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Generating income from buildings

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A guide to using your premises for additional income.

If your organisation owns or holds a long lease on your premises, you may have thought about turning this into a trading opportunity.

Buildings can be a valuable asset, but they can also be a liability if they are costly to run and don’t suit your purposes. Here are some tips to help you think about how to get the most out of your building.

What could you use your building for?

There are lots of ways that voluntary organisations can make money from their buildings. These include:

  • hiring out rooms to other businesses for meetings or training
  • subletting office space to other organisations
  • hosting ticketed events and training related to their mission
  • providing a full conference service (room hire, catering, stationery, audio-visual equipment)
  • running a shop or cafe
  • hosting an office hub or co-working space (hiring out desks to small businesses and providing full IT services)
  • letting the building out as a film location.

Options appraisal

Start by mapping out all your options, and setting some criteria to allow you score and critique the options, and their advantages and disadvantages. Criteria might include:

  • level of existing income
  • potential for future income
  • number of new trading opportunities created
  • impact on mission and beneficiaries
  • impact on local economy/environment
  • cost to deliver
  • ongoing costs and overheads
  • level of risk and liability
  • reputational impact.

Gathering as much information as possible will help you to assess each of the options effectively. The Prince’s Regeneration Trust has some useful guides on making a building sustainable. For example, the trust’s guide How to Make the Case for your Business Project contains useful information on appraisals.

What do we need to think about?

Legal requirements

You need to check that you’re legally allowed to use the building for the purpose you’ve chosen. Check with your local authority, and find out whether you’ll need any additional health and safety checks or insurance.

Your mission

Make sure that your own governing documents allow you to carry out the activity. You may want to set up a separate trading company in order to offer services that are not within your mission.

Think about how the new service will affect your mission. Will it complement or conflict with your existing activities? Do you have the time and resources to manage the new services without drawing resources away from ‘on-mission’ activities?

Viability

You’ll need to do some market research to find out whether there is actually a demand for the service you’re planning. Read our guidance on trading to get started. Think about what type of service is most appropriate to your mission, the location and the premises. You may be in a beautiful building, but if there is no passing trade, a cafe may not get the level of customers you need to make it profitable. If you’re thinking about hiring out rooms, you’ll need a good concentration of businesses or other organisations within the local area that don’t have access to their own facilities.

Do some ‘mystery shopping’ of similar facilities to see what they offer and how much they charge.

Cost

Get as much information as you can about the costs associated with running the service. This will include:

  • Staffing – think about how long you want the building to be open for and how you will staff it during those hours. Volunteers can be useful but you may need at least one employed person to make sure that the building can be opened and closed at consistent times. You’ll also need someone to manage customers, suppliers and the facility itself.
  • Utilities – how will your energy bills change when you are using the building for additional purposes? How will you pass this cost onto the customer?
  • Insurance – you may need additional insurance, such as building and contents insurance, or public liability insurance if you are hosting events.
  • Health and safety checks – you will need to pay for regular checks, such as gas safety and electrical checks.
  • IT – if you’re offering a fully-equipped office facility or conference space, you’ll need to invest in high quality IT services, such a wifi, keyboards and screens, or an online booking system.
  • Catering – if you’re running a café, you’ll need a professional quality kitchen. Even for office or room hire, customers may expect access to a kitchen.
  • Accessibility – your building must comply with the Disability Discrimination Act regulations. You need to ensure that all potential users of the building have access to the building, including toilets or other essential facilities. If you are providing audio-visual facilities, you may want to include additional facilities for people with hearing or visual impairments.
  • Marketing – you’ll need to promote your new service, possibly to a customer group that you haven’t worked with before.
  • Security – depending on what stock or equipment you have, you may need to invest in new security measures, such as alarms or additional safes, locks or security doors.
  • Repairs and maintenance - setting aside some of your budget for longer term repairs and maintenance will ensure you don’t run into trouble.

Quality

Your building may not currently be suited to the purpose that you intend to use it for. If you are using it as an office space, but want to add in a cafe facility, think about what customers will expect from that space. They may want somewhere that is clean and comfortable; a place to relax or to work quietly. They will expect decent, clean toilets and possibly baby-changing facilities. They might need car parking.

This might be different to the office space that you are used to, so you’ll need to spend some money on upgrading.

Reducing risk

One way to reduce risk is to do some market testing. Trial a basic version of your service before investing in the new facilities. Find out what customers value about the service, and what they would change. Read more about market testing on a budget .

You could also share the risk. For example, if you want to run a shop unit, could you lease out some of the space to other organisations? If you aren’t confident that you’ll be able to maintain a high level of stock, you could lease out space in the shop to other relevant, local producers for a monthly rent. This means you are guaranteed income, while the sales risk is passed onto them. They get the benefit of having a shop space without the overheads.

Another way to reduce risk is to offer a membership or direct debit payment scheme, where users of the facilities sign up to a regular monthly subscription. This makes it easier to forecast your income and can help you build longer-term relationships with your customers.

Skills

You may need to recruit new staff to manage your new service. Your staff may be brilliant project managers, but terrible at making coffee. Don’t assume that you can use your current staff in your new facility.

A note on community cafes

There are many successful community or social enterprise cafes in the UK. However, there are probably just as many that have failed or need to be subsidised. Cafes can be seen as an easy way to make money from an under-used space. However, customers tend to have higher expectations of cafes these days – they want proper coffee made in a professional coffee machine, and food made on the premises.

Food retail is an incredibly competitive and difficult industry to be successful in. Don’t rely on your customers’ philanthropic nature – most customers will come to you because you have good coffee, not because you have a social mission (though you can use the coffee to help them learn about your mission). In most high streets, there will be a choice of cafes, so make sure yours stands up to the competition in terms of quality, experience and price.

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Page last edited Mar 29, 2017

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