It seems like a good financial move to buy commercial real estate to house your business if you can afford it.
After all, your rent might be one of your largest expenses. Shouldn’t you use it to build equity instead of just throwing it away?
And yet, what I’ve learned from experts is that the opportunity cost of buying a building may be way too high. I saw this for myself when the building I was leasing went up for sale for a million dollars.
I realized two things:
1. If I were in a position to spend a million dollars on a piece of real estate, I wouldn’t want to spend it on this real estate.
2. I didn’t necessarily want to be a landlord, even for my own business.
Trying to bundle a building alongside my business didn’t make good financial or logistical sense. I’d be unwittingly getting into the real estate business, and my life was already complicated enough. PASS.
This kind of “bundling” makes decisions complicated. It distorts our ability to assess value and muddies our intent. We might think we’re giving ourselves a great deal or being efficient, but ironically, we are probably setting ourselves up to get less of what we want.
Why? Well, you might be able to cultivate a tomato that’s great-tasting and cold hardy, but you might have to let go of the possibility of strong branches, richly colored fruit, and plentiful blossoms. It might not be great in salads and pasta sauce.
In other words, you can theoretically have anything, but you can’t have everything. Not all in one and all at once. It’s better to choose what’s most important to you and optimize for that characteristic.
I talk to a lot of people who are keenly interested in launching a new business. The problem is, they want the business to be financially rewarding, aesthetically pleasing, environmentally sustainable, deeply fulfilling, and truly unique. They want it to be the truest expression of who they are and what they stand for while also making the world a better place and making lots of money.
As usual, I’m the dream-crusher: This is just way too much to ask of your next business. Attempting to cover all of those bases may slow you down so much that you will feel like you’re not making any progress. Focus on profitability and sustainability, or profitability and fulfillment, and you might find it easier to move forward. Better yet, just try to maximize one thing. That can be hard enough.
It’s hard to accept, but our resources are always limited. That’s part of the magic and the grief of being a human being. Try to have it all, and watch it slip through your fingers. Simplify and prioritize, and you may be pleasantly surprised at how much easier it is to attain your goal. Instead of compromising to try to get a little of everything, you may get what you most need.