If you have unused space, subleasing part of your business premises to a third party is a great short-term strategy to reduce some of your fixed costs. This will reduce your rent expense and provide extra cash flow.
Subleasing typically makes sense when:
- Business conditions are tough - this reduces your overheads and improves profitability.
- Downsizing - the business can operate with less space than it previously needed.
- Your looking to retire - you can sign up a subtenant for a short-term lease with a view to them eventually assuming your lease.
- Your planning to move due to business expansion.
- Introducing a complementary business will generate extra sales and customers for your business - for example, an accountant subleasing part of their office to a financial planning business.
- Determine the amount of excess space you have available.
- Confirm whether your lease agreement allows you to sublease the excess space - unless the lease states otherwise, the landlord has discretion whether to grant your request.
- Get the landlords written approval to sublease.
- Work out the rent to charge the tenant.
- Find a suitable tenant - the tenant needs to be both compatible with your business and financial.
- Have a sublease agreement drafted with the tenant - the subtenant is to provide personal guarantees and/or bank guarantee.