Congratulations, business is good and you’re ready to open your first office! Now what?
Startup companies that reach the point of needing an office location should examine all of their options before committing to office space. The toughest part of choosing that first office is knowing what criteria to base your decision on. Keep in mind that real estate costs are typically the second or third largest expense on a company balance sheet, and many companies remain in the red because they carry more facility related overhead than necessary. Our suggestion for startup and small businesses looking for space is to keep three specific criteria in mind:
1. How much space do we really need for the foreseeable future?
2. Does the location or visibility of a space help our company generate more revenue?
3. How important is flexibility in the lease of any space we pursue?
Entrepreneurs who have reached this point need to be wary of how they approach leasing space. For example, many take on more space than the business requires, sign leases that have a longer term than necessary, or fail to negotiate adequate concessions, and protective clauses, during negotiations. Others sign up with executive office suite operators without realizing that the premium they are paying for space there could get them larger, or more desirable space somewhere else. Co-working spaces have a similar model to executive suite operators, but are typically more flexible when it comes to paying for space. If your business doesn’t yet require you to be in the space on a day-to-day basis, this option could be for you. Our advice to most young companies is to scout the market for space listed for sublease before engaging with the afore mentioned options. Subleased space often comes at a hefty discount from what the master tenant is paying the building owner. These spaces can come furnished, and typically have less than three years of term on them. Sometimes, a sublessor will even allow your business to sublease for a shorter term than what’s remaining on the master lease. Finally, subleases are an agreement to lease space with the master tenant, and although the landlord must approve them, can often be attained without using the business owner’s personal wealth and assets as collateral should the business become incapable of meeting its debts.
Startups and small businesses looking for space should hire an active tenant representative who understands their needs. The Ocean Company has assisted many young companies in securing their first spaces, and negotiates the best possible lease with your objectives in mind.