
• How many people will be there? Just you, or a team?
• Do you need a prestigious address? For some businesses it matters, for many it doesn't.
Write down the genuine must-haves, not the nice-to-haves.
Option 1: Run it from home
For many start-ups this is the sensible starting point. It's cheap, flexible and keeps your overheads low. But it isn't a free-for-all. GOV.UK's guide to running a business from home says you may need permission or separate insurance, and you'll need to check whether you pay business rates.
Here's what to check:
• Your mortgage or tenancy. You may need permission from your mortgage provider or landlord. If you rent, check your agreement and ask in writing.
• Your local council. GOV.UK says you may need permission if you're going to get lots of customers or deliveries, want to advertise outside your home, or need a licence to run your business.
• Insurance. Your home insurance may not cover business stock, computers or customers visiting your home. MoneyHelper advises talking to your insurer and explaining your plans, because if you don't tell them and you need to claim, the claim might not be paid. We'll look at this in Step #19.
• Business rates. You may have to pay business rates on the part of your home you use for the business, depending on whether the Valuation Office Agency has given it a rateable value. You may qualify for small business rate relief if the rateable value is £15,000 or less.
• Tax. Sole traders and partners can include business costs in Self Assessment. The cost of running your home office is a business expense so should be recorded as such. Also be aware that you may need to pay Capital Gains Tax on the part of your home you used for the business if you sell it. Speak to an accountant about this.
• Health and safety. You'll need to manage this as you would with any other business, especially if you have employees in your home, or lots of deliveries to your premises for example.
There are practical things to think about too. Can you separate work from home life? Is the broadband fast and effective enough? Will your neighbours be fine with deliveries? And if you're a limited company, remember you'll need a registered office address, so think about whether you're comfortable with your home address appearing on a public register. Companies House makes company information available to the public.
Option 2: Co-working and shared space
A middle route that's growing in popularity and available in lots of locations. Shared offices and co-working spaces typically offer desks or small rooms on flexible terms, with meeting rooms, Wi-Fi and a ready-made community. You'll usually pay a monthly fee rather than signing a long lease. Can be great for some lunchtime networking too, as running a small business can be lonely.
It's worth knowing that the British Library's Business & IP Centres in over 70 libraries across the UK offer workspaces, community and friendly business support, and some have extras like meeting rooms and podcast studios. They can be a very affordable way to get out of the house.
Option 3: Rent premises
If you need a shop, studio, unit or office, this is where you need to be most careful. Before signing anything:
1. Get the full picture of the cost. Rent is only part of it. Add business rates, service charges, utilities, insurance, repairs and deposits.
2. Negotiate the length. Ask about shorter terms, and about break clauses that let you leave early if things aren't working.
3. Understand your responsibilities. Leases can make you responsible for repairs, restoring the property at the end and personal guarantees. Read the small print.
4. Get it checked. A solicitor looking over a commercial lease is money well spent.
5. Check you're allowed to do what you want there. The property needs the right permissions for your type of business, and the licences may depend on it.
6. Run the numbers. Put the new costs into your cash flow forecast (Step #12) and see what it does to your low points.
Other flexible options
You might not need a permanent space at all. Think about:
• Market stalls and pop-ups. A great, low-commitment way to test a product and meet customers face to face.
• Renting space by the hour or day, for meetings, treatments or classes.
• Mobile or on-site working. Going to your customers instead of having them come to you.
• Shared kitchens or workshops for food, craft and making businesses.
Think about growth
It's tempting to take a bigger space "for when we grow", but you're paying for space you don't use. Choose somewhere that works for the next 12 months, and have a plan for what you'd do if you outgrew it.
If you’re not sure if working from home is the forever option…
Work through this to-do list. Don't panic, you don't have to do everything today!
• ☐ List what your business genuinely needs in terms of space
• ☐ Contact your home insurer and ask what's covered
• ☐ Look into co-working or library business spaces near you
• ☐ If you're considering premises, list every cost beyond the rent
Want to talk it through?
If you're torn between home and premises, I'm happy to be a sounding board. Book a call with me here.
Next up in the series: Step #15, What Licences and Regulations to Consider. Time to get official.
