Moving on up – and out
Wednesday, 2 March 2011 |
Operating a home-based business is no longer reserved for stay-at-home mums and retirees. Technology has made it incredibly easy for almost any business venture to begin at home.
With a backdrop of rising commercial premises rents, the low overheads of a home-based business are undeniably attractive, as is the associated benefits of work/life balance and a reduction in travel time.
However, fast-growth start-ups often outgrow the home environment. Maintaining growth in staff, infrastructure and client numbers isn’t easy if you have to cram everything into a cluttered spare bedroom.
But how do you know when it’s the right time to move out of your home-based office and how can you achieve a smooth transition to another workplace once you do make the shift?
Read the signs
According to home-based business expert Jane Shelton, you need to plan to move out of your home office as soon as your business begins to take off, particularly if it is putting a strain on your home life.
“When the demands of business life are making home life more and more stressful, it is time to separate your two lifestyles,” she says.
The Women’s Business Centre Australia says business owners who are unsure if it’s time to move out of their home office should ask themselves the following questions:
- Are you finding it difficult to work productively because you are distracted by household demands? Do you frequently feel torn between caring for your family and caring for your business?
- Does your home atmosphere enhance or detract from the professional image you wish to project to clients?
- Does your growth require you to add employees? Is a business that started in a spare bedroom or basement taking over the house? Is adding on to your house or moving not an option?
If you answer ‘yes’ to any of these questions, it’s probably time to make your move.
Accept your fate
The founders of iiNet, Michael Malone and Michael O’Reilly, started their business in 1993 in the garage of Malone’s mother’s home. For every customer that called the company, there needed to be a phone line.
By July 1995, there were two people working out of Malone’s garage and four people operating at desks in his bedroom. However, this was not the primary reason behind the company’s move from suburbia to the CBD.
“I’d love to say it was a plan but in reality, we had 300 phone lines coming to my mum’s house by then. Telstra was very accommodating but they ran out of capacity,” Malone told StartupSmart last year.
“Their recommendation was the CBD because it was the only place they felt they could cope with our growth.”
Economist Kevin Johnson says despite the advantages associated with working from home, start-ups should expand their business premises in line with the expansion of their operations.
“I remember a market research guy who started his business out of his home. He said when they reached about 12 people sitting around his lounge room, it was time to get an office,” Johnson says.
“From my own experience, I don’t think you’d want more than two or three people [when operating a home-based business].”
“If you’re really not in a financial position to be able to take a lease on an office space by then, you’re probably doing something wrong.”
Assess your budget
Tammy May is the founder of MyBudget, which specialises in helping people manage their finances. What began as a one-woman operation carried out on May’s kitchen table is now a $6.9 million brand with 6,000 clients.
According to May, there were several factors she took into consideration before deciding to move out of her home and into a commercial space.
“It was not ideal to have staff working from home and client numbers rose to a level where travelling to meet them at home or in coffee shops was no longer viable,” May says.
“My advice to start-up business owners would be to ensure you can financially afford the additional cost of commercial rent.”
May says a good thing to keep in mind is that the first floor of a building is often more cost-effective per square metre.
“We had a budget per square metre for ourselves. Also, the size was based on how many offices or work stations we needed for our staff and predicted staff numbers,” she says.
“If you expect further growth, look for a building that has additional space that you can lease in the future. At MyBudget, we took more space within 12 months of being at our first office.”
May also advises start-ups to cut costs in less important areas, such as furniture, to help minimise the financial impact of moving.
“When MyBudget made the step from home office to commercial office, we bought secondhand furniture, including our reception desk,” she says.
“Things don’t have to be brand new to start with, especially when you are on a tight budget and every cent is going back into the business. This will help to keep your capital costs down.”
Serviced offices are a decent option for some small businesses. They remove the burden of property ownership and management, but can provide workstations and meeting rooms, technical equipment and administrative support.
William Willems, Regus vice president of for Australia and New Zealand, says he has seen increasing demand from local start-ups seeking a professional presence without the expense and workload of managing their own office.
“A lot of businesspeople say to us, ‘It’s great to work from home but I really need to move into a professional office because I’m unable to balance my private life and my business life’,” Willems says.
“Also, a lot of home-based businesses feel as if they’re losing their corporate identity and would prefer to be surrounded by other people doing work.”
“But with business sentiment uncertain for 2011, and profits already squeezed by rising wage costs and weak selling prices, Australian companies are looking for more cost-effective and smarter ways to work.”
Willems says companies offering workplace solutions can also speed up the process of moving, which is ideal for start-ups.
“If you’ve got a great idea and your product is ready, don’t take too long [to move from your home into commercial premises] – you need to be quick and efficient in the market,” he says.
Location, location, location
Shelton says despite the need to move quickly in the property market, you shouldn’t make a hasty decision.
“Before even thinking about buildings, rent, contracts and clean-ups, it is essential to conduct preliminary market research with a sample of your best customers,” she says.
“Make sure that the premises are not just a new location but rather offer the chance to make your presence felt in the market.”
Like MyBudget, Planet Chocolate is an example of a successful start-up that made the leap into commercial premises after starting out as a home-based experience.
Now with five stores across Victorian shopping centres, founders Greg and Darren Factor have learnt a thing or two about how to secure commercial space that suits their offering.
“At the start, it really wasn’t easy to deal with major shopping centres… They’re not very interested in giving new retailers a crack,” Greg Factor says.
“We got some good designers on board to put a [store] concept together for us. Westfield liked what we presented to them and started to look for a site for us.”
Factor believes presenting Westfield with a plan, as to how to their store would look, contributed significantly to their success in securing a site.
He estimates the entire process probably took around 15 months, from the time he and Darren first started developing their concept to opening their first store.
“It took a long time. That included going to the different landlords and negotiating the rent… We weren’t running our business but it was still tough,” he says.
Factor says other start-ups looking to move from their home into commercial premises should ensure they choose a visible location with suitable rent.
“A lot of retailers fail because they overpay on rent – it’s not a fixed cost; it escalates every year. My advice to any retailer is to get your rent right but, before you look at the rent, be happy with the location,” Factor says.
Don’t commit too early
The WBCA says home-based businesses should consider every option before signing a long-term lease or approving expensive building plans.
“A flexible inexpensive interim solution may be just what your business needs to get to the next level,” it says.
The WBCA says businesses should check out serviced office suites not only for the savings, but for the flexibility the companies often allow.
“Short-term contracts, from several months to a few years, are usually available… Some temporary office space providers will even rent space for a few hours or a few days,” it says.
The WBCA says if this type of service is not available in your area, try talking to a local commercial real estate manager.
“It’s likely you’re not the only business in your area in need of this service. A little demonstrated demand may be all that’s necessary to push a real estate manager to offer this type of service,” it says.
Bumps in the road
ICT interruptions proved to be biggest pitfall for MyBudget when it came to moving. May says businesses can enlist the help of a specialist to ensure this happen smoothly, but should factor in any professional help into the budget.
Shelton says a common mistake made by businesses is deciding to relocate before every aspect of the move has been converted into “costed, detailed and achievable realities”.
“Unless there is a sound business case for the move, it is worth taking the time to explore alternatives including taking on business partners or at least a transition manager for the business at the new location,” she says.
“This ensures that the smooth transition you have planned has room for change and reconsideration.”
“Don’t be afraid to consult a business development strategist, talk with people in your industry, and remember to give everyone plenty of time to make the move with you rather than away from your home business.”
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