Mistake of the New Office

I’ve written about having professional offices on several occasions, but I’ve also learned that poor choices in office planning can undermine a business, potentially for years. There are several aspects to the risks inherent in renting new offices, and I will attempt to address each of them in turn. At the end of the day, only you, the owner of an expanding business, can fairly assess whether the move is right.

The first issue is in regard to cashflow. Renting an office for the first time can be a surprise in terms of what is, and isn’t, included with the rent. The little fees that aren’t mentioned can often be the same fees causing the largest issues. Is your internet access fast enough? What about coffee for the office? How about furniture? What maintenance fees will you have to pay?

A good rule of thumb is to have 6 months worth of rent stockpiled before signing the lease – over and above the deposit you’ll have to make. It may take you that long before your business is breaking even with the new and increased cost.

The second issue is in regard to the amount of space rented. It isn’t good to move your business too often, so you need to plan for expansion. At the same time, that extra space will cost, and isn’t earning the business any money, and so should be kept to a minimum.

One strategy to deal with this issue is to find an office in a building with a fair number of vacancies, where larger or additional rooms can be rented when the time is right. With careful selection, you may even be able to find buildings that include some shared resources such as meeting rooms, which help to reduce your costs (though the rent at such offices is likely to be higher as a direct result of this).

Last, there’s the issue with a bailout plan. Offices will often request a multi-year lease – something startups should be reluctant to sign. As there are two scenarios that could result in you wanting to break the lease (enormous expansion or spectacular collapse), try to avoid signing for two years if possible. However, bear in mind that with shorter leases, the amount of negotiating you can do on the details will be extremely limited.