Do start-ups really need an office?

HI David,

As someone who has never had a job in an office (yes, really!) working both for myself from home and now within a company, I absolutely agree with Stefan.

As a parent of three children under the age of 6 I could not possibly work in an office environment; the commute time is too precious to me, and inflexibility of childcare arrangements (and the cost!) would mean any post that offered a 9-5 office job would be out of the question. Often, insisting on an office based business alienates many excellent potential employees. I might not work 9-5 every day but I am no less productive in my flexible home based working hours than someone in an office.

It is a fact that people are most productive when they are happy and enjoy their job; long commutes are wasted time for everyone. Employees are not with their families and nor are they being productive in work.

You are absolutely correct that all of those technologies allow businesses the opportunities to save a great deal of money, and make a great deal of money, as a home based business. Add to this the environmental benefits of home working, and a pick of the best employees from around the world it really is possible for your business to be the best.

Susan

I think it depends on the amount of employees you have. When you first start off, it's ok to work out of your basement with your colleague, but when you have 5+ employees...a physical office is necessary. A physical space will improve your employee production and motivation. It also sends the message that you want to expand your business. Leasing or renting office space from an existing business is a great way to get started in a physical space.

Hi David,

This is a question that I am asked by clients from time to time. Without knowing much about your particular situation or aspirations my best answer would be "well possibly but..."

Stick with me on this for a while and you'll see what I'm getting at…

A lot depends on the type of business that you are involved in. For example - if you were running an estate agency it is likely that prospective customers would want to visit your office to discuss a possible sale or purchase. In this instance the absence of physical office premises could result in a negative perception of your business, the professionalism of your staff and your capacity to meet client needs. My suggestion here would be that the benefits of having an office would in all likelihood outweigh the costs.

If on the other hand you were for example running an IT consultancy business, I would expect that you would be visiting clients within their premises all of the time as there would be little benefit in undertaking off - site consultancy as you would need to physically be present at the clients site in order to undertake an analysis of their IT needs. In this instance a physical office is of less importance as you could quite conceivably work from home. A virtual office could well provide a prestigious address, call handling and mail forwarding benefits at very low cost so this could well be a viable alternative.

Thus far I have concentrated on the financial costs and benefits but when dealing with clients there often tends to be an aspirational element that goes unmentioned, the benefits of which aren't always easy to determine. One example would be a consumer electronics retailer where the owner wanted to replace his three year old delivery vans. The existing vans were all in perfect working order however he felt that having newer vans would provide a more professional image. He could have been right however it would be difficult to wrap a set of metrics around something such as this as it was an aspiration.

Do startups really need an office?

Well possibly but… ;-)

Andy.

David:

Good timing for this post. I am actually in the process of moving from an executive office suite to a home based office, mostly to reduce my expenses and risk with a long term lease contract for office space. After a year in an office, I realized that I don’t need the professional front, as most of my business is done by phone, email, webinar, etc.

I have really flip-flopped on this decision, but hearing some of your insights has confirmed it for me. If you can do without the expense, go it at home. Use that money to get customers instead. Later, when you have the revenue, move into an office if it's absolutely necessary.

Furthermore, there are a ton of new virtual services available to give you a professional appearance, at a lot less cost.

Rich Helm
Independent Business Specialist
Ventureline

David,

In addition to the issues already contributed to support a "virtual" office in today's technology driven marketplace vs. a conventional communal work space I would like to add some specific advantages both from your perspective as well as your clients.

Human resources, (HR) reflect an expense and exposure that is virtually eliminated by a properly structured online network of independent contractors vs. employees. In addition to the savings in fixed and semi-variable expenses associated with the facility needed to house and support an in-house staff of employees the ability to isolate potentially confrontational personalities allows a greater diversity of human resources.

Of equal value is the ability to attract a higher caliber of people with competitive compensation packages that provide a better quality of life for the sub-contractor. Savings in transportaion costs and the ability to multi-task other real life needs and family obligations with a flexible schedule translates into savings for all parties -- especially you! This relationship could not exist if you required all of your support staff to meet in one location and with a common schedule.

Another advantage realized by linking your staff with an online communication and distribution system is that their compensation packages can be more performance based tied to actual work product vs. a salary paid for a set number of hours. Productivity can be quantified and qualified in a more objective manner without requiring addiitonal management support and expense.

All of these issues surface opportunities to pass on savings and increased access to more diverse resources and skill sets to your clients. Combine your improved work product with reduced fees and the decision to support a virtual office and staff vs a real world brick and mortar facility becomes self evident.

Finally, the shift by consumers to the Internet Super Highway for information, products and services has matured because consumers prefer to maintain that glass wall between them and a high pressure sales person. They also are limited in the time that it takes to research their buying decisions and to access information or support services after they have made a purchase. The improved relevancy and transparency provided by today's technology driven websites -- virtual showrooms and/or offices -- combined with improved conversion tools and online transaction applications make doing business with an online vendor or business superior to a conventional one.

First impressions are irretrievable and a small start up can develop an impressive website with integrated services and applications for a fraction of the cost to build and maintain a conventional office. When all is said and done -- an Executive Suite with services limited to providing operator services, a physical address for mail and a communal board room with presentation facilites for the ocassional customer meeting is the future both for economic reasons and to accomodate the shift to the WWW by the customers that you intend to serve.