Finding Your Right Space

Posted: October 23, 2011 by Bill Cunningham in Operations, Planning, Startup

If you are in business, you have to do it someplace! The someplace is usually a rented space for most of us who are not working out of our homes. If you are thinking about purchasing your space, then think long and hard – because now you will be running two businesses – your current operation and the business of being your own landlord.

Your space defines your company in many ways. Attention retailers! — Your marketing program includes your space. The look and feel of your store communicates what you do – with the aim of persuading consumers to enter your space, shop and buy!

Hello white-collar office workers! — Most of your people spend most of their time in this space, then the layout and appearance impacts productivity, employee retention and attracting new ones.

Dear Mr./Ms. Manufacturer! — Proper layout of the site can make or break your production process. Designing production systems requires as much artistic talent as well as science. Improper design creates unnecessary costs which reduces profits. Well designed systems enable companies and workers to do more with less and do it faster.

When looking for your first space or if you need to move from your current space, ask yourself some of these questions to decide what is the best space for your long-term success.

First of all, what is your budget? While you have written this into your business plan, make sure you have captured all the costs to make this space just right. Know your real costs of the space. The lease figure given to you by the landlord (usually stated in annual dollars per square foot) needs to be calculated for total cost. For example, 1,000 square feet of office space that rents at $24/sq ft is really $24,000 per year or $2,000 per month. More questions to ask the landlord: Does this include heat and electricity? Does this include a cleaning service? Are there additional charges for common areas? Is there an escalation factor in later years? All of these questions affect the bottom line.

As part of your budget planning, think about the kind of space you need. Do you really need class A office space? You know, the kind with glass towers, fountains and courtyards, and maybe underground parking or a view of the golf course.

If you have a lot of clients visiting your site and you need to communicate that you are a successful enterprise, then go for it. That’s why you find a lot of Fortune 500 companies in this type of space. As far as the budget goes, this is expensive, but worth it if your customers have high expectations of your company’s image.

If you don’t have the pressure of maintaining a ‘prestigious’ address, then less expensive space may suffice. For instance, startup companies can take ‘cool’ and very inexpensive space during their early years. These ‘garage-based’ companies spend as little as possible on everything to make their “buck spend like a hundred.”

As Over-the-Rhine develops its new economy of startups, taking advantage of older space that the P&G’s and Chiquita would never occupy creates a culture of entrepreneurial startup fever. (There are rumors that P&G has already moved folks there to get closer to innovation!) New startups now live in old department stores, paint factories (HCBC), old fire stations and old warehouses.

Old warehouses have particular advantages like setting up a basketball court or play frisbee inside — giving your high-tech knowledge workers the feel of Silicon Valley here in Cincinnati. The good news:  you can do that for about 20% of the price of Class A space.

Watch out for the hidden costs of moving into a new space. These include – furniture (try to rent it or lease it!), networking (it’s better to do this before you move – and plan for expansion), amenities (kitchen, microwave, dishwasher, bottled water), phone system (make sure it can grow with you or you will be trading it in at 20 cents on the dollar for a new one), copiers, computers, servers, internet access, firewalls, parking (make sure it can accommodate your growth plans.) One company found a great space, but found that it could only have 1/2 of the parking spaces on Wednesday because that’s when all the realtors had their meetings in the other half of the building. (They decided to look elsewhere.)

Plan out your move so that it can accommodate your growth and your budget. One startup company estimates they spent about $60,000 one year because they occupied 3 different offices as they outgrew them. The first move was just across the street – but they had to reprint stationery and business cards, pay the phone company to move the lines including the computer access lines, and they had to pay a mover to move the furniture. They only lost 2 days of productivity (which was 6 people times $800 per day of billable time – amounting to almost $10,000 of lost revenue.) Their next move took longer, and they had 12 people – so you can do the math. That’s a pretty tough number to take when you are starting up.

So plan ahead – ask the hard questions and enjoy your new home!

 

Bill Cunningham is the CEO of OneMorePallet.com and shop foreman at the Greater Cincinnati Venture Association.

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