Arkansas Startup Tips: Understanding Real Estate Needs

by Innovate Arkansas February 19, 2018 Resources

Arkansas Startup Tips: Understanding Real Estate Needs

Inspired entrepreneurs and motivated startups need to do some research when it comes to having a brick and mortar location for their business. There are a number of considerations and location may have much to do with the success of a business. In addition, the initial budget of a startup may impact which area would be best to set up shop and grow their business. What are a few real estate needs startups need to address before signing a lease or taking over ownership of a commercial property? Here are some of the initial considerations every startup in Arkansas needs to review before making a final decision on a real estate property.  

Buying vs. Renting

Depending on the situation, just as a buyer would consider with their personal residence, buying or renting may be the right choice for startups. Startups may want to buy when the location itself is a benefit. Whether the location can increase foot traffic, may increase in value or has significance in the community, owning may be a recommended strategy based on the services or products offered to customers. Another great reason to buy is to be able to manage monthly expenses and predict expenses month over month, year after year.

The advantages of renting are also numerous. Renting and leasing require smaller initial costs for a startup and may make it easier to move if necessary. Appreciation or depreciation of property value is not important to the tenant. In addition, startups do not have to cover property taxes and in many cases, general maintenance is covered by the landlord or property management company.

How much money does a company have to invest in initial costs of setting up a location and do they need to modify the space for their needs? These questions may be fundamental to deciding whether to buy or rent a property. Some tenants may need to alter the space significantly to meet their needs or have to make expensive additions. In such a case, buying rather than renting may be the best choice for them. Other startups who may need few changes and simply need a place to hang their sign may find renting the most suitable solution.

Zoning Laws and Regulations

Startups need to be aware of the regulations, costs and incentives that may apply to a specific location. There are often specific zoning laws and taxes that are associated with setting up business at a desired site. Some may be set up in such a way as to attract small business development in the area. Personal preferences, business partners and one or more target markets may also influence the decision-making process. There are costs that may vary based on location. These costs may include:

  • Government licenses and fees;
  • Utilities;
  • Business insurance rates;
  • Rental rates;
  • Property values;
  • Minimum wage laws; and
  • Standard salaries.

Areas are usually zoned for commercial or residential use. Specific types of businesses may be banned or restricting from operating in a location. Startups want to check at the local department of city planning to learn more about applicable zoning laws. Use the License, Permit & Tax Requirements for Arkansas Small Businesses ebook from the Arkansas Small Business and Technology Development Center for more details in key areas that will apply to setting up in the state. In addition, state and local governments may provide incentives or tax credits to some startups and small businesses. Such programs are often offered to those businesses involved in urban redevelopment, energy efficiency and job creation.

Planning for Growth

Can you scale your business once you get going? Will a particular location accommodate additional staff and changing requirements? Owning a location can make it easier to make physical changes. In addition, when a business is closely tied to a location having to move locations on short notice may be difficult for a busy startup to do.

On the other hand, research has found that premature scaling is the primary cause of startup death. Those expecting major changes soon may want to rent for the time being. They may want to purchase a location once they mature as an organization. These are all good reasons to carefully consider where to locate startup headquarters in Arkansas and whether to own or rent a commercial property.

Blog post contributed by Gary Ashton.

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