2. Does a physical space make financial sense?
You can’t make any sort of business decision without considering finances. Sure, you might want a physical location—but that ultimately doesn’t matter if you can’t afford it.
In fact, 80% of small business owners feel stressed because of their company’s cash flow. So, you’ll want to be mindful of the large expenses you’re adding to your profit and loss statement.
Take a look at your budget. Do you have enough left over each month to increase your overhead costs this way? Keep in mind that there are a number of ways you could pay for your location, including:
- Rent: You’ll pay monthly, and rental agreements are typically shorter term (like 30 days at a time).
- Lease: You’ll pay monthly, but lease agreements are longer term (usually at least one year).
- Purchase: You’ll pay monthly on a commercial real estate loan or commercial mortgage to work toward owning the property.
Your rent, lease, or loan will be the bulk of your expense, and renting office space costs anywhere between $8 and $23 per square foot. However, it’s also worth considering the other costs associated with moving into a physical space, including:
- Utilities: You’ll likely need everything from internet access to heat.
- Furnishing and supplies: If the space doesn’t come equipped or furnished, you’ll need to invest money to purchase all the furniture, materials, and decor needed to complete the space.
- Amenities: Some spaces charge extra for amenities like a shared mailroom or security measures.
- Insurance: You’ll want the peace of mind of your own business liability insurance coverage. In fact, your landlord might require it.
- Commuting: This won’t be as big of a deal in less urban areas. Still, keep in mind that commuting to a building will require an added investment in both time and money when compared with working from home.
The cost of these things will vary based on a variety of factors—like your geographic location and the type of your business. Do some research to assign estimates to each of them. The more realistic you are about your expected costs (and whether you can afford them), the more confident you’ll feel making a decision for your business.