Beware the long-term lease or contract

Before signing on the dotted line, be certain you understand all aspects of a rental agreement or equipment lease, including termination costs.

By Michelle van Schouwen

Ideally, a small business is nimble, ready for growth, opportunity or any necessary change. In many cases, landlords and service vendors want just the opposite from your company. They prefer to tie you into long-term agreements. They will argue that, in return for the guarantee of a long-term relationship, they can provide better pricing or service terms.

Be that as it may, beware. The day you need to get out of such arrangement is typically the first time you study all the onerous fine print, and then the fun begins.

-Your lease. What if you need to move for any reason? What if you sell the company and the buyer doesn’t need your space? Unless you are in a really hot market, or want the coolest space in town, you can probably negotiate a lease that either 1) is a short-term lease (two or three years at most) with the opportunity to renew one or more times and/or, 2) has a “right to terminate” clause in which (ideally “for any reason”) you can give three or six months notice and simply end the lease more quickly and at lower exit cost.

-Equipment. Our office had a leased postage meter, which had become less important to us in recent years. When we recently sold the company, we wanted to end the postage meter lease, which I erroneously thought was slated to end in about six months. Instead (surprise!) it turned out that we had two years remaining on the contract. When we asked the leasing company how best to terminate the lease, they offered only about $200 off the total cost of keeping the lease for the next two years, this discount being for the privilege of sending back their meter immediately. Several phone calls and letters later, we got another $400 off our early termination penalty, and paid the company over $900 for the privilege of sending a postage meter back to them two years early. Expensive lesson learned!

-Everything else that ties you to monthly fees: Similarly to the postage meter story, watch what you sign up for with internet, phones, software, and services.

-Negotiate up front. Negotiate before you sign, because that’s when you have the power. You are now a prospect, not a mere leaseholder at that point, so leverage your position before losing that status.

Sending significant checks just to get rid of office space, services and contracts you no longer need is painful, and often unnecessary. Avoid it whenever you can.

__________

Michelle van Schouwen has started an “Act II” career as principal of Q5 Analytics, providing advocacy and communications for climate change mitigation. Website to come.

For the past 32 years, Michelle has been president of van Schouwen Associates, LLC (vSA), a B2B marketing company. In October 2017, van Schouwen Associates was acquired by Six-Point Creative Works, Inc. of Springfield, MA

Leave a Reply

brand building Branding corporate culture customer loyalty digital marketing employee training Facebook hiring Media relations mentor mentoring networking office design publicity reputation management search engine optimization SEO Twitter Web design website design

Subscribe to keep up with the latest on how to make your small business a success.