Before signing a lease or paying suppliers, examine which costs can be reduced, delayed, shared, negotiated or supported—and how early decisions affect future funding.
Opening day may be months away, but the decisions determining your rent, cash runway, funding eligibility and supplier obligations are already being made.
When founders plan to launch a physical business, they often treat opening day as the financial starting line. They assume that their cash runway begins depleting only when they welcome their first customer. But the truth is that a business starts spending money—and committing to future obligations—months before the doors open.
By the time you open, your runway has already been determined by the agreements you signed during the planning phase. If you accept the first proposal from a landlord, pay list prices to suppliers, and incorporate without considering funding criteria, you will surrender a significant portion of your capital before trading even begins. A business does not just fail because of poor sales after launch; it often fails because too much capital was locked up or spent unnecessarily before opening day.
The commercial lease is typically a business’s largest fixed overhead. When a landlord issues a lease proposal, it represents their ideal position, not a take-it-or-leave-it offer. Depending on the venue, the landlord’s vacancy rate, and your bargaining position, you can negotiate alternative rent structures to preserve capital.
For instance, you might propose a stepped rent that starts lower during the initial trading period and increases in subsequent years. You can also negotiate a rent-free fit-out period during construction, or a longer rent-free period in exchange for a longer commitment.
Another option is a Gross Turnover Rent (GTO), where your rent is calculated partly or entirely as a percentage of gross sales. Under a hybrid GTO model, you pay a lower base rent plus a percentage of sales. The trade-off is that while GTO reduces fixed costs when sales are low, it can become expensive once the business grows. If you use a GTO structure, reporting requirements, what counts as turnover (such as refunds, taxes, and online orders), and audit rights must be defined carefully.
Other lease terms to negotiate include a cap on service charges, paying the security deposit in stages, a break clause allowing you to exit under defined conditions, or permission to sublet or assign the lease if necessary.
For businesses that sell physical goods, purchasing inventory is a major cash drain. Many founders assume they must buy all stock outright before opening. However, inventory terms can also be structured to reduce upfront cash commitments.
Depending on the supplier and your industry, you can propose a consignment stock arrangement where you display the goods but only pay the supplier after a sale is made. This keeps your working capital free, though consignment terms may yield lower profit margins and require strict reporting obligations. Other options include negotiating smaller initial order quantities, staged deliveries, 30-, 60-, or 90-day payment terms, or sale-or-return arrangements. Equipment leasing is also a viable alternative to purchasing machinery or fixtures outright, preserving cash for operations.
Incorporating your business is not a simple administrative formality. The choices you make during setup—including the entity type, shareholding structure, registered location, and declared business activities—have long-term operational and financial consequences.
A poorly considered setup can create issues during bank onboarding, delay licensing, or disqualify the business from industry-specific grants. For example, if your declared business activity codes do not accurately reflect the operations you intend to run, a lender or government agency may reject your application during due diligence. Lenders and investors consider much more than the registered activity code, including financial records, forecasts, security, cash flow, and the proposed use of funds. An inconsistent or inaccurate setup creates unnecessary friction when you can least afford it.
Many founders attempt to apply for government grants or financing programs after they have already spent the money. By then, the expense is usually ineligible because most support programs require approval before any commitments, vendor contracts, or payments begin.
As a specific example, Singapore’s Market Readiness Assistance (MRA) Grant supports eligible Singapore businesses expanding overseas. It is not general funding for opening a domestic business. To apply, the Singapore applicant must already be registered and operating. The grant supports up to 70% of eligible third-party costs for activities like overseas market promotion, business development, and market setup (which includes costs for establishing an overseas entity, IP registration, tax planning, and market-specific agreements).
Under the programme, overall support is capped at S$100,000 per company per market, with separate pillar caps, including a S$30,000 cap for the market-setup pillar. Applications generally must be submitted before contracts are signed, payments are made, or work commences, and actual reimbursement is subject to satisfying the programme’s conditions.
To understand the impact of pre-launch negotiation and planning, consider these hypothetical illustrations:
Hypothetical Grant Support Example: A qualifying Singapore SME plans S$20,000 of eligible third-party overseas market-entry work. At a support level of up to 70%, the potential grant support would be:
S$20,000 × 70% = up to S$14,000
The company must still fund the project upfront, satisfy the grant conditions, and bear unsupported expenses. However, if the business had budgeted the full S$20,000, receiving the S$14,000 reimbursement ultimately preserves S$14,000 in working capital. If the company’s monthly operating costs are S$7,000, that recovered amount is equivalent to two additional months of operating runway.
Hypothetical Rent Negotiation Example: A founder negotiates the proposed rent of a space down from S$6,000 to S$5,400 monthly.
Before committing any capital, make a list of every pre-opening cost and identify where you can negotiate terms.
Run a pre-commitment review to separate what must be accepted from what can still be negotiated. Evaluate every contract, lease, and supplier agreement to see how it affects your post-launch cash flow. The goal is to reach your opening day with as much working capital as possible, ensuring the business has the time it needs to build momentum and survive.
Before signing, paying or incorporating, separate what must be accepted from what can still be negotiated. Planning a physical business? Talk to Freakyyy Studio before the expensive decisions become permanent.
Read next: You Opened the Doors. Now Can the Business Afford to Stay Open?
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