Wine shop owner learns to select landlords with care

You can be in business for 30 years and still have so much to learn. I put way too much emphasis on thinking that you could be successful through your own good works and acumen.

That's important. But it's only part of the equation.

I didn't have a business background when I bought my first wine and liquor store. I decided to get a doctorate in art history after I started working at Shaker Square Beverages in 1979. Five years later, I bought the 40-year-old business. In the next four years I opened stores in Cleveland Heights, Kent and downtown.

For a long time, business was good. But in 2000, things began to change, and change rapidly. In the last year, I've sold or closed three stores. You can do the best you can to run your business, but your biggest advocate or nemesis is the landlord.

 Plain Dealer reporter Marcia Pledger writes this weekly feature about the obstacles small business owners must overcome.

To reach her:
mpledger@plaind.com or 216-999-4813

More "My Biggest Mistake" featuresMy biggest mistake was thinking that you could control the destiny of your business by running a good business. For me, success for 20 years came from paying my bills, doing a great job at marketing and striving for phenomenal customer service. But things generally change when landlords and neighboring tenants change.

For instance, at the downtown location, I was working on building out a larger space after operating a wine and coffee shop in the same building for 20 years. I was able to get out of a newly signed lease when I learned a major new tenant decided not to move in and building occupancy decreased severely. Issues generally aren't resolved that easily, especially when property is sold to various owners throughout the years.

There are so many issues that affect the success of your business, including things you can't control. Sometimes leases are only as good as the paper they're written on. It's up to the integrity of landlords and tenants to make sure they agree and understand what things mean.

I owned another store for 40 years, and it was quite lucrative for a long time. But rent tripled in 10 years. At one point, in order to extend the lease for five years, a new owner increased rent $1 a foot every year. Adding about $4,500 a year sounds manageable. But after 10 years, that's $50,000 in extra costs. A landlord assumes that your business will continue to grow. Vacancies are not included in that assumption. You're locked into higher rent, with less drawing power. And a rise in rent, it doesn't include other charges, like common area maintenance fees.

Some landlords believe that all that they have to do is provide you space. It's strictly a business for them. But they should have a fiduciary responsibility to help you succeed. So many things can affect your business, including the types of neighboring tenants, parking availability and lack of snowplowing. If landlords don't do their job adequately, it's a sure mark of failure, and you will be the one who fails. If you sign a 10-year lease and after five years, through no fault of your own, business goes down, you're still technically responsible for the remainder of the lease.

It took a long time for me to learn how much outside factors affect your business. I used to think that I could do it alone. But it's not a good approach. Not only do you need a good lawyer to raise red flags before you sign a lease, you should talk to tenants. Ask questions like: What's this guy like? Is he a sweetheart or the devil incarnate? Is it a local or an out-of-state owner?

I didn't realize how important it was to go to city hall and talk to development directors off the record. Even small things like checking out a landlord's Web page can help. You can find out if the owner is the face of the company or if there are a lot of gatekeepers. You need to know who you can go to if you have a problem, before you sign a lease.

There are several facets to running a successful business. But you also have to realize you're in partnership with many faceless entities that have a direct effect on your company. Protect yourself as best as you can.