Business Q&A April 23

I am planning to relocate my business to a space that has higher rent, how do I know I can afford it? Elkhorn, NE

There are different methods to evaluate if and when a business can afford a relocation to a larger space. In my opinion, predicting the amount of increased sales as a result of additional space is highly important. A great way to do this is to look at your current rent as a percent of your monthly sales. For example, let’s say you have monthly sales of average $10000 and your current rent is $500. As a percent your rent represents 5% of your revenue, $500 divided by $10000. If you anticipate sales will go up to $15000 per month due to the larger space, but your rent will now be $1500, as a percent your rent now represents 10% of your sales. You may have increased sales, but as a percent rent is now a larger portion of your monthly cash flow. This is where strategic planning is so important for a small business. The larger space may have a great potential for higher earnings in the long term future, but the short term increased rent obligation may have a larger impact on your monthly cash flow. I would suggest closely evaluating how soon and by how much sales will go up in the first 90 days of your new occupancy. If you anticipate sales to go up to meet the same pre-move percent then it may seem reasonable.