For any business establishment to start, four factors of production should be present – land, labor, entrepreneur, and capital. Of all these things, land is considered the most important. Here are the reasons why:
1. Land never depreciates in value.
2. This is where the facilities will be built, as well as determine the type of business that could be established. The location of the land and the area of land available are two very important factors that can dictate whether a business will be feasible or not.
With this reality, people who own properties tend to become rich even if they are not interested in doing business, as charging for the use of land (rent/lease) from interested entrepreneurs can be a steady form of income. As the land gets closer to business areas, the rent for its use also increases significantly. For landowners, one service they can offer is using their property for a warehousing facility that businessmen can use. Aside from the benefit it gives the landowner (it generates more income because of the rental fee), this also benefits the businessman who utilize them. The following are some such advantages.
1. Choosing established warehousing services over building a storage facility can save an entrepreneur a large amount of money. Essentially, if the business is just starting out, renting a facility is a more cost-efficient option. It is common practice in business to hold off on investing in something if there is no certainty that the investment will not gain significant earnings. If one is not yet sure that their business can generate income, they settle with leasing facilities rather than building them. In the future, if expansion is possible, entrepreneurs can consider building their own facility as they have the resources already.
2. Warehousing favors large businesses whose products are not perishable (with the exception of meat as there are cold warehouses). With products that can be stored for a long time, the business owner can make the most out of what he paid/pays for.
On the other hand, there can also be disadvantages to renting warehouse facilities. Since the business will be contracting from another person (the landowner/ warehouse facility owner), this can lead to misunderstandings between the parties, especially if the contract entered into is a lease. If the facility owner sees that the business is expanding, and the business does not have plans to build its own facility, they might devise a plan, after the expiration of the rental period, that changes some provisions in the contract, especially the amount to be paid, for the use of the facility. This situation might stain the relationship of both parties, and there could be a possibility for a lawsuit in the end.
Businesses can never operate on passion alone. They should keep an open mind and consider every possible situation available to them to make the best informed decision for their business.