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Top Mistakes To Avoid When Signing A Lease Agreement For Your Business. A Few Missteps During Lease Negotiations Can Easily Put You Out Of Business

Jacob Healy felt pretty confident negotiating a lease for a second Toronto location of his Golden Gecko Coffee concept, so much so he didn’t bother getting a lawyer involved.

“The lease on my first store on Jane Street was very detailed and about 20 pages in long,” he said. “At the time, I thought it was painful and excessive, and was so iron clad and detailed it left no room for negotiations.”

As a result of that experience, Healy was thrilled when the lease he was presented with for the new location was much shorter.

“The terms were loose, and there weren’t a lot of details,” he said. “I remember thinking this is pretty amazing.”

In hindsight, that was a mistake.

“The killer was that I didn’t double check what was reasonable for that neighbourhood,” Healy said. “The location wasn’t right on Bloor, but I was being charged Bloor Street rates.”

Another problem was that after signing the lease, the landlord decided to rent out the basement space that had been promised to him.

“The initial offer had the basement in there. After the fact, it was removed and I didn’t notice that,” Healy said. “What I ended up getting for the dollar value didn’t add up anymore.”

Healy was fortunate that he and the landlord came to an amicable parting of the ways.

“We discussed what would be fair and reasonable, so I paid three months in advance and called it quits.”

But the experience has not stopped Healy from considering another project.

“I will do it again, but definitely the way I did the first lease,” he said. “I learned a lot from this whole experience.”

Not every small business owner can negotiate their way out of such a situation like Healy did. In many cases, a few missteps during lease negotiations can easily put you out of business.

A big error is overlooking any differences between the offer to lease and the actual lease agreement, said Olivier Fuldauer, a lawyer at Aarbo Fuldauer LLP in Calgary.

“A lot of times you end up signing a one- or two-page offer to lease before you sign the 30- to 40-page document,” he said.

The offer should have essential information on basics such as lease terms, operating costs, personal guarantees and tenant and landlord improvements.

“You need to make sure that when you sign the lease, that information is the same,” Fuldauer said. “It’s easy to overlook things, because lease agreements can be mind bogglingly complicated and boring.”

He also advises carefully reviewing the document for any potential additions, such as management fees.

“Really try to examine those and decide if they are appropriate in terms of what they do for that fee, which can run from 10 to 20 per cent,” Fuldauer said. “A mall with 100 tenants absolutely needs management services. But I’ve seen charges for a building with one or two tenants and the landlord basically does nothing.”

Another piece of advice is to file a caveat that alerts any future buyers of the building of the lease.

“If you don’t file a caveat to put future buyers on notice, then you don’t have a lease with the new owner and could get kicked out,” he said.

Other factors to review are subletting and assignment rights subject to the landlord’s approval.

“If you might sell or move your business other than when the lease term ends, you want that in there,” Fuldauer said. “Be clear on what the conditions are for approval.”

Depending on the demand in an area, he said, businesses might be able to negotiate a free period at the start of the lease, especially if landlords think they need an incentive to attract tenants or get them to sign a longer lease.

Another possible negotiating point is tenant improvement budgets.

“When entering an initial lease or renewal, it’s always worth asking to see if the landlord will contribute to some of those improvements to the property,” Fuldauer. “After all, they will belong to the landlord when they’re done.”

One thing is certain: doing the due diligence on a lease can save startups considerable grief over the long term, even though it may seem overwhelming.

“Your negotiating power is severely curtailed once you sign that commercial lease agreement,” Fuldauer said. “So it’s important to consult with lawyers before you sign, because there’s a lot of money on the line.”

Financial Post




Being an entrepreneur can be mentally taxing. In June, the Canadian Mental Health Association produced a report with statistics that confirmed what I, unfortunately, already knew to be true.

Nearly half of the entrepreneurs interviewed in the study experienced low mood or felt mentally tired at least once a week, while three in five (62%) felt depressed at least once a week. Nearly one in two felt that mental health issues interfered with their ability to work.

To me, these are more than just numbers. I was the one in two when I owned my company and to be frank, it almost killed me.

In February of 2015, nearly 10 years after starting my company, I woke up one morning to a crushing weight on my chest. My back and shoulders were on fire — it felt like my skin was going to peel away from itself — and I could barely get out of bed. A series of negative business-related events, combined with a divorce, had floored me. The 10+ hour days and lack of self-care had caught up to me. In short, I was burnt out beyond belief.

The days that followed were messy and blurry but I remember trying to pretend like everything was fine and maintain my strong, heroine-like persona. That didn’t last long. One night, after having dinner with my family, I drove myself to a walk-in clinic and told the receptionist that I needed to see a doctor immediately or I might not make it through the night. It was one of the scariest moments in my entire life — I teetered gingerly on the edge of life and death and thought there was only one way out of my burnout and stress.

As I began to seek out various treatment options to get through this period of burnout and depression, I came to the stark realization that there are very few support frameworks in place for entrepreneurs who are suffering from mental health issues. There is no paid leave, no paid sick days and most clients won’t wait around for you to get your life together — they have businesses to run, too.

When my doctor would suggest taking time off, I’d get more stressed out thinking about the bills I needed to pay as a newly single mother. When they suggested I do therapy, I had no idea where I’d get the time to do that while I was also trying to keep my clients happy and ensure my life kept chugging forward. The suggested solutions felt misaligned to what I needed. The other challenge was reconciling the new version of myself.

As an entrepreneur, you wrap a lot of your identity around being a founder. The company you run, being productive, creating solutions for customers, shipping a product – these are all things that become the fabric of what makes you, you. Depression made me believe that the strong, confident, can-do-anything person I thought I was simply a farce. I felt like a fraud and carried doubt, fear, frustration, confusion and vulnerability with me, daily.

In the June study, it notes: “Both popular and academic discussions tend to favour a romantic view of entrepreneurs as heroes, visionaries and pioneers, leaving little room for discussions around their vulnerability.” This couldn’t be more true to my own experience.

In my own article, which I shared on shortly after opening up to the world about my experiences, I shared this: “We live in a society that values fortitude and optimism and business owners must have both in abundance. We have been taught that the weak do not rise to the top and as a result, we have become extremely well-versed in ‘impression management.’ We stuff our vulnerabilities down under the sheets knowing full well that there is only one place for them — hidden and out of sight.”

The silence we maintain around struggle, especially as an entrepreneur, needs to be lifted. We need to speak out.

We founders and mental health organizations also need to find better ways to support entrepreneurs who are in crisis due to stress, anxiety and overwhelm. We need to find a way to reduce the stigma so that entrepreneurs don’t feel silenced. I’m fortunate that I survived and made it through – but that’s not the case for many and we need to figure out how to ensure that we’re doing better for our founders.

The report suggested a few recommendations, based on the findings, which included: developing flexible and relevant mental health support for entrepreneurs; creating tools to help entrepreneurs achieve better work-life balance; strengthening research around entrepreneurial mental health; shifting the popular view of entrepreneurs and entrepreneurship; and including mental health in entrepreneurship education.

Given my own experience with entrepreneurial burnout and depression, I couldn’t agree more with these points – particularly the first point around flexible and relevant support for entrepreneurs. The current framework around mental health support isn’t set up in a way that many self-employed people, especially contractors, consultants or solopreneurs, can engage with without loss of income or loss of customers.

The other point that feels extremely close to home now that I’m working at a startup accelerator is the last about including mental health in entrepreneurship education. At L-SPARK, we’re actively looking for ways to engage with local mental health professionals who can help arm us with the information, resources and support we need to pass on to our founders in the same way we’d pass on marketing, sales or fundraising support. We also launched an event series called L-SPARK Unplugged, which brings founders together in non-traditional venues to network while doing activities such as bouldering, yoga and hiking.

The role that accelerators and incubators have in the entrepreneurial ecosystem can go far beyond mentoring startups on topics such as investment and sales. We have a unique opportunity to create safe containers for entrepreneurs to connect with other founders and share their struggles. We can also arm our mentors with the tools and resources needed to ensure that, if a founder does come to them with struggles, they are prepared to help.

If you work in an innovation hub of any kind, consider: creating peer groups so that founders can chat one-on-one with other founders; arming your mentors and team with resources that can be referred to, if needed; encourage your founders to practice self-care and disconnect; and ask your community to share their own stories on your blog or social media, if they feel comfortable to do so.

I don’t have all of the answers to how we change the support system for entrepreneurs but I am feeling extremely inspired by organizations like Canadian Mental Health Association who are researching this topic, producing these reports and starting the conversation. I’m grateful that there’s light being shone on this shadowy side of entrepreneurship and I’m encouraged to continue forward with the work we’re doing around mental health in the accelerator.

As I continue to share my own story and create as many containers for this tough-but-needed conversation in the entrepreneurial circles I find myself in, I’m hoping that you’ll look for ways to do the same – because you just never know when a single conversation will save someone’s life.

Re-Blogged from: The Canadian Business Journal