Want to save money on rent and other fixed costs?

Fixed costs occupied my thoughts during the crisis in 2012. A business I worked with wanted to save on rent, and its negotiation with the landlord prompted this video.

Fixed costs and a specific rent negotiation

The business found cheaper premises and gave notice on its existing lease. The landlord wanted to discuss the possibility of it staying.

I say the negotiation ended with a rent reduction of around 40 per cent. That’s my account of this particular case, not a promise of savings on other leases.

I had a sense there were lots of vacant commercial premises. I also say in the video that this assessment was based on what I heard and saw, not a documented market survey.

A cheaper address came at a price too

I wanted people to consider whether they needed all the space and the address they were paying for. You’ll find more of my experiences of running a business in Iværksætter til jeg dør.

But moving wasn’t free. Internet, refurbishment and the move itself could cost money too. That was part of the consideration.

Empty desks and other bills

I discuss the possibility of sharing an office with others. At Amino, we had businesses working alongside us that also inspired us and helped with things they were good at.

I also suggested setting aside time to go through the bills one by one. Lots of small amounts could add up in the business’s finances.

Prices, expected savings and information about Amino Lokalebørs in the recording date from June 2012. The story describes my example and thoughts back then, not current rents or subletting rights.

Fixed costs keep running

If you’re an entrepreneur or business owner already renting premises, rent is one of the fixed costs you notice. In June 2012, I mentioned that even a place in a shared office could cost DKK 2,500–3,000 a month. That money comes off the bottom line. And when revenue falls in a crisis, rent doesn’t necessarily fall with it.

I worked with a business that was having a slightly difficult time financially and wanted to save on premises. We found cheaper premises nearby, and the business gave notice on its existing lease. It hadn’t yet committed to the new place. Then the landlord was there straight away: Couldn’t they have a chat about it?

They ended up getting the rent reduced by around 40 per cent. I recalled a change from approximately DKK 1,050 per square metre to DKK 650. They’d paid the initial rate for years without seriously considering whether it could be different. For me, the story was a reminder that a crisis could also be a reason to negotiate expenses you’d otherwise simply paid.

I had a gut feeling there were lots of vacant commercial premises because businesses were closing or downsizing. I also said directly that I didn’t have a survey to base that on. It was what I heard and saw around me.

Research the price and think about what you really need

My first suggestion was to contact the landlord and ask for a better price. At Amino Lokalebørs, we were building a feature where you could enter your postcode and see prices per square metre in the area. It was tucked away at the side because the figures were still being calibrated. I called it a beta version that wasn’t working one hundred per cent yet.

The idea was to have something to compare with. If the landlord wouldn’t adjust, you could consider whether you needed less space or different premises. I was particularly critical of paying for a prestigious address if customers didn’t visit and the address therefore wasn’t important to the business.

I used a rough example of DKK 1,200 per square metre versus perhaps DKK 500–600 somewhere else. You paid that money regardless of revenue. You could indulge in that sort of thing when business was good. During the crisis, I thought it was wasted money if the address didn’t provide equivalent value.

Moving costs money too

You have to move the internet connection, perhaps paint when moving out, sort out the new premises and pay movers. That can be a big expense precisely when you’re trying to save. So moving wasn’t the only option I had in mind.

If you had spare space, perhaps you could rent some of it out. It didn’t have to be many square metres; a single desk could be enough. If you’d had to downsize or lay off employees, perhaps there was already a desk another entrepreneur could use.

Other businesses can bring both income and inspiration

At Amino, several businesses worked alongside us for free because they inspired us. I mentioned the Webjuice guys, who were good at search engine optimisation and Google Analytics. I wasn’t an expert in those myself. When we had problems, they helped a little, and we helped them with other little things. Both parties benefited.

You didn’t have to do it for free. I mentioned DKK 1,000–2,500 for a desk as an example back then. There could also be a lunch arrangement and internet with shared costs. That way, a couple of places could help cover some of your fixed expenses.

At Amino Lokalebørs, you could then post a free advert for an office space. You could describe the internet, desk and other things already there. For an entrepreneur, it could be a solution ready to move into.

You also needed to find the right person. If the office was quiet, someone doing telesales all day might not be who you should bring in. Write what you’re looking for and invite some candidates for a conversation. My point was to think creatively about the space you were already paying for.

Take a day with the bills

The same thinking could apply to the bank, insurance and broadband. Were you paying more interest than necessary? When had you last asked the insurance company whether it could be cheaper? Did existing customers benefit from prices being reduced?

I suggested taking a day out of your calendar and going through the bills one by one. Research the market and look for small savings: DKK 50, DKK 100, DKK 200 or DKK 500 a month. I wouldn’t be surprised if they added up to a couple of thousand kroner without sacrificing comfort or revenue. That was encouragement to investigate the possibilities, not a guaranteed result.

My calculation was simple: If one day’s work saved DKK 2,000 a month, that was DKK 24,000 over the next year. I thought that was quite a lot of money. And perhaps you could find more. So I wouldn’t just let expenses carry on while complaining about the crisis.

Also read about my concerns about bank financing in 2011.

The original reference led to Amino Lokalebørs. Information about prices and features in the video dates from 2012.

Best wishes, Martin

Historical reference from 2012: Here I linked to an interview with Henrik Valentin about insurance in Sydney. The original interview page cannot be opened at the time of this review.