Negotiating the Rental Rate – For Chiropractic Tenants

August 16th, 2017 - Jeff Grandfield and Dale Willerton – The Lease Coach
Categories:   Chiropractic  
0 Votes - Sign in to vote or comment.

As we explain in our new book, Negotiating Commercial Leases & Renewals FOR DUMMIES, your rent is typically one of your major business expenses – often second only to salaries. Consider that your rental rate can also be a major factor if and when you retire and sell your practice. Prospective buyers may hesitate to take over your practice as they may be scared off by the high rent and increased overhead.

Never underestimate the importance of getting a commercial property at the right rental rate. Rent can make or break your practice. If you’re struggling to pay your rent, there are two possibilities: either your rent is too high or your patient load is too low.

You can’t negotiate your rent until you have some idea of what you can afford to pay. This would seem to be a basic business tenet, but it’s one that many chiropractors neglect to figure out. Therefore, it’s important to come up with a figure that won’t eat up too much of your business profits.

A general rent range figure, encompassing all industries, is that tenants should budget to pay between 5 – 12 percent of their gross sales in rent (provided their sales volume is high enough). Naturally, the exact number varies from industry to industry, depending on the type of product or services you’re selling from the premises.

The landlord doesn’t generally set the rental rate based on what they think tenants can afford to pay. It’s your job to figure that out. If you’re a start-up chiropractic tenant, you should have a business plan or sales volume figure in mind that you expect to achieve in any particular location. The amount of patients you see can vary depending on the location. Being realistic about your rental budget begins with being realistic about your area and how much space you lease.

Current chiropractic tenants need to remain realistic about their rent as well. If your yearly gross sales are $800,000, and you don’t want to pay more than 8 percent of your gross revenue on rent, then, mathematically, you can only afford to pay $64,000 per year in gross rent. If the gross rent you’re looking at is at double that figure, there’s no realistic reason for you to expect that you can magically come up with that extra money from further patients.

 

We often see tenants who get into trouble by agreeing to pay a rental rate within a property or plaza where their location is inferior to other units. End cap tenants with a high visibility to the street and parking lot often pay the highest rental rates. If your premises are at the elbow of a plaza with side exposure (instead of front exposure), you need to examine that closely and determine how it might affect your patient load. A bigger space doesn’t always equate into higher sales on an equal scale basis; remember the old adage: location, location, location.

Landlords anticipate that the cost of living or Consumer Price Index (CPI) may increase over time, and it usually does. By its simplest definition, this is called inflation. Therefore, the landlord wants to build steps, or annual increases, into a tenant’s 5- or 10-year lease term. This may be stated as a rent per square foot (such as $25.00 per square foot the first year with a $1.00 per square foot increase each year thereafter). Many lease agreements state that the annual rent increase may be calculated as a percentile factor.

On a final note, commercial space isn’t the only thing that your landlord may charge you to rent. You may also be charged for signage, parking, a marketing fund, or extra storage. Not all lease agreements disclose that there’s an additional charge for these items, so don’t assume that you can get these items, so don’t assume that you can get these things for free, or even at all.

 

For a copy of our free CD, Leasing Do’s & Don’ts for Chiro Tenants, please e-mail your request to JeffGrandfield@TheLeaseCoach.com.

 

 

Dale Willerton and Jeff Grandfield - The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Dale and Jeff are professional speakers and co-authors of Negotiating Commercial Leases & Renewals FOR DUMMIES (Wiley, 2013). Got a leasing question? Need help with your new lease or renewal? Call 1-800-738-9202, e-mail DaleWillerton@TheLeaseCoach.com or visit www.TheLeaseCoach.com.

###

Questions, comments?

If you have questions or comments about this article please contact us.  Comments that provide additional related information may be added here by our Editors.


Latest articles:  (any category)

Why is HIPAA So Important?
October 11th, 2019 - Namas
Why is HIPAA So Important? Some may think that what they do to protect patient information may be a bit extreme. Others in specialty medical fields and research understand its importance a little more. Most of that importance lies in the information being protected. Every patient has a unique set of ...
Eliminating Consultation Codes?
October 10th, 2019 - Chris Woolstenhulme, QCC, CMCS, CPC, CMRS
There are a few payers that have joined with CMS in discontinuing payment for consultation codes. Most recently, Cigna stated that, as of October 19, 2019, they will implement a new policy to deny the following consultation codes: 99241, 99242, 99243, 99244, 99245, 99251, 99252, 99253, 99254 and 99255. United Healthcare announced they ...
Hypertension & ICD-10
October 7th, 2019 - Raquel Shumway
Hypertensive Diseases and ICD-10. Helps and examples for these codes.
CMS and HHS Tighten Enrollment Rules and Increase Penalties
October 1st, 2019 - Wyn Staheli, Director of Research
This ruling impacts what providers and suppliers are required to disclose to be considered eligible to participate in Medicare, Medicaid, and Children's Health Insurance Program (CHIP). The original proposed rule came out in 2016 and this final rule will go into effect on November 4, 2019. There have been known problems ...
Federal Workers Compensation Information
October 1st, 2019 - Wyn Staheli, Director of Research
When federal employees sustain work-related injuries, it does not go through state workers compensation insurance. You must be an enrolled provider to provide services or supplies. The following are some recommended links for additional information about this program. Division of Federal Employees' Compensation (DFEC) website Division of Federal Employees' Compensation (DFEC) provider ...
2020 Official ICD-10-CM Coding Guideline Changes Are Here!
October 1st, 2019 - Wyn Staheli, Director of Research
It’s that time of year for offices to get ready for the ICD-10-CM code revisions. As part of that process, it’s also good to know what is going on with the ICD-10-CM Official Guidelines for Coding and Reporting. In the examples listed below, strikeout text is deleted and highlighted text ...
The New ICD-10-CM Code Updates Are Here — Are You Ready?
October 1st, 2019 - Aimee Wilcox, CPMA, CCS-P, CST, MA, MT, Director of Content
Chapter 1: Certain Infectious and Parasitic Diseases (A00-B99) A small revision in the description changed[STEC] to (STEC) for B96.21, B96.22, B96.23. Remember, in the instructional guidelines, ( ) parentheses enclose supplementary words not included in the description (or not) and [ ] brackets enclose synonyms, alternative wording, or explanatory phrases. Chapter 2: ...



About Codapedia by InnoviHealth Systems Contact Us Terms of Use Privacy Policy Advertise with Us

Codapedia™ by InnoviHealth Systems™ - 62 E 300 North, Spanish Fork, UT 84660 - Phone 801-770-4203 (9-5 Mountain) - Fax (801) 770-4428

Copyright © 2009-2019 Find A Code, LLC - CPT® copyright American Medical Association