What to consider when you seek space for a new firm

In the past decade, I have helped hundreds of companies in their search for office space. I have helped Fortune 500 companies relocate or expand their business and have also helped brand new companies starting with nothing more than an idea look for their very first office space. While there are many similarities with any transaction, dealing with a company getting their first space can be much more rewarding as this tends to be a much more stressful decision for the company and will have a greater impact on the bottom line.

I am not implying that leasing or purchasing commercial real estate is the most important decision for a company. Oftentimes it is the last decision that a company makes and with today's technology there are more and more companies (especially start-ups) that are choosing to work from a home office. There are many pros and cons to choose a formal office space versus a home office and each company will have different motivations for their decision. I have outlined herein some key items to help you make the best decision when choose a home office versus formal office space.

Costs

For any business, especially a new startup company, upfront expenses are going to be one of the main concerns when considering each and every decision, and proper management of these expenses are the key to most company's successes or failures. Assuming this is a one- or two-person company to start, there are limited options to lease small office space. Most small companies pursue what is referred to as an executive-suite location. Executive suites provide small companies with office space as well as access to a conference room and break room. Some even offer a receptionist and mail service as well as other amenities that small companies would be able to utilize. Unfortunately, each of these perks do come with an additional cost. The alternative would be to find a small office space. However in this case, the company will be responsible for all upfront costs: phone system, copy machine, possible receptionist and many more. In addition, owners of commercial real estate are typically hesitant to lease space to a startup companies due to the risk involved, so they may require guarantees or higher security deposits up front.

There are more office leasing and sale opportunities for companies larger than one or two persons. On average, you should plan a space consisting of about 200-250 square feet per person (this includes circulation, restrooms, break areas and such). When negotiating the initial lease term, it is important to consider your growth pattern and not commit to any space that will be too big or too small for any long period of time.

There are costs associated with running a business regardless of running it from the home or not, such as the phone system, computers, paper and equipment. Therefore, it's crucial for companies to run a proper cost-benefit analysis to determine if adding office space is worth the additional costs.

Customer/client base

In my opinion, this is the most important aspect for a company to consider. Each individual business will have a unique customer and clientele that they will have to take into consideration with regards to a home-based business versus leasing office space. Who are you selling to? Will they need or want to visit your office, or will all of your communication be through email and telephone? Companies or individuals that are looking to purchase a product or services are more likely to purchase from a reputable and respectful company, and oftentimes perception is 90 percent of reality.

If you are in a growth pattern and looking to hire your first employees, I know both from client stories and personal experiences, that good employees typically prefer working at an office than in someone's home.

Technology

Phone system technology and cloud computing has made working from home not only much easier, but also a much more acceptable business practice. Places like Starbucks that encourage utilization of their space as a meeting place and provide wireless internet access, give companies an alternative to the typical conference room meeting. The need for a central server location in an office space will soon be a thing of the past. and phone systems are now able to connect directly to your cell phone. For a home-based company that does not need a brick and mortar location, these advances in technology have leveled the playing field.

Image

Many startup companies are not concerned with their office space image, while others rely on having a nice office environment with higher end finishes to help generate necessary capital. Not to say that there aren't some exquisite homes with beautiful offices, but there is something impressive about being in a professional office space.

When deciding whether or not to work from a home office, it is imperative to take into consideration all these critical factors and decide what will save money and what will cost you business. The first step in this evaluation process is to contact a commercial real estate expert to discuss market opportunities that would fit your budget.

Kevin Annis is a principal and broker with ArchCrest Commercial Partners LLC in Reno. Contact him at 775-742-2539 or Kannis@archcrestnv.com.