As the year turns, many small business owners reflect on their operations and make plans for the future.
According to Lynda McAlary-Smith, the Victorian Small Business Commissioner, New Year is the perfect time for small business owners to review their leases or consider new spaces — but it’s important to make informed decisions before committing.
For those in Victoria—where more than 701,000 small businesses operate, many in leased spaces—this often means reevaluating retail leases. Whether you’re thinking of opening a new location or reviewing your current lease, the start of the year is the perfect time to set the right foundation for success.
A retail lease is more than just a contract; it’s a significant financial and legal commitment that will shape your business for years to come. With the busy holiday season behind you, now is the time to take stock of your lease and ensure it’s aligned with your business goals.
Here are some important steps and tips by Lynda to guide you through the process:
Focus on Business Needs, Not Wants
While a trendy location might seem appealing, it’s important to assess whether it fits your business model and target audience. Does the area align with your customer base? Are there too many competitors nearby? Sometimes a smaller, more affordable space in a less glamorous area may be the best option. Before you sign anything, review your business plan and consider what type of location will help you thrive.
Do Your Homework: Get All the Facts
Before entering a lease agreement, make sure the landlord or agent provides you with all the necessary documentation. This includes the lease itself, a disclosure statement with floor plans, and a list of outgoings (expenses you’ll be responsible for). Make sure to request the Victorian Small Business Commission’s retail leasing fact sheet, which includes a helpful checklist to ensure you don’t overlook important details.
Understand the Fine Print
Lease agreements are often filled with legal language and clauses that can be difficult to understand. It’s crucial to read the fine print carefully. Focus on key elements such as permitted use, maintenance responsibilities, renewal options, notice periods, and exit clauses. If you’re uncertain, consider getting advice from a lawyer to ensure you fully understand the terms. Additionally, double-check with your local council to confirm the property can be used for your intended business purposes.
Account for All Costs and Budget for the Future
Rent is just the start—consider all additional costs like outgoings, utilities, insurance, and fit-out expenses. Some leases may include rent increases based on the Consumer Price Index (CPI) or may have set rate increases each year. A seemingly affordable lease can quickly become a financial burden if you haven’t accounted for all costs. Take time to budget realistically and factor in any likely increases.
Plan for the Future: What Happens Next?
Success means growth, but growth requires flexibility. When negotiating your lease, think about the future—how will your business evolve? Consider clauses that allow you to sublet or transfer the lease if needed. Look into options for lease renewal if your business grows faster than expected. Also, plan for your “make-good” obligations, which require you to return the property to its original condition when the lease ends. A property report can help with this process.
Explore Short-Term Leases for Testing New Ideas
If you’re testing a new business idea, a short-term lease might be the best option. These leases, usually lasting a few months or a year, can give you the flexibility to evaluate the success of your business without long-term commitment. However, if the business takes off and you wish to stay longer, be prepared to negotiate a new lease when the current one expires. Retail tenants in Victoria have a legal right to a five-year lease, but you can apply for a waiver if a shorter term suits your needs. Visit the Victorian Small Business Commission website for more information.
Don’t Hesitate to Negotiate
Leases are negotiable, and landlords often expect tenants to negotiate terms like rent, lease duration, and outgoings. A well-negotiated lease can save you money in the long run and set your business up for success. If negotiating isn’t your strength, seek help from a trusted friend or family member, or hire a professional to guide you through the process.
Whether you’re signing a new lease or reviewing your current one, taking the time to make informed, thoughtful decisions will ensure a prosperous year ahead. If you need more guidance, the Victorian Small Business Commission (VSBC) offers valuable resources to help you navigate retail leasing. Visit vsbc.vic.gov.au or call 1800 878 964 for assistance.
Here’s to a successful and prosperous 2025!
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