Why Your Business Should Plan Its ROI Before Investing in a New Property

Thinking of buying business premises? There are many factors to consider. Before you become excited at the prospect of owning your own workspace, it pays to work what exactly what you get back on your investment.

Business premise

Return on Investment – what do you really get when you buy a business premises?

It is, for many business owners, the pinnacle of success: owning their own business premises. There are many benefits of doing so but walking hand in hand with these are a few downsides.

Overall, you need to be confident that the money you invest in a property is going to be worth it, financially as well as working to the overall benefit of your business.

So, what do you need to assess?

Is it the right building?

If you have bought a domestic property, you may have approached your search with a list of must-haves, like the number of bedrooms, the location, off street parking etc.

You will approach buying your business property in a similar way. You will want it to easily accommodate your business now, but you will also need to look at long term practicalities. How well will this building be able to accommodate your growing business?

Is building your own bespoke premises an option?

You may think building your business premises will be too big a project, financially as well as planning and managing the build.

But there is a solution: modular construction.

Modular construction is when a building is built off-site, in a factory-type setting. Because the building itself is being constructed at the same time foundations are being laid and utilities brought to site etc., the building time is halved.

Modular office building
photo credit: Cramo Group / Flickr.

Many business across industries and sectors use modular buildings either as stand-alone, complete premises or as extensions on to their current properties.

Medical modular construction is, for example, a popular solution to an age of problem of providing more space and quickly. Within the medical profession, increasingly sophisticated and big pieces of equipment struggle to be accommodated in old hospital or clinic buildings. With the inability to knock walls down and quickly move things around, many health boards are relying on high-quality modular buildings to provide accommodation.

Is it in the right area?

The location of your business is paramount for the success of it. It may be that you are a retail business, and this means walk-in customers, as well as a steady stream of deliveries in and order out.

If you are too isolated, your customers may not come. If there is insufficient parking, they may not come. if deliveries are too difficult, it becomes a nightmare every time an order comes in.

If the area is not ideal, it may mean that your investment in the property does not increase at the rate you thought it would. Like a purchase of a domestic property, when you do sell, you want a profit. You want equity in the property to build over the longer term.

Is it a long-term solution?

The purchase of business premises is similar in many ways to a domestic property but, there is even more riding on it.

The right location, the right interior to promote productivity and so on, are all key. And it needs to be a long-term solution, the place that you see your business being in and working from for many, many years to come.

Any property is a long-term investment. The days of buying property and reaping a huge profit by selling within months are on the decrease.

You will need to maintain the property, adapt it, ensure that it meets health and safety requirements at all times, that it is a pleasant place to work and forms the right impression in the minds of visitors, customers and partners.

How much work will you need to do to the property to bring it up to scratch? How much ongoing work and maintenance will you need to do to protect your investment in it?

Businessman doing business loan calculation

What happens if you don’t make a considered purchase?

The results can be catastrophic for your business. Once you have bought a business premises, it is not so easy or quick to offload the property if things go wrong. This means your capital could be tied up in the property and with your cashflow stuttering, there is no quick or easy way to release it.

You need to approach buying a business property with your eyes wide open and confident that the figures stack up. With the right business premises and detail financial projections, you will understand what the return on investment could be – and how this will impact on your business.

MTX Contracts are specialists in modular construction, working with clients across the country to design and build modern workspaces.