These days, most businesses do not start in offices. Whether it’s an idea cooked up in a dorm room or a crowdfunding campaign conducted from the living room, many startups get their real beginning outside of an official office space. There are many reasons to run your business in a dispersed and primarily digital fashion for a long time; some companies have even been able to run at scale without any kind of centralized work location.
Different executives have different thoughts on when companies need to move into physical spaces, and much of their differences may have to do with their industries. A retail company, for example, will need a physical space with physical offices right off the bat, while a company creating an SaaS product may not need a physical office until it’s approaching big corporations as clients.
Even then, it may only need to have its key staff in the office; marketing, accounting, IT, and support staff can all be housed off premises or dispersed. If these positions remain freelance or contract rather than full employees, this also allows the company to save money on benefits payments.
Companies relocate their entire production processes from state to state to take advantage of cost differentials, but when is the right time for a startup to move into a physical space? That time is going to vary, business to business. Let’s look at some of the factors and challenges.
At first, many companies get by with contracted services. You can use SaaS accounting software, work with a freelancer for your marketing, contract your IT services, and connect with a graphic designer in another country to get your layouts done right. But as you start to look for local staff to hire, you are going to need somewhere for those people to work. An office becomes the right place to train new employees.
Relocating to a new office already comes with its own challenges and the last thing you want is to lose your hard earned customers. If your business is primarily online, you don’t need a physical office to meet your customers. If your business starts to transition into a more local business with a higher number of face to face interactions, having somewhere to meet your customers other than the coffee shop is ideal. At this level, you may still be able to just rent a conference room in another company’s office space, but looking for your own office may be the right idea.
If your company is looking to expand into the retail sphere, having a physical location may become necessary, whether it’s public facing or not. You will usually need to pack and ship goods, keep your customers informed about your moving plans, work with staff – doing all of that out of your living room or even a home office will quickly become complicated.
Ongoing, Continual Collaboration
When your team members need to check in every so often with questions about assignments or how to pieces of a product will interact, working online with chats and video calls is perfect. But for many businesses, there’s comes a point where continuing, ongoing collaboration is key to success. For that to function, you will need to have more, if not most, of your employees at the same location.
This can be a big transition point for a company, and it can force them to choose between their dispersed workforce and their scaling planes. After all, many people work from home because working in a physical location is either impractical or impossible. Their own health, or the health of loved ones, can make it necessary to work from home. If you move your entire company to a physical space, it’s possible to lose crucial employees. Make sure to talk to your workforce and know what the next steps will be before you move forward.
You Can Afford It
This should seem obvious, but one factor in whether or not you relocate your business into a physical space is whether or not you can afford to move your business into a physical space. After all, rent is expensive, and not all offices cover utilities and amenities. Plus, you will need to purchase office furniture, find the right location, and more. You will need to make sure your office space has room to expand, but isn’t more office than you can afford.
Run a solid budget for your business (you should be doing this anyway!) and see if there’s enough left over to cover monthly rent and any utilities a landlord says you’ll be responsible for. Consider equipment rental and purchasing, and factor in maintenance costs. You can also consider potential increases to income, but remember to overestimate costs and underestimate incomes.
If getting your office into a physical location is going to make your company cash tight, it may not be worth it yet.
You Can’t Afford Not To
For some businesses, there is a point where it becomes clear that they are losing money by not having a physical space. They don’t appear “serious” enough to key customers, or they’re losing out on retail opportunities, or they just can’t quite scale their business to the next level without that extra boost of business.
For those companies, finding a physical location is key, and they often need to do it as quickly as they can without hurting their business.
That said, it’s important to remember that the definition of a physical office has changed from what it was twenty years ago. You don’t necessarily need a desk for every employee. You could rent a certain number of desks in a local shared workspace with a conference room that you could book. Your local employees could work from home and from the office on a rotating schedule, and some portion of your workforce could be dispersed.
When you choose to move your startup into a physical space is going to vary depending on your startup, your industry, and your finances. Carefully consider the pros and cons of the move before you make a decision.