• Entrepreneurship
  • Money and finance

Enjoy workspace without destroying working capital

Guest Blogger | May 6, 2013

Since starting a consulting company three years ago, we have always opted to have space.  While working at home and in coffee shops can be convenient – saving time and money – a decision was made to have a small and modest office that was close to prospective clients and business partners.  In addition to the perceived credibility of actually having an office, there was an impetus for the team to have a creative and collaborative working environment. Skype can only take you so far, and the constant grinding of coffee machines limits productivity and professionalism – especially when you are trying to have calls with clients.

That being said, as a new business there are several options to have workspace and not destroy any working capital you might have on costly rent and insurance requirements for an office. A few include:

  • Working with an agent. There typically isn’t a fee to work with an agent. While initial research on your own can help to determine pricing and areas, we used an agent to narrow down the search based on criteria for location, pricing, and space requirements.  Agents are also essential in advising on, and ensuring, a successful contract negotiation.  At the end of the day, you need to be focused on your business and taking time away by trying to find space on your own is not good value.
  • Consider subleasing from others. Sometimes you can get good deals on shorter term leases via tenants who are trying to decrease costs or move mid-lease. Typical agreements are 3-5 years and are a risky proposition (especially for startups) to sign-on to. Shorter term subleases may provide a more practical and cost-effective option.
  • Subleasing to supplement your business. When you do decide to lease a space consider subleasing to help supplement the rent in the short to medium term, as you may have too much space initially to support your company’s growth plan. It is also ideal to find tenants who may have complementary businesses, as they may be a source of good opportunities. It will be important to ensure that you are complying with your landlord’s lease agreement and requirements for subletting, and that you have a formal contract with the sublessor to mitigate risk of legal and/or financial liability.
  • Shared workspace options. Most major cities have Business Development Centres or incubators that offer reduced rent to start-ups. In addition, there are also pay-as-you-go offices if you want to have a hybrid approach to work, giving you the flexibility to work at home and in a formal office.
  • Working from home. It has its benefits and I do this one to two days per week. In addition to eliminating a commute to the office (and therefore giving me back an hour a day to spend with my kids), I find that I am more focused on getting things done. There are also several tax breaks you can take advantage of as well.

At the end of the day, you need to decide what works well for you and your business. That being said, take a measured approach to leasing space, particularly if you are in your early stages of your business where working capital is tight and you still need to get paid. Signing on to a 3-5 year lease, plus insurance, utilities, internet, phone and more can be very expensive.

By Bryan Santone, H Two Consulting Inc., Toronto, ON