In life, the chances are that buying a home will be your biggest investment, and it’s no less true for a fledgling company. Deciding on the right place to base your business, and when to upsize, is challenging – and getting it wrong could make or break your enterprise.
While some ventures require specific premises and equipment to function,
for the vast majority the decision is based on cost, practicality and comfort. Here we outline the main options available, how the benefits and drawbacks weigh up, and when – if ever – you should step up the premises ladder.
Working from home keeps costs low, provides a familiar environment and eliminates delays in launching your start-up. It’s a popular option: FSB research conducted by the Adam Smith Business School and University of St Andrews shows that half of all Scottish businesses are home-based.
“The number one mistake for a newly established business is to be over-committed,” says Dorian Payne, Director of Elidor Property and Finance. “Working from home allows the business to grow without the pressure of the additional costs.” Cutting out the commute also saves money, and you’re guaranteed to start on time, increasing efficiency.
Despite these advantages, a home office isn’t always a simple solution. There may be legal constraints to consider, such as freeholder’s consent or restrictive covenants in the deeds or lease, and it could even be against your mortgage lender or insurer’s terms and conditions.
There is also the challenge of separating home and work life. “I was originally based at home, but I had family in and out,” says business coach Robin Waite. “It’s a distraction; they don’t fully understand the need to be left alone.”
Conversely, there is the risk of becoming isolated or claustrophobic, which can be exacerbated by advances in technology. FSB research shows that isolation is among the top three challenges for the self-employed, while a report by Aldermore revealed that 39 per cent of self-employed Brits feel lonely. “Being a small business owner can be very lonely, with no one to share the responsibility and no one to talk to about concerns,” says FSB Commercial and Operations Director Dave Stallon. FSB Care can help members who may be struggling with stress or depression: visit fsb.org.uk/benefits for more information.
Networking through organisations such as FSB Connect can help counteract isolation, while a co-working hub could provide daily contact with peers. There is no shortage of such facilities, both private and publicly funded. The Welsh Government, for example, has announced a £5 million investment in four new business hubs, following the success of Welsh ICE in Caerphilly and Entrepreneurial Spark in Cardiff.
“If you’re unsure what you’re doing in terms of your business, a co-working space is really good,” says Marc Thomas, CEO of doopoll. “You’re surrounded by people who will question and support you, and help define your vision.”
However, being surrounded by entrepreneurial types could impact your productivity. “If your business involves a lot of calls where confidential subjects are discussed, there’s no space to be private,” says Mr Waite. “And when you take on your first member of staff, you double your co-working costs.”
“When you’re building a team, culture is important, and you can’t control that in a co-working space,” adds Mr Thomas. “You see people eating at their desks, not taking breaks. You think, everyone else is doing it, so I should, and you lose your personality.”
Piggybacking a company that shares your ideals is one alternative. “A young family and a small flat made it desirable,” says Sian Dacanay, co-founder of graphic design partnership D.R.ink.
“The office rent, although costly, has been worth it for domestic felicity. We moved in with a client in an office share. It felt fresh: we had camaraderie and people to bounce ideas off. We also gained new work through their contacts. Other advantages are having most services included, like a meeting room and utility bills, and more than two of us for Christmas parties!”
The downside is tying your fortunes to another company’s. If they grow, they could need the space themselves, and if they go under, you could be homeless. And, says Ms Dacanay, it’s a culture not of your making. “Office politics and personality clashes within the other company have occasionally put a pall on the working atmosphere,” she admits.
A serviced office could be a stepping-stone between someone else’s space and your own. Less casual than co-working hubs, they provide a sheen of professionalism, pooled utilities and reception services. “The pros include networking opportunities; call answering is professional and convenient, and having bills included is good for budgeting,” says Mr Payne.
Among the cons are higher costs and a lack of branding. “Some blocks have 100-plus businesses and the only advertising allowed is your name on a mailbox,” he adds. “The offices can be small to maximise revenue. Plus there’s no control over who is next to you: it could be a competitor.”
To have total control, you need to lease or purchase your own space. This also incurs significant expense, so should only be entered into once the business is profitable and you’re confident it will be sustainable. “You must be able to justify it financially,” says Mr Waite. “From paying nothing, it puts up costs by hundreds of pounds. The business has to be going in the right direction to justify it.”
Generally, however, he says the increased productivity and confidence from having an office usually outweigh the costs associated: “I typically see businesses double turnover within the first year of the move.”
Dedicated premises can also create a good external impression. “It looks more professional,” says Mr Payne. “It should be more productive, give you that work/life balance and provide more privacy.”
A range of FSB benefits can help members looking to take out their own premises, including legal advice, telecommunications and insurance. Visit fsb.org.uk/benefits for more information.
The FSB Scotland research showed that one in three home-based businesses were put off moving by the high cost of commercial property, with 31 per cent focused on a better work/life balance, and 27 per cent on not wanting to commute. In the face of these powerful motivations for staying put, why should you up sticks?
“You know it’s time when you should be working 40 hours a week, and you’re only managing 20,” says Mr Waite. “You’re feeling a bit embarrassed about people visiting you at home. You want somewhere that represents your business.”
Ultimately, says Mr Payne, it comes down to money. “No one wants to remain working from home forever unless they’re planning to keep the business small,” he says. “If they are growing at a stable rate, are relatively happy to commit to a lease and can afford the rent with the income frequently coming in, they should move.”
Marc Thomas is co-founder and CEO of electronic polling provider doopoll. Founded in 2015 at Entrepreneurial Spark in Cardiff, the company recently moved to a shared office.
“It’s been a rollercoaster ride, by which I mean exhilarating, not up and down!” he says.
“Entrepreneurial Spark was very attractive: it’s a good address, which was a great draw, and there’s access to a wide network of help. If you don’t have any team members, it provides a party of people doing the same kind of stuff – you can debate with them, get feedback. But the drawback is that you can’t engage as a brand until you move out of that atmosphere.
“Now we’re developing an identity as a company beyond being an exciting start-up,” he adds. “Financially, we got a really good deal. We’re sharing space with a big charity and, while our team is small, it means we have people around to socialise with.
“What’s important is a space where people can behave like humans. We’re building an office that feels homely and inviting, where people are comfortable. We work at one big table – you can feel really lonely behind a laptop screen, so we bring everyone together.”