Independent retailers - that are often start-up businesses - are playing an increasingly important role in the shopping centre scene, but how can landlords judge their strength? Rahul Thakrar suggests five tell-tale signs…

1. Do they have clear goals?

Does the business have a clear mission, yearly goals and a long-term gameplan?

Have them talk you through their business plan. They may be a start-up business but they should have specific, measurable, achievable, results-focused and time-bound goals in place. Do they expect to still have one store in five years’ time or five stores in one year’s time? Their ambition should be tempered by a sound grasp of what’s achievable.

2. Cash is king

New retailers won’t come with the type of covenant strength you get from the multiples but what sort of resource do they have behind them – and can that cover both the operation and marketing of the business?

A shortage of cash is generally what sinks small businesses so their cashflow projections are critical. You may be able to help by sharing relevant – anonymous - turnover data from other occupiers in your centre.

3. Do they know their market?

Before you even start talking about lease terms, get your prospective tenant to show you just how much they know about their target market. Their customers are your footfall so it ois of mutual benefit if they fully understand the depth of their market and the competition.

Knowing your market and accurately assessing the potential demand for a product or service is the key to an idea becoming a success or a failure. If your product or service has a very limited market, you won’t be able to sell enough of your product to create a successful business. You should take time to understand who your competitors are and identify what differentiates you from them.

4. Marketing makes money

Successful retailing is not just about opening a shop and waiting for the customers roll-up. It needs good products – but it also needs good marketing.

As a shopping centre owner, you can help your new tenants promote their business using your existing promotional platform but they should also have a marketing plan and budget set aside to deliver it.

Whether it hinges on national TV advertising or handing out leaflets, ask them to talk you through their marketing strategy and the channels they plan to use.

5. Are they well advised?

While independent or start-up retailers are understandably trying to keep costs down, it is a good sign if they have the right professional advisers onboard. If they have a good solicitor, surveyor and accountant advising them it shows both their capability as a business.

It will also save you as a landlord both time and money as you won’t have to walk your prospective tenant through each stage of the letting process nor deal with the inevitable delays that spring from dealing with an unadvised business.

In conclusion

Independent retailers and fresh concepts can breathe life into shopping centres and turn the mix from lacklustre to vibrant. Dealing with businesses who are in their infancy will require more engagement than letting space to mature brands but it could provide excellent returns for your centre.