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BFS Capital Blog

Does Your Small Business Need an Office Space?

July 8, 2015

The best rent, really, is no rent.

So when opening a small business that doesn’t require a storefront, it may seem tempting to not even bother with getting an office space. The SBA states that 52% of all small businesses are run from home, with retail businessesbeing the fastest growing sector of in-home businesses.

Additionally, the Harvard Business Review recently found that employees at a call center were actually moreproductive when allowed to work from home, and you may think operating your business without an office space is a no-brainer.

But not so fast. Having an office space for your small business has its advantages and disadvantages, as we’ll outline below.

It’s Hard to Innovate Alone

If you’re running a startup business, a company that has a fresh idea and is about to be the next big thing, one of the most important parts of that business may be collaborative thinking. And as much as you think Skype is a great collaborative tool, it doesn’t exactly lend itself to fast-paced brainstorming.

The inherent problem here, of course, is that a startup business often doesn’t have the kind of cash on hand to fund an office space. So you need to assess the return on investment. Will more sales be made, and more investors courted, if you have an office? And how much is that collaborative environment worth to you?

You must also factor in things like office supplies, furniture, utilities, and office snacks when figuring out said return. Because let’s be real here, nobody wants to work in an office with no chairs or no M&Ms.

It Worked for a Call Center, but It May Not Work for You

That Harvard study we mentioned earlier involved a group of workers from a call center. The researchers found that employees who worked from home completed 13.5% more calls than employees in the office, and the company studied saved an average of $1900 per employee over a nine-month period.

But that may not hold true for your small business. In the rather mundane world of the call center, employees may be more motivated by being in familiar surroundings and the ability to put the Springer show on mute in the background if they want to. Your business may get more out of having people around, especially if that job is collaborative. And your employees may also not be the type that works more effectively from home.

Additionally, some people don’t like working from home. There is something to be said for having designated places to work and live, hence the rise of shared office spaces in many major cities.

Your Living Room is Not a Meeting Room

Nothing says “take my business seriously” like holding a meeting on the same couch where you watch Big Bang Theory. And even if your business is not client-intensive, the effectiveness of face-to-face meetings can’t be debated.

And while there are plenty of meeting spaces you can rent in hotels and other buildings, having a façade to show clients will make them take you more seriously.

This isn’t saying that you need an office space to succeed, but rather you should not underestimate the potential business one can bring you. Even though the economy has shifted to a more mobile workforce, an invisible business isn’t necessarily a successful one.

Reach a Happy Medium

As we said earlier, shared workspaces have become a favorite compromise of small businesses who want their employees in the same place, but don’t want to pay high office rents. Even large companies like Google have adopted this method for smaller operations they have in cities away from their headquarters. And while it doesn’t give the appearance of stability that a permanent office might, the cost savings might be worth it.

Similarly, Marriott and some other hotel chains will rent out meeting rooms by the hour in their Workspace on Demand program. That’s a good option for small business owners with home offices and even when traveling on a business trip.

Obviously, if you run a business like a restaurantauto shopbeauty salon or bar, having a working space is completely necessary. But for service-oriented jobs, or even some retail businesses, think long and hard about the benefits an office space might bring. The cost savings are large, but the opportunity cost might be greater. And if you decide an office is an investment you want to make but lack the capital to expand your business, Business Financial Services is always here to help.