Why You Should Never, Ever...Ever Sign a Lease for Longer than 12 Months

Column by Jeff Landers/INC.

Who knows what can happen in 12 months' time? Even you don't! So why would you sign a lease for more than 1 year?

Just knowing it's time to move out of the home office is the easy part. It's what comes next that gets hard -- finding the right office space situation. But four walls that feel right aren't the only key to a good office space strategy. When I lecture to small business entrepreneurs, I call this section of my talk, "There is no hell like being locked into a long-term lease," because the standard three- to five-year lease that real estate brokers and landlords want you to sign can be catastrophic for a start-up business, which may not be on the same sort of growth schedule that conforms to those set lease periods.

As you well know, a lot can happen in a year. You might run into trouble and go bust. If your business starts to struggle after five, 12, or even 18 months into the lease, you are still legally obligated to continue paying the full rent to the landlord month after month for the entire three-year term -- that's almost 1100 sleepless nights!

And here's the rub -- the on-going rent payments for a traditional office space you can no longer use or afford will only put your business in a more precarious situation and make it even harder, if not impossible, for you to turn things around.

If you're lucky, you might be able to sublease your office space to someone else, assuming your lease and market conditions will permit that, but instead of spending all of your time trying to keep your business afloat, you'll be wasting a lot of time and effort dealing with attorneys and brokers.

And what if after all of your valiant efforts, your business still goes under? Well, as far as your landlord is concerned, you're by no means off the hook since you probably had no choice but to personally guarantee the lease. So now, on top of all of your other problems (like no business, no job, no money), you have a remaining lease obligation of thousands, if not tens of thousands of dollars, hanging over your head.

This is one nightmare scenario. Another is that your business is expanding through the roof. You are turning over product so fast you can hardly keep up. And you are stuck in an office space that no longer meets the needs of your burgeoning business. You are stuck in an over-crowded space that restricts your growth and compromises your ability to attract and hire new employees.

You can try to move some of your crew into additional office space nearby, but this kind of split operation can be an organizational nightmare for an expanding company and I've really never seen it work out well.

The solution is short-term, ready-to-use executive office suites. This is, simply put, a Manhattan office Space you can move right in to. It is fully equipped, furnished, and ready-to-go. It has high-speed Internet access, phone systems, furniture, fully functional conference rooms and in many cases a receptionist to answer the phones.

These Executive office suites are available in almost every city and offer small businesses the opportunity to "test drive" a real office space. Entrepreneurs can take out a lease for one month, three months, six months, or longer. The point is you get to decide. Because only you know what's right for your business. And most importantly, it gives your business another chance to beat the statistics.