All businesses are fighting for the same goal: producing a return (financial or otherwise). That battle, of course, isn’t as simple as keeping costs low because you have to invest in your business in order for it to grow. So, what you end up focusing on — and what your investors (current and prospective) look for above all else — is a strong ratio between spend and return.
At a very high level, your spend breaks out into two categories:
- $ spent to grow your business
- $ spent to run your business
Number 1 is complex and takes a considerable amount of trial and error. But you’re prepared for that. You give this spend a lot of attention. You identify specific growth initiatives in which to invest and find the right time to do so. You watch their return (or lack thereof) and you put resources into optimizing or pivoting accordingly.
Number 2, on the other hand, is quite different. It’s full of the daunting, unsexy things like office space, taxes and administrative services that you invest in because you have to — not because you choose to. For this spend, you typically follow status quo… you look for familiar, affordable solutions and spend little to no effort innovating your approach.
Most businesses are guilty of this. We let sex appeal dictate our attention and allow selling, general and administrative expenses (SG&A) to sit idle. Huge mistake.
Thinking intelligently about office space to reduce administrative expenses
SG&A typically comprises 15-25% of money out the door. That’s no small factor in your spend-to-return ratio! And the biggest line item among those expenses is office space. It’s the second-highest cost a business faces after headcount, and that’s before you take into account all the resources it takes to find and secure office space.
Here’s a look at specific costs:
Calculations for a 10-person Team – Growing to 20 People in 1 Year
(Calculate the specifics for your team here.)
As it turns out, the impact of office space on your spend doesn’t stop there. Because traditional leases are antiquated, they don’t account for variability in your growth. That means that, outside of the cost to find, set up and maintain space, you have the added risk of defaulting on a lease or growing out of your space.
Flexible office space helps businesses control costs
The good news? Commercial real estate is finally starting to evolve. The rise of flexible office space solutions (things like coworking, office sharing and short-term subleasing) make it easier for businesses to cut costs on office space and avoid falling victim to long-term commitments.
The bad news? Some brokers are slow on the uptake. That means the onus is on you to know your options and push for flexibility so that you can make smart decisions that will drastically impact your overall spend. Here’s a little help.
5 ways to take control of your office space spend, lower your burn and impress investors
1) Do your research. You wouldn’t go to a car dealership without first doing a little research on the latest car models, would you? Before you shop for space, arm yourself with the knowledge you need to make informed decisions.
Recommended reading: 14 Commercial real estate terms you should know before signing on the dotted line
2) Weigh your options…all of them. There are office space solutions outside of traditional leases that apply to all businesses, regardless of size, stage or location. It’s up to you to weigh them to determine which makes most sense for your team.
Recommended reading: How to choose the right office space for your team and 10 Surprising realities of office sharing
3) Reset your expectations. The real key to staying sane during your office space hunt is managing your own expectations. Money doesn’t grow on trees, and chances are the perfect office you’ve created in your head doesn’t either. The upside? There are plenty of fantastic offices that will work for your team—you just have to know where to look.
We’ve created a cheat sheet to help.
4) Think long term…but not too long. While you may never be able to accurately predict your growth, you CAN compare costs of things like rent and setup fees with much greater accuracy.
Here’s a tool to calculate the cost of a traditional lease and shared space for your team.
5) Retain flexibility. Understanding the future of your business with 100% accuracy is next to impossible. Long-term growth projections are iffy at best, and there’s no sense in betting your second-highest cost on an unknown reality. Protect against uncertainty by baking flexibility into your business plan—especially when it comes to your office space.
Recommended reading: How IRIS.TV outgrew coworking and found a new office to call their own.
With thousands of services and tools to choose from to help you run your business, things can get a bit confusing, but hey, you’ve got Stacklist to help!
And if you’re looking for guidance on office space, you’ve got us. The team here at PivotDesk is trained to evaluate the best office space option for your specific situation — should you land with us, mention Stacklist and get 10% off your first month… no questions asked!
–Ginevra Figg, VP of Sales and Marketing, PivotDesk