Does my new business need an office.
When you are considering starting a new business and are preparing your business plans and cashflows, there are 2 major expenses that may ultimately make or break your business idea. If you are reliant on your own savings, a redundancy payout or even a business loan, a significant proportion, in the first year of trading, will be allocated to:
- Business premises – the rent, service charges, office fit out, desks, telephone installation and rental
- Salaries – you may decide on not paying yourself a wage but you will need additional admin/sales people help at some point.
Before you start the business, consider if you can work smarter and more cost effectively. Every bit of money you can save can be allocated to money generating budget lines and activities, such as marketing or to purchasing stock.
Here are alternatives to renting a property:
Work from home:
You may decide that you wish to work from your kitchen table, spare room, home office, garage/shed (cold in the winter!!) or a garden room. With technology today, you do not need to be office based or stuck in one location and home working can save you money and provide a good balance for a healthier home and work life.
Make sure you have the right insurances in place and enquire whether this would have any effect on any tenancy agreements, mortgages, business rates or capital gains tax implications, if you decide to sell your house in the future.
There are many benefits to working from home, but you should also consider the following:
- Your customer’s perception of your business. Does your website and marketing materials (and do you wish to) give the impression of your company being larger than it really is.
- Your security and confidentiality. You will be publishing your home details on the website, in business directories and to your customers – this data is accessed by marketing companies and visible to anyone. Once in the public domain it will remain for many years, if not forever.
If you plan to register as a limited company and use your home as the registered office – read this article
There are many virtual office companies throughout the UK that can provide you with a virtual address, which you can use on your stationery and website. These are actual addresses which can provide your customers with confidence that your business has permanence and a physical location but at the fraction of the cost of renting offices. You can usually either get your mail forwarded, pick it up from the office or have it sent electronically to your inbox.
Things to consider when choosing a virtual address and a mail forwarding service:
- You can purchase prestigious addresses in central London, or regional addresses. Your choice is really dependent on what your customers would expect and to provide them with the necessary reassurance.
- I have many calls from people asking for a central London address – Mayfair, Regent Street etc., but when asked why they would want such an address it is usually to impress customers.
- But, your customers may check your business out before doing business with you. Today it is easy to Google addresses and businesses, and it is apparent when 300 companies are all located at the same address, that you are using a mailing or virtual address. This is not a problem, but don’t expect your company to be the only one using the same address.
- These Virtual Offices and addresses can be very useful if you require a prestigious address to hold meetings, especially if your customer base is also situated in that geographical location. You can rent many by the hour, half day or full day.
- Sometimes a prestigious address can also put customers off, they may falsely assume that your business prices would be too high.
- If your business model is based on online retailing – how many customers are bothered by a central London or “swanky” business centre address. They just need to know that if there is a problem with any of your goods that they can be returned easily to a real address. So you could end up paying a premium for the address without any added value to your product/service.
- Always check with your virtual address provider their policy on signing or accepting packages or parcels – some will charge considerable amounts for handling your packages.
- Are your customers more interested in your skills and the quality of what you can offer rather your office location?
- You can use a virtual address for your registered company address when registering at Companies House, protecting your personal details from becoming public.
- On the road – If you are constantly on the road, either attending conferences, business shows, sales pitches, international travel etc. a virtual address and mail forwarding service can forward your mail to you anywhere in the UK (or world) and most will now scan and email to you the same day for the price of a stamp. This provides you with a permanent base which can deal with all your mail.
Therefore, when putting your business plan together decide why you want an office, is there any ideal geographical location, could you, as a short term or long term solution use an alternative? You will need all the financial resources at your disposal during your first few years of trading, so aim to save as much as you possibly can.