Internal Tool Building

The more I build internal tools to help automate our processes here at Coalition and bring greater efficiency to our clients and employees, the more areas I see that I can improve! I now have probably a year of programming work… probably need to hire another developer to work with me on these improvements.

Landlord Lease Buyout – My Initial Offer

My landlord wants to buy me out of the awesome lease I have. Their goal is to redevelop the whole massive property into a booming retail & residential & office complex that will multiply their square footage as well as what they charge per square foot. I spent a year hunting hard to find the best possible office space for my company with the most long term benefits. The landlord stopped by today and had a conversation with me about all of this. Here is my opening thoughts to him on what the lease buyout could be structured like. What do you think? Also, I included his initial response.

Name changed for privacy:

<Landlord’s name>,

I really enjoyed our meeting today! It was by far the best start to a relationship we have had with anyone representing <Landlord Company> so far. Being pressured by other <Landlord Company> employees in the past to leave my lease was very unpleasant. I think we will be able to figure out something that is fair and makes sense for both of our businesses so you can get a much better use out of the property here. It’s much better to work as allies than the other options.

I understand that you are thinking it will probably be 18 months till you want to break ground and begin the redevelopment. I mentioned it took me 12 months to find this place, so the sooner we get a plan of action together, the easier I think everything will go.
Building a new residential / retail complex and rebuilding our office building should be highly profitable for <Landlord Company>. You can multiply the square footage available for rent while also greatly increasing the rent per square foot. The increased property value will be many millions of dollars.
My thoughts on Coalition’s cost / compensation factors for exiting our lease:
  • We took possession of the property in April 2014 and the lease runs through to April 2024 I believe. We have a little over 7 years left. Approximately 87 months left on our lease I believe. It sounds like you guys would like to begin construction perhaps when we have about 70 months left on the lease, so you would like us out before then? We currently pay something like $2.10 per sq ft. A comparable space will probably cost us $4-6 per sq ft per month. (estimate: $4.50 – $2.10 * 70 months *5000 sq ft = $840k)
  • We also have the expense of the disruption to our business:
    • Probably a couple of months of lost revenue from the time and effort and downtime and distraction of moving (estimate: monthly revenue of $250k * 2 = $500k)
    • Changing all of our marketing & sales & advertising materials ($30k)
    • Informing all of our clients and employees and prospects (??)
    • Losing employees who don’t want to move to the new location (anticipate 20% staff losses of in office people with related expenses) (estimate – we have 20 employees, based on my experience last time I would lose 4-5. Cost of recruiting 4 * 20k = $80k)
    • Losing clients from the distraction of the move / clients who like being in close proximity / etc (estimate: based on last time we lost 5-10% from the disruptions .. included probably in the first bullet with lost revenue)
    • Paying contractors / construction to build out the new space ($50k?)
    • New furnishings / desks / chairs / decorations / art in the new office ($40-60k?)
    • Breaking our multiyear contract with the fiber provider (not sure)
    • Loss of easy access to the metro station which was a major reason in why we selected this location – makes us much more attractive by removing the commute from lots of areas of the city (not sure)
    • Increased cost of parking in new location. We pay $75 per spot and the local garages were asking $200 when I asked for a spot for new employees. (probably $1k a month over the remainder of the lease = $70k)
    • Loss of easy access to all the local partner companies, as well as the great restaurant and social scene here. (not sure)
    • Moving company expenses & breakage (not sure… $5k?)
Those are just my initial thoughts, I’d need to really analyze it further to see what else can be come up with. Ballpark might be around ~$1.6m. I know in a lot of markets tenants are getting crazy offers based on the landlord’s multi-million dollar gains, but I think we could possibly approach it from the cost to Coalition perspective I outlined above. If we leave, <Landlord Company> gains 70+ months of the entire property renting for far more which would probably put a buyout at several million dollars rather than the number I came to from cost calculations. What do you think?

 

P.S. – Also one factor I forgot to include would be tax implications. Perhaps also legal issues with a less favorable lease?

The landlord’s response:

Joel

I also enjoyed our meeting. Great to know you are a UW guy!

As I said, we have a lot on our plate right now in terms of development and quite honestly don’t know that I can recommend to the family to move forward with everything at once!

We have other tenancies in the buildings that will also be looking for compensation on a move-out.

I will take your notes below in to consideration but at first blush it is higher than I would have anticipated

Lets keep the dialogue open and friendly

All the best

Matt

 

Growing the Business

I just made the decision to send out quite a few job offers. We have had a lot of great applicants recently and I am hoping Coalition continues to grow strongly in the first quarter. We will definitely have a very robust team to service all of our clients! I am anticipating growing my team 20% in the next couple of months.

The Programming CEO

A CEO who knows how to program has superpowers over those CEO’s who don’t. The fundamental job of every CEO of a company with over a couple of dozen employees is to structure the company so that it runs efficiently and well. A lot of this is building systems and processes so that your employees know what to do and your customers know what to expect and for you to make sure that quality stays high. A CEO who can program can build customized tools for his or her own business that can help it leapfrog the competition. That is what I am trying to do with Coalition.

Operations Management

I have spent most of the last four years working in Operations Management for Coalition. Basically, I am trying to make sure that all of the promises we make to our clients are fulfilled. The single biggest area for me for a long time was recruiting. Recruiting continues to be a major time commitment for me most workdays. I also am building tools to help support our teams workflows and make sure that the right items get worked on for each client. For my business, having excellent team members who are well trained and understand what priorities need to be worked on is pretty much the whole of what I am responsible to deliver.

Hiring

I have had about 19,000 applicants apply to work at Coalition over the last year. About half of that number have taken my skills test. We have hired probably 70-80 people. I think we have one of the most stringent and effective recruiting processes of any company I have seen; certainly far superior to traditional outsourced recruiting. We have a truly awesome team now.

Todo management application

I have been building an internal todo management application for Coalition. The key difference between my todo application and others out there is that it has automatically sortable priority lists by client and by user that synchronizes across multiple users and multiple clients. I am also tracking a user activity log and going to sync it with Basecamp. Hopefully it helps my team focus on their top priorities better.

Process Aging & Updating Processes

It’s amazing how quickly time goes by. The last time I updated our “Company History” document was two years ago… feels like I just updated it yesterday. We have created 390 GB and hundreds of thousands of tracking, process, and other docs on our Google Drive. Some of these have aged and need updating. I spent all day yesterday updating our primary processes we use for running the company and I still have a lot left to do. For core processes we do over and over again for clients, I am building Laravel web applications for managing these going forward so all of the data can be stored and managed in one place.

Coalition Site Redesign

I have been working for quite some time on Coalition’s own site redesign. Our current site is actually pretty solid, so to make a major improvement worth pushing live we need to really push the envelope. I am currently thinking about how we can improve the design look & feel, implement incredibly fast page load speeds, and increase our conversion rate. I think we are getting closer to where we need to be.