I often tell people when they ask how are business is doing, "I never expected to grow so fast." A little over a year ago, we started Red Shoes PR with 3 people. Today, with the latest job offer, there will be 6 of us. That's a lot of change for a small start-up but certainly a welcome one. However, I know enough to keep a close eye on our growth because I've heard over and over again, "Be careful of growing too fast."
One of the most excruciating growing pains has been our search for more space. For the past six months we have been searching for the right space only to end up right where we started. Currently, we occupy about 400 square feet of packed offices. With six of us, it gets a little crazy. We love the open working environment but also recognize there's quite a bit of work we do that needs to be done in a quiet area as well. At the same time, we don't want to lose the energy, creativity and communications that have worked so well for us.
We looked at multiple buildings with space for lease but couldn't quite find something that felt right and one that had the right price. Despite the downturn in the economy and the vacant space, rental prices are surprisingly still high. Not good enough for me. These are the times you can find deals and don't tell me otherwise. It's a commercial renters market, plain and simple.
During our search we came across a building located downtown Appleton. A building that is owned by a bank and was foreclosed on almost three years ago. The building housed four office suites; perfect with one suite for Red Shoes PR and three others to rent. With one tenant and two other interested parties to rent from us it seemed like the smart way to go.
We did the math so many times, it really made good sense to make a mortgage payment to an established LLC and own a building versus paying rent to someone else. It would actually cost less to own a building than what the rental market was asking. And then came the next step of finding financing. And many of you know that story. Credit is not so easy to find. Down payments are not what they were last year. Some banks were asking for 30 percent down.
After quite a few of these meetings and getting nowhere, a financial institution did come through for us and we had our financing set up. Unfortunately (or fortunately!), in the meantime, we had a professional commercial inspector go through the building along with many contractors to make sure we had a clear picture of the condition of the building. Not so good. The "guts" of the building, the HVAC, all needed to be replaced along with many other issues. We were ultimately looking at more than $60,000 in needed repairs overall.
Our commercial realtor presented the estimates to the bank's realtor, and well, let's just say the bank wasn't too happy. We then went back to the bank a few days later with a lowered offer taking into consideration the cost of repairs. No go. They refused the offer. It was disheartening but unrealistic to think we were going to take on a money pit.
After months of searching including hours of our time, thousands of dollars spent on inspections and more, we are staying put in our current office space and knocking a doorway through to the next adjoining office suite. While we won't own a building, we are going to have more capital to work with to focus on the things that will help create the working environment we are developing-- a vibrant, collaborative and team infused workspace. The new digs will include a bullpen work area, offices, a conference room and a community room for brainstorming, connecting, sipping coffee, and watching TV.
Here's what I learned during this process:
- It's who you know and the relationships that you have and cherish that are important. If a lender is giving off bad vibes and not doing a good job during the courting process, forget 'em.
- Have all of your financials lined up and ready to go. We had a complete binder of our business and personal financials, business plan, credit reports, projections, and more, ready for review. Many of the lenders expressed disbelief at our impressive 3-inch binder and organization of these materials.
- When you are looking for real estate, be prepared to walk away from the deal before you walk in the door.
- Always, always have an inspection done on your soon-to-be-purchase! Our lender told me that most people don't have an inspection done beforehand. What??? The money we spent on this was well worth it.
- If it's not meant to be, it's not meant to be. It it feels like you are fighting an uphill battle, take a few days to gather your thoughts and re-group.
- Figure out where your business is and where's it's going. What is your business centered on? Is it your people? What will make them happy?
- Not getting answers from vendors or financial institutions? Move on.
- Keep an eye on your business while you are considering a move. This process took a lot of time away from the business and we needed to call it when we did.
