New and seasoned retail business owners alike face financial difficulty from time to time. One budget-friendly remedy is to share commercial or retail space with another business owner. You could enter into a co-tenant agreement, which means you would co-sign a commercial lease or mortgage with another retail tenant. Or you could sign a consignment contract, in which a property lessee or owner sublets space to one or more individuals to display and sell their products.

Step 1.

Define your ideal co-tenant. Before entering into a space-sharing agreement, business owners should carefully consider who their ideal co-tenant would be, or which types of products they would be willing to offer space to on a consignment basis.

If you are a new business with a limited start-up budget, sharing space with a co-tenant might be a good option. However, you might not want to enter into an agreement with another business that sells the same type of products as you. If you plan to sell your own clothing line, you might want to steer clear of sharing space with another clothing designer because it might hamper your efforts to establish your brand. Sharing space with a complementary business, such as a jewelry or accessories designer, would make a better fit.

Step 2.

Create a space-sharing plan before looking for a co-tenant. Identify the amount of space you will need to adequately display your inventory, as well as the dollar amount you are willing to pay for your space. Research the market rate per-square-foot of retail space in your area to ensure that your expectations are reasonable. You might also want to think through additional details such as the layout of the retail space, checkout methods, and any other terms that you would like to include in your agreement.

Step 3.

Locate a co-tenant. If you own or lease retail space, you can find a co-tenant by placing advertisements in local newspapers, online classified sites such as Craigslist, or in retail trade magazines. Or you could ask your professional network connections to refer potential candidates to you.

If you want to place products in someone else’s space on a consignment basis, you should search for leads by perusing classified ads in local print publications or on Craigslist. Additionally, you could ask local retail shop owners directly if they would consider subletting space in their showroom.

Step 4.

Create a written space-sharing agreement. Even if you have entered into a commercial lease with a co-tenant, you should have a separate contact detailing the rights and duties of each co-tenant, as well as the terms of the space-sharing agreement.

Co-tenants should consider the costs each party will be responsible for each month, including utilities. They should also consider the specified space that is reserved for each party’s use, and how disputes will be resolved.