Note: The information in this section is provided as a general guide only. Seek your own professional legal, financial and business advice before committing to a property.
Running a business comes with plenty of costs – but not all of them you necessarily think about before moving in and getting set up! Let’s chat about some of these costs, and some ways to prepare for these in your own premises.
On this page, you'll learn things like:
- expenses that may be passed to you from the landlord,
- the cost of retaining vs replacing staff, and
- how staying on top of various costs can have a big impact.
If you still have questions about costs of operating business premises, please contact us using our live chat.
Preparation is key!
Before even deciding to set up a business in commercial property, you should be thinking about future costs. Moving too fast and committing to a long-term lease without doing some budgeting can spell trouble when you have five things go wrong at once. Running a physical premises, whether it’s a bricks and mortar retail outfit, or a regular office space, is often what’s required to lift your business to the next level.
You should speak to your business advisor and/or accountant about how to budget for all the costs you’ll expect to have – plus some for emergencies. So, what costs might you have to prepare for? That will depend on your business, the commercial space, the agreement and a whole host of other factors. We’ve uncovered some typical costs that most businesses encounter – but you should write your own list, too.
Repairs and maintenance
The premises will at times need repairs and maintenance. It’s quite common for buildings, especially older ones, to have things like leaks after heavy rain, or external damage after a moving accident or weather. This could be your responsibility, depending on where it’s located and what’s stated in the lease.
It’s really important that your lease is very clear on who is responsible for repairs to your floor/space - and not just the interior but the exterior of the building as well. Some leases will have this responsibility fall with the tenant, other perhaps the landlord or maybe a mix of the two. We can’t tell you what your own agreement dictates, but this should be a warning to take the lease signing slow, and always with the help of a good lawyer.
If you are responsible for maintenance and running repairs relating to your business premises, you might need to think about budgeting for the cost of things like:
- Worn or broken window seals and latches
- Paint or plasterboard damage to walls and ceilings
- Broken, chipped or cracked glass (windows, partitions etc)
- Wiring or outlet faults
- Kitchen and bathroom plumbing leaks or blockages
- Ceiling leaks
- Worn or lifted flooring e.g. carpet, lino.
- Air duct cleaning and repair
The cost of each of these jobs will vary depending on the size of the job, location and the service provider.
Damaged or faulty equipment
You’ll have equipment to run your business effectively – computers, cash registers, heaters, appliances – the list goes on. All of this equipment will be your responsibility to fix or replace when needed.
You might wish to buy brands or models of equipment that have a good warranty and/or affordable repair costs associated with them. Your employees using your equipment will wear them out over time, faster than you might on your own. Don’t overspend on fittings and equipment that is going to be used heavily. Instead choose reliable products that will stand use but not cost the earth to fix or replace.
Some of the key areas you’ll incur costs with equipment are:
Computers
You should expect computers to wear out and slow down over time. The more hours a computer is used, the more the components will wear from being under high load and temperatures. The number of things that can go wrong with a computer requiring maintenance or replacement is fairly broad, but you may expect to see:
- Worn plugs and connectors
- Dust inside the computer on components
- Broken keyboards and mice
- Dead pixels on screens
- Graphics cards failing
- Hard disk drives failing
- Speaker issues
- Slow loading after system updates.
The unfortunate reality with technology is that many computers don’t perform their best after 3-4 years (although some can last much longer). You might have a supplier of computer equipment that can offer solutions like service plans and replacement programmes.
Heating and cooling
A comfortable workplace is reliant on its management of the temperature. If there’s not satisfactory building heating, then you may invest in a heat pump/AC for your work space. These are usually very effective but they do require regular servicing to clear filters. Sometimes parts on these units can fail, which will come with a repair charge, too.
When you’re shopping around for a heating/cooling solution, make sure to ask about their maintenance service, too. This will help you budget for the purchase of, running and the maintenance of your heat pump.
If the heating is a building solution then repairs will likely go through your landlord although your lease agreement may allow them to recoup costs in some circumstances. Be sure to check this in your lease before you sign it.
The kitchen!
Think about the daily use that your fridge, microwave, oven, kettle etc gets at home. Now imagine that but with 5x the people. Staff kitchens get a lot of use, and the appliances within them wear out fast as a result, even if your business is full of careful people.
It may not feel like it at the time, but buying sturdy, quality appliances can actually save you money long term over cheaper models with components like hinges that get loose, droop or break. For cooking appliances, you should expect some maintenance cost when heating elements go or controls stop working.
A fridge is the appliance that will be on for possibly years without ever being turned off. They have motors and other parts which will eventually stop working well. Perhaps part of your ongoing budget could be towards kitchen/appliance maintenance so you don’t get caught out – these things are never timed conveniently!
Rent increases
A commercial building lease will often be for a long period of time – but will have in built checkpoints during the term where the rent, among other details, is reviewed. We can’t speak to your own unique lease agreement, but like the responsibility for repair issues, you need to understand how rent increases are going to be handled in the future.
The more information on this in your lease, the better prepared financially you can be for increases to the rent.
Insurance
Insurance is a fact of life for all businesses – especially those with a physical location. Businesses can have a number of different insurance policies in place including liability, property damage, equipment theft, breakages, business interruption, cyber attacks – the list goes on. Business insurance comes with premiums you need to pay. We’re not insurance advisors, so you should talk to a broker/advisor and insure your business in the ways it requires.
Premiums can go up, and if you need to claim there’ll often be an excess to pay. Being prepared for this in your operating budget is simply a must.
Body corp, rates and other passed-on costs
The costs of operating a building – not just your workspace, but the entire commercial property, may be passed on to you as the tenant to cover. The body corporate who is in charge of managing the building will have fees to help them do this. This money may be used for maintaining communal facilities like elevators, repairing or improving the exterior, and contributing to building-wide insurance premiums.
The rates associated with a building may also be charged to you as a tenant (or maybe paid for by the landlord and then reimbursed by you). Once again, you need to be very clear about what your lease agreement expects from you as the tenant vs the landlord’s own responsibilities.
Staff costs
Your people are central to making your business thrive. In order to attract and keep the right employees, you’ll need to offer competitive pay along with a good working environment. The cost to a business of staff isn’t just in the pay however, with operating overheads such as power, lighting, supplies and equipment all factoring in.
Expect the value from staff to increase during their tenure. You should budget for pay increases over this time as your people will become more desirable in the market and could be attracted to other opportunities.
You might have heard this before, but it’s worth saying again – hiring brand new staff to replace lost employees is more expensive than retaining them instead (such as with better benefits or pay). If you’ve trained a staff member who has good experience and confidence in the role, you will need to spend quite a bit more to hire someone in the market with equivalent abilities.
If you’re looking for ways to reduce ‘staff’ costs, put your attention to things like optimising your group mobile phone plan, reviewing travel providers to find the best deal, reducing unneeded software subscriptions and other areas where the employee won’t necessarily feel it in their own pocket or parts of the job that really matter to them. The best way to reduce staff costs is retention. Make your business somewhere your people love to come to every day.
Kitchen and bathroom supplies
Individually, a weekly snack run, a toilet paper restock or the coffee pods don’t seem like much of a cost to your business. But these perishables need to be replaced frequently. If you spend just $30 a week for some Friday team nibbles, that’s $1,560 a year. We’re the last ones who would ever recommend against enjoying coffee or snacks, but you should make sure this is budgeted for in your planning.
If you do some shopping around, you may find bulk deals on some of these supplies. Toilet paper bought regularly in small packets will cost your business a lot more vs a bulk office order. Both the bathroom and kitchen will need cleaning supplies, too. Even with commercial cleaners coming in throughout the week nights, day-to-day mess is never far away in a busy office.
Speak with the local supermarket and office supply company to work out a deal on your kitchen and bathroom needs. The savings are worth it.
Increased power consumption
The electricity the workplace needs to run won’t stay the same, especially if you’re looking to grow. Depending on the business, your power could go up due to more staff putting demand on communal areas, the use of equipment increasing, and seasonal changes needing more aggressive temperature control. Remember, as the employer you want to provide a comfortable, dry working environment – so be ready for winter!
We’ve got an entire section dedicated to saving power at work – head over to this guide now if you and your team are interested in reducing your usage.
Emergency budget
Once you’ve budgeted for the forecasted costs, build in a layer for surprises. Your financial controller, business advisors and accountant will be able to help you figure out how much this should be. Being well prepared for operating costs will mean your business doesn’t have to make tough decisions down the road.