When Does Renting Furnished Office Space Make Financial Sense?
Thu, 04 May 2017 | Written by Corporate Suites Staff
It’s a common misperception that NYC shared office space is only for startup companies. Some say that going into furnished NYC office space only makes sense in if the company has less than 20 people but not for companies any larger than that. The reality is that there’s no hard and fast rule.
How to Find Out if Furnished Office Space is Right For Your Company
For some small to medium-sized businesses, renting furnished office space makes financial sense while for others it would be a bad business decision. Factors such as workforce instability, growth rate, appetite for financial risk, and technology requirements should be taken into account. Read this blog to determine if furnished office space is for you.
Consider Your Growth Factors
There’s a saying that small companies are small for a reason. The following growth challenges are typical of those faced by small and midsize businesses and are easily overcome by being in furnished office space.
Let’s take the case of a 10 person company in Manhattan. For a slow growth company, every penny in the budget matters. As real estate is one of the largest expenses on the income statement, there’s the opportunity to save on overhead by being in one of the many NYC furnished office space centers available. The company could save money by not paying the full share of rent for communal areas such as kitchen, lobby, and meeting room space which are probably not utilized to their fullest 100% of the time.
Having a receptionist is a big plus for a growing company’s sales. According to industry sources, “One-third of those going to voicemail hang up and most that leave messages still call another company afterwards” (Conversational, 2015). When the first to market wins the buyer most of the time, clearly the lack of a receptionist is a huge obstacle for any organization who wants to grow its sales. Many furnished office space facilities in NYC offer their clients the use of a shared receptionist which can also create tremendous cost savings. In addition to paying one less salary, you avoid worrying about other HR-related obligations.
Moreover, furnished office space has benefits for an NYC company’s image. By the time most small companies get done paying the rent, utility bills and employee salaries, the office look and feel is the last thing on their minds. Maintenance costs can creep up pretty quickly. When office furniture gets worn down or the bathroom isn’t as fresh as it should be, it’s the first thing that people notice. Suboptimal quality sends a message about the quality of the enterprise who lives there. Furnished office space, especially in expensive locations such as NYC, can make a difference in the brand. An elegant, modern office can present make a small company appear efficient, sleek, and on the cutting edge of innovation rather than shabby and penny-pinching.
Class A office space for is hard to come by and usually only affordable for the top echelon of small companies in NYC. The average 10 person company won’t be able to reap the benefits of an office building with high security, close location to public transportation, and overall cache image. Corporate Suites, for example, offers eight Class A business centers in NYC for clients to choose from.
The rate of growth can be a decisive factor. A rapidly growing 10 person company may actually be better off on its own. When a company grows to more than 15 people, the cost efficiencies of being in a furnished office space may lessen. For companies of 50 or more, dedicated office space is worth the cost most of the time.
Think About Workforce Instability
Let’s examine the case of a large insurance company with an NYC office and an active agent recruiting program. If the company recruits 20 new employees every month, trains them, and then puts them through a rigorous program that only 1-2 people survive over the course of 6 months, it’s safe to say that you’re going to see some empty desks. The grueling insurance agent quota engenders a high layoff rate. Renting space to accommodate 240 employees when in reality you only end up using 40-50 seats is a quite waste of money to say the least. Moreover, it can be a detriment to employee morale to see empty desks everywhere you turn. This image of solitude can make a daunting task even harder psychologically for the survivors.
Now let’s say that the company decides to up its recruiting efforts and increase the pool of agents. Now they need even more desks for an uncertain amount of time, and to boot, they’ll need space for the recruiters and trainers who are part of the ramp-up effort. Now they’re in another conundrum.
What is the situation is rosier than imagined? If the insurance company gets a good batch of recruits, they could potentially retain 10 employees per month. If this happens a few months in a row, now you’ve got 20-30 extra people that you don’t have space for. Given the highly sensitive nature of financial data, allowing the agents to share desks would invoke compliance violations. It’s not just desk space. They’ll need more meeting rooms, better broadband, and more café space where people can eat lunch. Opening another office is time-consuming and a risky proposition as growth can fluctuate as the agents continue to be under the quota system. There’s no way of knowing if this trend will continue or fizzle out. Predicting the weather would be easier.
This aforementioned example illuminates how for companies of all sizes with unstable workforces, whether large or small, furnished office space can provide the flexibility to solve this problem.
Assess Financial Risks
There are some pretty big financial risks to leasing office space if you’re a small company. Signing a long term lease is a heavy obligation for companies with unstable income. Let’s say that you opt not to take on the burden of a long term lease and choose to pursue options such as subletting. This makes your business vulnerable to the financial condition of the lessor. If they go out of business, you’re suddenly out on the street. Other financial risks are present because of the lack of clout with the landlord. When building issues arise, you are subject to the willingness of the lessor to help you and may have to foot the bill on your own. In other words, a sublease provides zero control of the office space which can lead to aggravation and cost.
Instead of subleasing, entering into your own temporary leasing arrangement with one of the many furnished office space providers in NYC affords you control over your own destiny.
Consider Technology Requirements
Technology is often the last business investment that a small company makes. While the movement to cloud computing has allowed many small companies to slash their infrastructure costs, there still exists a need for IT support, even in a server-less environment. For example, mounting cybersecurity risks and the growth of hacking warrants the need for dedicated IT resources. Even in a mobile office environment, workstations, networks, and devices need maintenance. The costs are substantial for small and midsize businesses. According to AMR Research, for such businesses over 6% of revenue goes to IT needs. (as cited in Jaworski, 2014)
Furnished office space is great for companies who lack the means to maintain an in-house staff. A furnished office space comes wired and ready with phone equipment and a technology support staff to attend to what you don’t get paid to worry about – making sure the infrastructure runs smoothly. In most business centers, conference room technology, server infrastructure, and IT storage facilities are far better what a small company would be able to provide on its own.
Elegant, Discrete, and Secure Private Offices
Corporate Suites offers private offices in a shared environment that are elegant, discrete, and secure. Our flexible private office packages will accommodate your SMB’s business growth as it ebbs and flows, and you’ll love our concierge office team, responsive IT staff , and choice of eight locations across Manhattan. Email email@example.com today to set up your private tour.
Conversational. (2015, January 23). Should Small Businesses Hire a Virtual Receptionist? [Web log post] Retrieved from https://www.conversational.com/small-businesses-hire-virtual-receptionist/
Jaworski, Beth. (2014, May 31). The 3 Costs of IT. [Web log post] Retrieved on May 1, 2017 from http://www.envisionitpartners.com/the-3-costs-of-it