Developing basic business systems
When you’re about to purchase a commercial property remember that what you’re really about to own is a full-blown business. You’re making a huge financial commitment, no matter how much of a down payment you make. Just as with any other business, you have customers — the tenants that you lease to — and you have inventory — the spaces or apartments that you’re renting. There’s also a sizable exchange of money between you and the tenants. Having said that, remember that every well-operated business develops basic systems to help it run efficiently. Commercial properties are no different.
For instance, you need to develop the following basic business systems in order to successfully manage your own property:
* An accounting system: This type of system will help you handle the cash flowing in and the cash flowing out. Accounting systems are getting better and better as new software is developed.
Because the lifeblood of a business is cash, you always need to be conscientious of your accounts. Take every measure to ensure that all the cash is accounted for every day — not just once per month.
* A sales and marketing system: Whether you know it or not, you’re a sales person when managing your own property. You’re selling units of space, apartments, or entire floors to a customer, your tenant. So, smile and close that sale. Your sales and marketing system may include various means of advertising, ways of tracking the effectiveness of your advertising, training of staff to show prospective tenants the property, and market studies about competition.
* An operations system: When managing your own property, you have to keep track of all the legal requirements of operating a property, such as enforcement of leases, building codes, local ordinances, building security, and hiring and managing contractors and vendors. And don’t forget to track lease renewals.
* A maintenance system: Let’s say that a tenant notices water streaming down into her workspace. Do you simply get her a cup or bucket? No, of course not. You need to have a system for tenants to report such things, so that you can fix them quickly. Also, you need to implement a preventive maintenance plan for every moving part on your property, such as air conditioners, furnaces, fans, elevators, escalators, and whatever else has moving parts.