For entrepreneurs trying to bootstrap their way to success, the decision of where to establish an office can be challenging. Renting an office can be expensive and often requires a minimum one-year lease. On the other hand, clients and employees might question your legitimacy, if you are working out of your living room. Here are some things you should consider when making the decision between a home office and an office lease.
If you are considering setting up shop in your home, you must have a room or separate “backhouse” you can dedicate as office space. Don’t make the mistake of thinking you can use your living room as an office during the day and as an entertaining or relaxing space in the evening. This “hybrid” will result in a very suboptimal work environment with lots of distractions. It will also eliminate your ability to have a proper desk space where you can leave files out and not worry about someone getting on your computer and closing an important document.
Even if you set up a completely separate space in your house for an office, your family will still think of you as being at home. Your location will significantly increase the percentage of home tasks that you’ll be expected to handle. If you have kids or a complex home life, you need to honestly evaluate how much work you’ll be able to take on during the business day. Is it enough to be genuinely productive?
If money were no object, every business would have a professional office. Unfortunately, money is THE BIGGEST object for most bootstrapping entrepreneurs. You need to be realistic when evaluating your options. For example, if you have $50,000 saved up to fund your initial business expenses, and you believe you’ll need $40,000 of it for equipment, salaries and marketing, you should seriously consider using a home office for as long as possible. If you run out of cash, the business is over.
You also need to look at the office rental market in your area. You should find a commercial real estate tenet rep specializing in office space to help you evaluate your options. Even if you’re looking for a small amount of space or trying to sublease from someone that has extra space, a tenet rep will want to build a relationship with you hoping to be your preferred broker when you achieve more success and need to upgrade your office. The broker will know the market and might be able to help you find a great deal in this early stage.
Type of Business
Different types of businesses have different requirements for office space. For professional service firms targeting local clients and charging higher rates, quality, conveniently located office space is a necessity. For technology businesses that rarely meet with clients and rely heavily on geographically dispersed contractors, office space will likely help with efficiency and coordination, but isn’t necessary to function.
Office space is an expense, but it can also help you attract better clients and hire more qualified employees. Think through the ways you’ll use the space. Will it pay for itself through revenue indirectly attributable to having the office? How about through increased productivity? If the answer is yes and you can fit it into your budget, then a traditional office is going to be a good investment for you.
Availability of Alternatives
If you don’t think you are ready for the expense and commitment of an office lease, there are other options you might consider. Some cities have incubator offices that offer extremely low rent to entrepreneurs for shared office space. For example, Capital Factory in Austin, TX, offers plans as low as $150/month that provide access to a desk in a professional work environment, a mailing address, conference rooms to rent, etc.
Companies like Regus and Intelligent Office also offer co-working office spaces, receptionist services, access to conference rooms and business mailing addresses. These can be great for presenting a professional appearance to people you need to impress without a large price tag or a long-term contract.
Your personal circumstances, business needs and opportunities will ultimately determine whether a home office or an office lease is the better choice. By thinking through these important questions, you will be well equipped to make the decision that will give you and your business the best chance to succeed.
Originally published Sep 01, 2014, updated Aug 12, 2020