When building a business, your circumstances will be different from other entrepreneurs. You might be building the business on the side or you have made the full leap and are working from home or at the local coffee shop. As your business ages and expands, the question of office space will come up. So, how do you decide if office space is the next appropriate phase for your business?
Initially, as you start a business, you need to be as lean as can be. A lot of the time, entrepreneurs will work from home or their local coffee shop to save money. (I am great working at home but if you have a family and no dedicated office space, it might be hard.) If you are one of those people who venture to the coffee shops, you might have noticed that after doing your budget, the $10 you pay for coffee daily may prove enough money to cover rent for a space. Here are ways to evaluate if office space is necessary.
The most immediate factor in your decision should be cost. Your budget, projections, and cash flow will help you determine what is possible. Office space is a huge commitment and renting doesn’t just mean physical space, it can involve upkeep and office supplies in addition to the rent. And, depending on what space or location you choose, it may require utility bills, permits, business insurance, and even parking. Also, be aware that commercial leases have longer commitments and breach penalties. If your cash flow suggests that you can sustain a physical space for a year with emergency reserves just in case revenue slows, then proceeding to secure office space may be viable.
The second factor is purpose. Yes, having your own brick and mortar location is wonderful but does your business require it. A lot of major brands that manufacture products started off in garages and basements. Have you outgrown your home space that without moving to a larger location you jeopardize your business? If the answer is no, then think about ways to outsource certain aspects of the supply chain or creative ways to initiate shifts so that people are not on top of each other.
If your business operates as a service business where you do not deal with clients regularly, then office space is just taking up space. Consider home visits or renting space by the hour or by days rather than committing to a full lease. By committing to the hour or day, you reduce the risk of paying for a location that will barely get use.
The third factor is the type of space. With the advent of co-working spaces, the traditional office lease has been upended. Co-working spaces are huge. Entrepreneurs can rent desks or full offices. Since they are becoming the norm, they are starting to price out at a premium. The benefits have been that part of these memberships include beverages, workshops, upkeep, and access to talent or potential partners. However, the downside can be that you are in a space with transient companies or overwhelmed by how many people exist in these spaces. They also elicit different cultural environments that may not be good a fit for your business or clientele. If that is the case, then it may be in your best interest to grow your clientele or consumer base until you can self-sustain your own location.
If it is absolutely necessary for you to have your own location. Consider partnering with one to three entrepreneurs who may want to split the cost of a location. Also really consider hiring a part-time office manager who can oversee items such as office supply, equipment, upkeep, and permits. Managing a business is hard but trying to manage a location is even harder, so keeping these factors in mind will help you make better use of your budget and make your business more efficient.