For Businesses: Pros and Cons of Owning The Buidling

Co-owners Tod Colbert and Todd Schulz had a problem: growth. Their company, Weather Tight, of Milwaukee, had operated out of the same leased office space since its founding in 1986. By 2005 they had outgrown it. Company managers aimed to buy ground and construct a building. It took two years to find the right location.

The Big Switch

Moving from leased to owned space is a giant step in the life of a home improvement company, or any kind of business. The advantages of owning rather than leasing your premises are many, but there are three really big ones.

The first is that when you own the property, you can use it in any way you see fit. You don't need a landlord's permission to erect a sign, do office build-outs, or anything else.The second is credibility. "It's a strong part of the company story for a customer," says Michael Majors, owner of Majors Home Improvement, in Milton, Fla. "We are established. We're not here today, gone tomorrow."

Thirdly, you're adding an asset to your business, even if, as is the case with most companies, a separate entity owns the building and leases it back to your company.

Other considerations are that you, the owner, gain whatever value results from the appreciation of the property over time. In addition, if your building is large enough, you can generate rental income from other commercial tenants. And if you don't operate a showroom, you can now add that to your promotional and marketing repertory.

When The Time Is Right

"The big issue is financing," says North Carolina real estate attorney Clint Routson, of legal firm Ward and Smith. "Do they have the financial ability to make that commitment and not have a problem?"

In fact, for Weather Tight, that consideration was paramount. A Small Business Administration loan enabled the company to put down enough to afford its $3.5 million lot and building. Weather Tight moved from 7,000 square feet with no showroom to a 25,000-square-foot location with a 4,000-square-foot showroom. In its first year, that showroom generated an additional $2.7 million in sales for the company. Weather Tight management had planned to stay put for 10 years, but now, Colbert says, "We're already outgrowing the space."