Michigan businesses that can sell their product or services online are increasingly confronted with the difficult decision of whether to have a brick-and-mortar location or to simply be an online entity. This hinges on many factors such as what is being offered, if there is a good opportunity for walk-in traffic, and the cost/benefit of having solely an online entity or having both online presence and a storefront.
An understated part of brick-and-mortar is the cost of renting or purchasing commercial real estate. There are myriad considerations that should be factored in when deciding how to proceed and the realities of a commercial real estate mortgage or the rent that needs to be paid. For these issues, it is imperative to have legal guidance before taking the next step.
Factors to think about when considering brick-and-mortar sales
Online shopping has exploded in recent years, largely because of its convenience and lower costs associated with businesses not needing to pay for in-store staff, rent, insurance, and more. However, there are still benefits and drawbacks of having as storefront.
In 2024, just shy of 23% of sales occurred online. Some like to shop in person so they can experience what they are purchasing beforehand. Interacting with people can be beneficial to the shopping experience. There can be individual attention for people who are considering whether to buy a good or service. That cannot be replicated by a chatbot or when needing to call for assistance and waiting for an unreasonable duration to talk to someone who can help.
The costs associated with opening a storefront can be one of the biggest and longest-term outlays. And if the business fails, the owners are still obligated to pay for the commercial real estate lease agreement. Among the costs will be rent with two years’ financing.
There must be a certificate of occupancy, permits, licenses, the costs of setting up the storefront, having insurance, advertising, renovating the space, and more. Businesses will also usually have an online presence which carries with it costs of its own.
Prepare for all potential challenges with commercial real estate rental
The key with commercial real estate is to understand the contract from the outset. There can be massive costs accompanying the agreement. This can be problematic if the business suffers downturns and finances are tight.
When thinking about whether to open a brick-and-mortar store, it is critical to understand the costs of renting a commercial space in Michigan, recognizing the language in the contract, complying with the law, addressing potential problems like repairs and maintenance, knowing if there are ways to terminate the lease, and knowing what options are available. Having help from qualified professionals who understand business and real estate is key.