A part of the American dream is to be our own boss.  Entrepreneurship is part of the DNA of being an American.  We also have dreams of retiring and doing some of the things that building our independent businesses have precluded us from doing while we were building our businesses.  We want to travel, volunteer, enjoy our hobbies, play with our grandchildren, and read all the books on the shelf we did not have time for.  We want to be comfortable and have freedom to make choices.  But will we?  Is Social Security enough for those who have owned small businesses to retire on?  How much capital does it take to retire, and is it easy to invest it in a manner that insures our life style when we are not working?  What will your small business be worth when you are ready to retire?  Do you have a succession plan that insures it will be viable into the future?  If you do, then it is likely you will have the income to continue your lifestyle and give you choices, and Social Security will simply be a medium to bolster you financially.  But, what if your business, like many others, is mostly dependent upon you and your family members to sustain value?  In that case, your business may be saleable, but only if you come with it.  While you get a chunk of cash, how will it be reporting to someone else and still be lashed to the rail?  If you had visions of retiring on the proceeds of the sale and the sale is dependent upon your continued participation, how does that work? 

While not a solution for every small business, the retirement fuel might come from purchasing a building for the business, let the business make the payment, and use the ongoing income or proceeds from sale of the real estate at the time you are ready to retire.  My experience is that a fair percentage of small businesses have little or no value without the owner operating it.  Consequently, when they want to retire, if they don’t have other sources of income, they are painted into a corner.  While many entrepreneurs want nothing more than “dying with their boots on”, even if that is the case, isn’t it better to have a choice?  

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As background, for over a decade, SBA financing has been available for small business people to use purchasing buildings to occupy.  We have observed the market for owner occupied buildings increase in value far beyond any other type of real estate.  Many years ago I created a financial model that compared owning a building with a low down payment to leasing the same property.  I wondered how much more expensive in the first few years it would be to own rather than lease a location for a business.  It was like putting my finger in a light socket.  To say I was shocked is an understatement.  Throughout the past decade, it has been cheaper on an after tax basis to own.  6 to 24 months ago it was even more compelling as interest rates were at an all-time low.  Today they are about 1.5% or more above the low water mark, but guess what?  It is still cheaper and we have the financial model to prove it.  That is not to say that every business is a candidate to own because they are not.  Business that are getting 15 to 20% or more return on their invested capital should lease.  Companies that cannot predict their future size within 25% should lease.  A company with dynamic growth will be constrained by building ownership.  Far too often we have seen those companies shaping the business to the real estate, when the business should be free to grow unimpeded and the real estate should support the enterprise.  

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I was a guest at ProVisors meeting this morning in Irvine, CA.  Scott Robertson spoke about Branding and how customers make decisions.  His talk was informative, and interesting.  Who knew that Proctor and Gamble invented the concept and that all their products are “branded” in a manner to make them unique, recognizable and a part of every home in America.  Another part of Scott’s presentation that was interesting to me is how people make decisions and purchases.  His opinion and mine are identical about the subject, except that he has research to back up his opinion.  The short version is that people make decisions, (purchases), based upon how they feel about them.  We rationalize our decisions with criteria and cognitive evaluation, but how we feel drives action.  Another important element of his presentation was the statement that “everything counts”.  Everything we do is part of our “brand”.  Consequently, our brand is a lot more than what we project to the world on a business basis.  In essence, our brand is who we are. 

 

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  1. Much of our business is focused upon what other good brokersWe lease and sell property representing landlords and tenants. If you have a good broker in your area that serves you well, you should continue using your proven service provider. If their practice is area specific in an area where you are located, all the more reason to continue using their services.
  2. What differentiates OCRS from 99% of the brokers at other commercial companies is that a portion of our practice is consultingA few examples of our consulting services are as follows:
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Helping You Avoid Pitfalls and Uncover Economic Opportunities

Selecting space for your organization and successfully negotiating an acceptable lease are complex, time-consuming tasks that are full of potential pitfalls. The pitfalls only multiply if you undertake the process on your own, without the benefit of an experienced commercial real estate professional serving as your tenant representative.

Hiring a tenant representative who acts on your behalf can eliminate many of the hassles in site selection and negotiation. It can prevent potentially disastrous missteps. And it can cut much of your real estate expense. More importantly, aligning yourself with an experienced tenant rep can turn up real economic opportunities and help turn your space into a strategic asset.

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