The weather is changing, and the great season of football is spreading across the country. But the change in season also means we’re all heading into a closure of outdoor dining patios and other weather sensitive places. Our new outdoor public lives have been allowing small retail and dining businesses to survive pandemic-related occupancy shutdowns.
The future is now, and the devastation to our Main Streets is obvious. Conservative experts believe the Covid 19 pandemic will result in a loss of at least 20 to 30 percent of small businesses, while others suggest it will be as bad as 60 percent.
Our main streets that were barely hanging on in good times are now losing businesses at an unprecedented rate. While we all grieve the loss of our favorite dining establishment or boutique, we need to start planning for the rebuilding of America’s great main streets once again.
So let’s apply some tried and true football metaphors to our favorite strategies to attract businesses to commercial storefronts. We’ll also consider a few problematic ones so we can win our game!
Pre-Game – Right Players On Your Team
Nothing is more critical than having the right players on the field before the game even starts.
Way too many vacant commercial spaces are poorly represented by their owners–who often don’t even have basic messaging about the availability and quality of their space. And sadly there are too many landlords that don’t even improve/maintain their properties let alone understand the real estate market!
If going the agent route, use a commercial broker instead of a neighborhood realtor. Usually, commercial brokers understand small business and the community landscape far better than a residential agent dabbling in commercial activity. Whatever you do make sure your place is being marketed by a competent, responsive, and proactive person.
It’s critical that a potential tenant easily determine who to contact, how much the rent is, and how they schedule a site visit. The application and approval process needs to be solid and streamlined also.
Once you make the call to offer your property, make sure that information is shared broadly at the property, online, and with neighboring businesses. And also consider reaching out to local advocates including city staff, chamber of commerce, and economic/ community development organizations.
First and Ten – Ramp Up Rent
The last tenant paid market rent before they closed so the new tenant should too, right? Makes sense to us but the goal is to get the space occupied with a tenant that will be a permanent and long-term fixture in your community.
Start-up costs for an independent business are ridiculous. Plus it takes time to establish a consistent customer base. Why not ramp up rent during the first few months or years so the burden of making rent is not one more hurdle for a nascent and often fragile business?
Think about it this way. When the game starts, the first few plays on offense are usually safe runs or short passes. The team needs to warm up and get into a rhythm before throwing the ball down field. You will get that market rent–but you just might have to give it a couple quarter or so.
Second Down – Equity Contributions
A massive obstacle to opening a small business is the massive capital expenditure to build out a space, acquire equipment, and purchase inventory. Small business lending has always been a challenge, but add a down economy and banks that are even less likely to lend to start-up businesses in these fraught times.
While it is certainly practical to “white box” a space and expect the tenant to complete a bespoke build-out. We advocate a different approach. Having a tenant make a permanent improvement to your space such as building or renovating a restroom is not appropriate. Because, if their business fails, you get that improvement and they get debt and possibly a future bankruptcy.
A fair rule of thumb we like to use is:
if it can move out over the weekend, it is on the tenant. And it’s on the landlord if it’s affixed to the building and can’t easily be relocated.
We’re not saying to fumble everything away–instead be reasonable and cook things into the rent.
To maximize small-business success, there’s also lease purchase options, land leases, and other creative structures that allow the tenant to share equity or buy the premises over time.
But we’ll save that for a future installment. Maybe with a baseball theme!
Field Goal! – Pop-up Shops
Remember that there are seasonal concerns as to when small businesses should open their doors.
For example, it’s dangerous for a small business to have a grand opening in the middle of January, as everyone’s all spent (both financially and free time) after the holidays.
If it’s getting into late fall and you still don’t have a tenant, it’s time to consider offering the space to a small business as a holiday Pop-Up Shop–temporary businesses in storefronts that are promoted as short-term or seasonal.
While a Pop-Up Shop often comes with little or no rent to you, it might be possible to ask them to pay for heat and electricity. Which is at least some income while you find your future permanent tenant.
Pop-Up Shops helps increase visitation to neighboring businesses which reduces other vacancies from occurring. Sometimes that Pop-Up Shop is so successful the temporary occupancy becomes permanent.
But the important lesson about Pop-Up Shops is this – some occupancy during the upcoming holiday season is better than nothing. Think about it as settling for a field goal instead of risking a costly turnover.
Third and Goal – Shared Everything
The team is at the goal line and just needs a couple yards for the big score. Everyone gives a big push in the same direction for that quarterback sneak or the running back leaping over the pile.
The same can be said for small businesses when they work together to share expenses. Name it and it can probably become a shared expense.
Shared advertising shows potential customers that a single trip to the business district or shopping center can satisfy multiple needs and wants. Shared bookkeeping, shipping, or insurance buys can create more buying power and, therefore, more competitive pricing.
Even the commercial dumpster (and its associated expense) can be shared!
With the increase in access to cash sharing apps such as Venmo, PayPal and others, setting up collective purchasing can be a breeze without chasing the slow-to-pay for their monthly check.
Now let’s consider 3 problematic yet still popular strategies that have track records of bringing more problems than they solve.
Fumble – Storefront Competitions
A growing fad across the country is to hold competitions for small businesses to compete to move into commercial vacancies. Potential small businesses compete for the opportunity to move into a vacant commercial district and possibly have access to a loan pool that already existed.
We’ve rarely seen one of these competitions that’s successful for the applicant competitors.
The competition does raise the profile of the commercial district in the media and neighborhood residents get to gossip about who might be the winner and enjoy the competition process.
But what about the actual competitors – the potential small businesses?
This process takes time and patience, which are in short supply for small businesses anxious to get to market. The “winning” businesses that move in are still typically undercapitalized and now must overcome the neighborhood stigma that they somehow won the right to toil daily and pay rent.
What a prize!
Interception! – Poaching and Second Locations
Sometimes the simplest plan is to steal an existing business by offering a more attractive location and/or lower rent. The business moves across the street or from a neighboring district with you collecting rent but resulting in a vacancy somewhere else.
Some property owners make it their mission to steal businesses from other owners and have a bad reputation for doing so. At the end of the day, the established business relocates and settles into your new location. Try to sleep well knowing that same business might leave tomorrow for even better digs because: if they were poached once, of course it can happen again.
Does poaching tennants work? Yes.
Is it destructive to your community? Absolutely!
How about convincing that successful independent business across town to open a second location instead? But while it’s not poaching, it is still extremely risky.
Because believe it or not, business failures for second locations are higher than for start-ups. Most independent small businesses require the owner’s talent and customer service to make their “secret sauce” work. Opening a second location divides the owner’s time but is often very seductive because these owners don’t have a business that works for THEM. They work for their business and often don’t pay themselves a fair hourly wage for their talent and commitment.
Two times not enough rarely equates to success. The owner’s second location fails and then the owner is saddled with debt from the failed expansion.
It takes incredibly careful timing to ensure the second location is the right strategy for a small business owner. It’s like the cornerback that jumps the route. Perfect timing is a “pick six” and a massive momentum swing. One small misstep and you’re giving up big yards to the competition.
Incomplete Pass – Blaming Others
It is easy to blame your local government, chamber of commerce, or economic/community development organization on their failures to find you a tenant. But you can’t expect them to do that sort of hard work alone. Because, frankly, months of missed rent at your vacant storefront has no real impact on their paycheck.
Of course, they care and are doing their best. But those jobs are underpaid and the people that have them are often not properly resourced to help in your quest for tenants. Since they only sort of have a vested interest in your success, the best you can hope for is that they might bring you a strong lead for your vacant storefront occasionally.
Just like a well-covered wide receiver, you can’t keep throwing them the ball and then being upset they don’t catch it every time. As you move down the field towards occupancy, these partners will be critical to distracting the defense and will sometimes bring you a big play. But you can’t blame them if you have a failed game plan.
Touchdown! – District Events
Nothing is as satisfying as the increase in community pride and district awareness of even the smallest district event. District Events (such as street festivals, scavenger hunts, ribbon cuttings, sidewalk sales, ground breakings, art fairs, etc.) bring out crowds and show potential business owners how vibrant your district could be all the time.
These events do not need to be complicated or even large. Don’t despair if the first couple events have meager turnout. Not every touchdown ends up making SportsCenter but it still adds points.
Your district events need to be promoted so people know it is happening. Make sure to advertise and invite the media well in advance. That way the news and the community can celebrate your accomplishment too. Just like the celebration after a touchdown!
At the end of the game, the above scenarios show that the best game plan is not a bunch of high-risk Hail Mary’s, constantly chucking the ball down the field. Like football, small business attraction is a game of inches and yards. Beating back this depressed economy will require grinding out a lot of first downs to swing momentum to keep moving the ball down the field.
Want to win the big game? Contact us here at Plan F Solutions for a strategy that is the perfect game plan for your community.