India’s demographic and economic state makes it a budding ground for start-ups. We have a large percentage of enterprising youth in our population coupled with a growing e-commerce and IT/ITES sector to support the growth of start-ups. Real estate strategies play a major role in the success and failure of any enterprise. However, in the case of start-ups, real estate decisions are of greater importance. Start-ups lack customer brand recognition and financial cushioning that can safeguard them if they choose a wrong real estate strategy.
Here are a few key factors that start-ups must keep in mind while making real estate decisions:
Cost and lease terms
As the profitability of a start-up venture is uncertain, it is extremely vital that real estate decisions are made so as to incur minimum costs. Real estate decision makers must try to negotiate with landlords to obtain flexible lease terms as this can further reduce costs. Early entrepreneurs should look for properties having negligible lock-in periods, low initial security deposits and affordable lease rates.
Location
Real estate cost differs drastically among the central city locations and suburbs. Location affects the image, scalability, talent attraction and retention, commutability and life cycle of the start–up business. It is also important to realise the returns that the start-up will be able to generate on account of its location. For instance, a cafeteria will generate better revenue if located near a college. However, the same cafeteria may not be able to generate a steady clientele if located on a highway. Suburban locations command significantly lower rentals and thereby, cut costs and boost profitability, making them an ideal choice for start-ups.
Human resource aspects
Start-ups have unique human resource requirements that are business specific. For instance, an online garment brand that manufactures its own products would have its operations based close to its manufacturing units. Thus, real estate investments by start-ups need to be made depending on the availability of specialized manpower that the business may require.
By keeping these three strategies in mind, start-ups can develop a conducive real estate plan that will accrue maximum profit in the short term and ensure sustainability of business in the long term.
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