The first thing I notice when I see a new company that asks for a harsh start: a beautiful office.
We all watch those TV shows, where we see those professional working in high rise buildings, having nice cars and seeming like nothing can stop them. That’s great, great fiction, from the past. In the past, you could somehow earn a reputation by having your office located in a hip place in your local market and people would come to you. That also made people trust you, the more beautiful an office you have, the more successful you are.
It’s not the case anymore.
Maybe you want to earn their trust by showing them that you have an office where they can come visit you in case of panic? With the recent internet revolution, we’ve seen all sort of fake approaches to look like a big/trustable business. Some small businesses bought Facebook likes to go from 1000 likes to over 100k and look “big”. Since it was really documented recently, many people stopped believing that the number of likes reflects the size of the business. Let’s be honest, your potential customers all have conference rooms and will most likely never visit you. They will find you online, so you should spend your money on advertising, to reach out to those customers.
But I need a place to work!
We all need a place to work. But if you start your business, why in the world would you need a rented office to work at. Let’s say it, an office is just the “front” of a business where people work on computers. I’m not saying not to rent a warehouse if you stock products or build a factory if you create stuff. I’m saying that if you’re running a service-based business where all you need is a computer and a functional brain, don’t be stupid and rent that beautiful office in the technology sector of your city because it looks great. Even a big company like Buffer (more than $6 million in sales) closed their office to go 100% remote and still have over 50 employees. If you can work from home, WORK FROM HOME. You’ll save time avoiding traffic jams, you will be able to wake up at any hour and don’t feel bad for not being in your office and you’ll earn much more money. If you have employees, just think about the fact that the 30 minutes (x2) per day wasted going to the office will not be given back to you. If you have 5 employees, that’s 25 hours per week of potentially productive time wasted, because of your idea of having an office. If you can’t work from home, go at the Starbucks and buy a coffee every 2 hours. It’s still less expensive and you’ll earn the Gold Card pretty quick.
Negative cash flow is not great
Okay, so you didn’t listen to me and decided to rent that office because you have employees and you need to do meetings (meetings sucks and are huge waste of time and money!). Well, as a former CPA (read my bio), I’d like to give you a small accounting class;
Income – Expenses = Profit
If you start your company and rent an office, you’ll begin with more expenses than income for sure and you’ll have a negative cash flow. You will NEED to get customers and sales just to be able to afford your beautiful office space. Let’s say you have a super good price on an office ($1000 per month). Your profit margin on projects is approx. 60% (because you run an internet-service based business). You’ll need to earn $20000 of sales, just to cover that office of yours. I’m being super generous here, not many companies make 60% margin and offices are much more expensive than that. Let’s make it more real with a 45% margin and $2500 per month office. You now need to earn $66,000 in sales before making 1 dollar of yours. You can spend that money much more wisely and grow your business.
How to be awesome without an office ?
There are tons of way to avoid the office rent trap. Here’s how I did it for many years:
- Have your customer meetings at their office
It’ll not only save you money, but you’ll get to know better how your customers work and they’ll be more than happy not to have to move their employees to your place
- Rent a conference room for a day
Many places nowadays (especially hotels) allow the rental of an conference room for a full day or half-days from time to time. This is a great way to invite your customers as it’s also super easy to park at hotels.
- Go to a nice restaurant/bar during the day
Alcohol is a great way to persuade people. We all see these guys that will get a cute girl drunk and bring her home and we don’t see how that would be possible if both were sober. You can use the same tactics with your customers by bringing them to a nice bar/restaurant during the day (choose wisely, a nice and classy place that doesn’t smell spilled beer and vomit) and pay for whatever they will order. Offer some more than they actually want and you’d be surprised at how many good contracts you can get that way. Plus, they will love having meetings with you and will probably refer you to other companies.
- Work from home
No need to explain that one. Buy nice furniture and use space from your home for dedicate work. The great thing about this is that in most countries, you can use your home office as an expensive and get a tax refund from your rent.
My homebase office?
Well, my office is rather simple. It’s a room in my condo, I have a big IKEA desk, dual screen computer, comfortable chair and tons of motivational framed posters. I have a lot of storage for invoices and legal stuff that I need to keep at home. I also have TV in case I’m super bored or if I want to listen to video clips/TV shows when doing alienating tasks. When I want to change ambiance, I either move to my living room with my laptop or go see new faces at a local Starbucks.
Let’s also note that if you don’t have any office, you can work from anywhere in the world and that’s the whole point of living the dream of being a digital nomad!