Just for a moment, lets imagine that we are going to set up an office. The office should be located maybe not in the center of the business district but not to far away. Needs to have a reception type area, and at least one separate office for maybe a total of 50sqm minimum, which should include some space for storage and such. Now lets take a look at what this may cost to set up and operate for a year.
THE LEASE
May as well go with the biggest expense first, and for the most part, it will be the biggest expense by far. However the cost can vary greatly depending upon the location that you choose. I have found that in the local area near where i am now that a 55sqm office, can be leased for $1,300 per month plus tax and outgoings. All up this comes in at about $20,460 for one year. This is located in a area just south of Brisbane, if you were to look at leasing a similar property in Brisbane it self you would be looking at closer to $40,000 per year.
THE FURNITURE
At a minimum for an office you would want to have an area that at least resembles a reception area, whether you actually decide to have a receptionist or not, the area allows for a separation of your work area and where clients may enter your business. For your office, you would look to have a desk, maybe a bookcase, and a sideboard, which can act as storage and a place for your printer, fax machine etc, plus a chair for yourself and 2 or 3 chairs for visitors. Purchasing these items alone from a office furniture store would come close to $3,000.
For the reception area, a reception desk a chair behind and a maybe again 2 or 3 chairs for waiting visitors, plus coffee table which you could hold a more casual meeting with your client at. Again a conservative estimate for this would come in close to another $3,000. Which would give you a total of close to $6,000 for furniture.
THE TECHNOLOGY
Really this is an area that having an office means you need to do a bit extra then you may otherwise. Just like with the furniture you need to prepare for future needs, even if it is just for one additional person. So your basic needs would be 2 x computers, a Colour Laser Printer (or mono laser printer, and colour ink jet), a fax machine, a basic phone system, external network drive for backup, and an ADSL router. You could replace the 2 computers with laptops, however this would not really cause much saving. Your total cost is likely to be around $1200 x 2 for computer, $400 for printer/s, $400 for fax machine, $1,000+ for a basic phone system, $200 external network drive, and $100 for ADSL router. For a total of $4,500.
THE SERVICES
There are a few services that you need to have if you have a office, these generally all cost money and will quickly add up over a year.
- Telephone : It is a good idea to get at least 2 lines, so that you can be on a call and another call can still come in, additionally a separate fax line also ensures that faxes can get through without being affected by other calls. While two lines may be suitable it really depends upon how many calls you get. The costs associated with phone lines can vary greatly depending on the level of service and additional features that are enabled, however i would estimate a minimum of $50 per line, for someone who makes a low volume of outbound calls and faxes.
- ADSL Broadband : A fairly standard business grade ADSL service can be connected for about $100 per month.
All up even for these basic two services you are looking at around $250 per month or $3,000 per year.
JUST THE BASICS
So really this is just the basics that you need for setting up an office and when you put it all together for just the first year it does quickly add up
Lease $20,460 + Furniture $6,000 + Technology $4,500 + Services $3,000 = $33,960. This assumes that you are not considering also employing someone for reception, which if you do happen to get busy is almost a necessity with an office, if you plan to be in and out during the day. You are probably looking at a minimum of $40,000 a year for a receptionist when taking into account the expenses associated with employing someone.
THE CONCLUSION
While some businesses literally may need an office because the clients do visit them more often, especially if you are selling to retail customers. The general cost of having an office is quite high, considering that you need to make this money as profit above the expense of product before you actually make any money for yourself. While it will get a little better in the second year when you don’t have to purchase new furniture or technology, there are other costs that just happen to come up, like the almost constant need for stationary supplies, printer toner, and other supplies that you don’t expect.
…I liked this article a lot.
In considering the equation as part of a choice between having a fixed office or using a home/mobile office, I found however that some of the costs are present on both sides. The technology and services are required for either approach.
Obviously the question about staff is a critical one, and again one that I think is independent of the fixed or mobile question.
So for me, this article says that I’d look at about $26,000 as a cost for a fixed office with no staff and presuming that I’d buy rather than lease the furniture. (The lease may be equivalent to the cost of purchase however.) Add a virtual receptionist and it’s a little more.
Clearly, one should see a burning need to have a fixed office to justify that overhead.
—v
Thank-you so much for your comment Vincent.
Essentially this is what it comes down to, you do really have to be able to justify the costs associated with an of office. It is a major cost to just about any business. The biggest cost is the lease i guess, however this also needs to be taken in perspective.
If you consider the other costs over the long term, then the lease may be much smaller in comparison. For example the general idea that if you have an office you are more likely to have additional staff to what you would really need. The actual cost of extra staff could potentially dwarf the cost of the lease itself.
This is just one consideration, another that extends from my post above is that this is just a fairly basic cost estimate. Based on a fairly small space, I did have the specific size, but it is somewhere between 30-50sqm not even in the major CBD area. Also some of the other costs could potentially be under what the true cost may end up being.
So yes it really does mean you have to be more sure then anything you can imagine that you do actually need an office.
…I agree completely. And your point about staff is well taken. Not only would one be well advised to cast a cautious eye on the prospect of adding staff (which is always significantly more expensive in the real world than the cost of the salary) but having an office would be likely to invite one onto the slippery slope of “requiring” at least one staffer. (I hadn’t thought about that implication, but I can see how it would easily go that way.)
When I read your article the first time, I thought about how one might virtualize a receptionist of staffer. I visualized a reception area with a comfortable chair and a luxurious workstation display. A visitor could approach the workstation and activate it with some obvious means. A virtual staffer could respond and interact with the visitor. Such a staffer could split time between many such clients given that the rate of visitors would probably not be a steady flow. (Otherwise an actual staffer would be indicated, and for that matter it would justify a full office.) It would be very Disney-like to have someone speak to you directly from “inside” the workstation screen. It’s a silly idea, but interesting and possibly workable for someone like me who might have one or two visitors in a day.
No matter what though, it is apt to consider that establishing a traditional office is a significant matter and should be carefully considered before engaging with the expense. The costs can sneak up on you.
My interest in this is that I work one of the top places in the US that suggests itself strongly as a location for a virtual office for a global business. (I consider those places to be New York, Washington, and Silicon Valley. There are a few others, but I think those might be tops.) In pricing such a services, I can see that I could be more aggressive than I previously thought. The value proposition is high, but the potential cost for a traditional office is a consideration and a significant one.
Thank you for engaging this matter. I certainly found value in this conversation.
—v
Vincent Lowe
Managing Director – Schoolhouse Earth