At Ansell Ryan Young we believe that taking on new premises is a major business decision that should be based on detailed financial planning rather than enthusiasm alone. Whether you are moving into your first commercial property, expanding into a larger unit or opening another location, the decision can bring opportunities for growth but also significant long-term costs. Before signing a lease, Irish SMEs should complete five essential financial checks to ensure the premises will strengthen the business rather than place unnecessary pressure on cash flow.
1. Calculate the True Cost of the Premises
The monthly rent is only one part of the overall cost. Businesses can find themselves under financial pressure when they budget for the advertised rental figure but fail to account for the additional expenses associated with operating from commercial premises.
Your calculations should include the full cost of occupancy, such as:
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Rent and potential rent increases
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Commercial rates
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Service charges
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Insurance
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Electricity, heating and water
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Cleaning and waste collection
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Security and alarm systems
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Maintenance and repairs
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Broadband and telephone services
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Parking and access costs
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Legal fees and lease-related expenses
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VAT, where applicable
You should also prepare a realistic estimate of the initial fit-out costs. This could include flooring, lighting, furniture, signage, partitions, decoration, IT systems, accessibility works and equipment.
A property that appears affordable based on rent alone may become considerably more expensive when the full cost of occupation is taken into account. Always assess the total annual cost rather than focusing solely on the monthly rent.
2. Stress-Test Your Cash Flow
Taking on premises often requires a substantial financial commitment before the business generates any additional income. You may need to pay a deposit, legal fees, fit-out costs, equipment expenses and moving costs before the new premises are fully operational.
Prepare a detailed cash flow forecast for at least the first 12 months. This should show the new premises costs alongside payroll, supplier payments, loan repayments, tax liabilities, stock purchases and all existing overheads.
It is important to test how the business would cope under less favourable circumstances. Consider what would happen if:
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Sales were lower than forecast
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The fit-out cost exceeded the original budget
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The premises took longer to open than expected
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A major customer was lost
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Trading slowed during a seasonal period
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Utility, insurance or service costs increased
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Additional staff were needed sooner than planned
The business should retain sufficient working capital after paying the upfront costs. If the move would leave the company with little cash available for day-to-day operations, the timing may not be right.
A profitable business can still experience serious difficulties if too much cash is tied up in a property move.
3. Identify How the Premises Will Increase Revenue
New premises should have a clear commercial purpose. Simply having more space or a more prestigious address does not automatically guarantee increased sales.
Consider precisely how the property will support the business. Will it allow you to:
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Serve more customers?
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Increase production capacity?
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Display more products?
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Employ additional staff?
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Introduce new services?
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Improve customer access?
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Benefit from greater footfall?
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Reduce inefficiencies?
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Improve the customer experience?
Try to put a financial value on these benefits. If the premises are expected to increase turnover, calculate how much additional revenue is required to cover the extra costs.
For example, if the total additional monthly cost is €5,000, the business will need to generate enough gross profit to cover that amount. It may need considerably more than €5,000 in additional sales, depending on its gross profit margin.
This break-even calculation is essential. It allows you to assess whether the projected increase in revenue is realistic and whether the premises will genuinely contribute to profitability.
Avoid basing the decision on vague expectations such as “the new location should bring in more business”. Look for evidence through customer demand, market research, existing sales data and realistic capacity projections.
4. Review the Lease Terms and Potential Exit Costs
The lease agreement can have a significant effect on the financial risk of taking on premises. A property with an attractive rent may still be unsuitable if the lease contains restrictive terms or substantial future obligations.
Before signing, carefully review:
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The length of the lease
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Rent review arrangements
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Break clauses
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Repair and maintenance responsibilities
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Insurance requirements
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Service charge provisions
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Restrictions on the permitted use
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Assignment or subletting rights
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Renewal options
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Personal guarantees
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End-of-lease reinstatement obligations
A long lease may provide security, but it can also leave your business committed to substantial costs if trading conditions change. A break clause may provide valuable flexibility, particularly for a growing business whose future space requirements are uncertain.
You should also understand your responsibilities when leaving the premises. Dilapidation and reinstatement costs can be considerable if the property must be returned to a particular condition.
Do not assess the lease based only on the starting rent. The terms and potential exit costs may be just as important as the headline price.
5. Consider Tax, VAT and Funding Implications
The financial impact of taking on premises extends beyond rent and operating costs. The move may affect your tax position, VAT treatment, financing arrangements and future investment plans.
First, consider how the move will be funded. Will you use existing cash reserves, a business loan, asset finance or another funding arrangement? Any borrowing should be assessed carefully alongside current debts and expected future repayments.
You should also establish how VAT will apply to the rent and other property-related costs. The ability to recover VAT will depend on the circumstances of the property and the VAT status of the business.
Fit-out works, equipment, fixtures and fittings may have different accounting and tax treatment from ordinary repairs and running expenses. Keep detailed records of all expenditure and ensure capital costs are properly identified.
Your accountant should also update your financial projections to reflect the move. This should include revised profit and loss forecasts, cash flow projections, balance sheet figures and any additional finance repayments or staffing costs.
The aim is to understand the full financial impact before committing, rather than discovering unexpected costs after the lease has been signed.
Make the Decision Based on Detailed Figures
Taking on new premises can be a positive step for an Irish SME. It may create room for expansion, improve operational efficiency and help the business attract customers or employees. However, it also introduces fixed costs that may remain payable even when sales fall.
By calculating the true cost of occupation, stress-testing cash flow, identifying the revenue opportunity, reviewing the lease and assessing the tax and funding implications, you can make a more informed decision.
The right premises should support the long-term development of the business without putting unnecessary strain on its financial stability.
If you would like to discuss your business, contact us on 0599151932 or email info@ansellryanyoung.ie or visit ansellryanyoung.ie.
Disclaimer: This article is based on publicly available information and is intended for general guidance only. While every effort has been made to ensure accuracy at the time of publication, details may change and errors may occur. This content does not constitute financial, legal or professional advice. Readers should seek appropriate professional guidance before making decisions. Neither the publisher nor the authors accept liability for any loss arising from reliance on this material.
This version keeps the focus on practical financial decision-making for Irish SME owners and uses the requested variables and European spelling.
