Does my business need premises?

It’s a question people ask me all the time. When should I get office space? When is the right time to move into office space? In my opinion, office space is a big step. As such a large, fixed overhead, you need to think about whether it’s appropriate to move into premises, or whether you are doing it for vanity. I see lots of entrepreneurs that want big, flashy office space and lots of employees early on – this is a great way to bust.

In the past, I’ve moved into office space sooner than I really needed to when I ran my first business, and I think the only time you should think about looking for premises is when you’re looking to employ staff. They’ll need to work from somewhere. When it’s just you I guarantee that you do not need office space. It’s a waste of money. If you need to get away from home, then ‘hot desk’ – where you rent a desk in shared office space and get in a 9-5 routine to separate your work life from your home life. There really is no excuse. Unless your business relies on its premises, such as a café or retail shop, then avoid office space until it hurts.

A second consideration is money. Do you have the money to move into office space. How does your business make money? Do you have to repeatedly sell to turn over your cash, or do you have client retention and people pay you recurrently? Office space, being a fixed, recurring overhead, is something you need to cover every month.

If you’ve considered all these points and you decide the time is right to establish your business with a physical presence, then make sure you know what you’re looking for and what to avoid.

When choosing office space for the first time, look for short leases with short notice periods. You want to be able to leave if it isn’t right or you hit hard times. Having a 6 month notice period is no good. Ideally, you need a 1-3 year lease maximum, with no more than a 2-3 month notice period. Additionally, in an ideal situation, you’ll choose serviced offices, so that the rent includes the gas, electric and internet, and you’ll probably get a swish receptionist for free! You’ll typically also avoid business rates (business council tax) if you go with serviced offices, which will save you a LOT of money. Your landlord should also be flexible. If you need to grow they will help you expand, or if you need to pull back a little they will help you contract. Let’s try and save your business money!

You don’t need a huge, flashy office. Just something that is smart, approachable and good for your customers. If you want to make money, then it’s not about being in the top office in the top block and spending thousands upon thousands of pounds, because you’re just taking it off your bottom line – i.e. out of your own pocket.

In summary, consider the following points before looking for office space:

  • Are you the only person in your business?
  • Does your business rely on having office space?
  • Are you about to employ any staff?
  • Are you thinking about it for vanity reasons?
  • Do you have sources of recurring income?
  • Do you have to work hard to make sales?
  • What profit do you make on a regular basis?
  • Are you keeping regular management accounts?
  • Do you pay yourself well from the business?
  • Would you have to cut anything back to get office space?

If you pass the checklist and you decide it absolutely is the right time and appropriate to think about moving into office space for your business, then consider these points:

  • Look for short leases or rental contracts that can be renewed
  • Only accept short notice periods, no more than 2-3 months
  • Get serviced offices so everything is included in your rent
  • Get an appropriate sized office, don’t do it for vanity!

Take a look at my video on the subject below:

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Nathan Winch Private Investor

About The Author Nathan Winch

British entrepreneur and private equity investor with over 12 years experience. Having started, scaled and sold companies in medtech, SaaS and FMCG, Nathan’s specialities include concept commercialisation, supply chain mobilisation, acquisitions and horizontal integration.