Searching for a new office space should be a fun, not scary, process. Here are a few things you should know
Finding an office for entrepreneurs, and even larger startups, is a difficult process. It’s imperative to select a space of the correct size, in the right neighbourhood, and at a price that’s manageable.
A technology startup headquartered in San Francisco recently contacted us at TheSquareFoot about finding an office space for their growing New York City team. Before coming to us, they were operating out of a co-working space. We guided them through the leasing process and helped them overcome the common hurdles that go along with it, which I’ll share below.
Surpassing the startup stigma
The “startup stigma” is a pressing issue that any startup or young company faces when searching for office space. Young companies with high growth (particularly in technology) have very different financial outlooks than typical tenants. A technology company with over US$150 million dollars in funding is a great start, but landlords need to feel financially comfortable for the long term. It can be difficult to negotiate lease terms on behalf of companies with rapid expansion because boutique landlords don’t typically know much about these kinds of companies and have been burned before (think of the financial crisis in the early 2000s).
In this case, remember to prove to building owners that your company is viable as an occupant and that you have the growth potential to sustain a long-term lease.
After reviewing your company’s financial profile, it’s important to get all of your numbers straight. Determine budget, size of the company and growth trajectory to help get the amount of space you’ll need. Then provide easy-to-understand evidence to support your growth.
The company we worked with calculated funding sources, sales numbers, budgets and expenses, all to prove that they had the means to grow and continue to be a great tenant in the future. They had a handful of people working in NYC, with a growth trajectory pointing towards 15-20 employees within 18 months.
It can vary, but typically each employee needs between 100-225 square feet of workspace, so we decided to look for spaces at 1,600-2,500. Their budget was $45-65 per square foot per year, which is in line with many Manhattan neighbourhoods.
Being in the wrong place
We started looking in the Garment District, which hit all the right notes from a budgeting standpoint, but as it turned out, didn’t have the right vibe and feel for them. This problem was particularly unnerving because “look” and “feel” are difficult to qualify. We went to the Flatiron District, then ultimately to Soho, where the culture more closely matched their needs. Having the right vibe and feel was more important than pursuing overly elaborate lobbies or marble bathrooms. In SoHo, we were able to strike a balance between neighbourhood vibe, employee commute and price. Remember to look for spaces around other creative and tech companies, if that’s where you want to be.
A custom space without a custom budget
We viewed and visited 10 spaces, keeping in mind that they wanted a very specific layout with an open aesthetic and two additional private rooms, but didn’t want to come out of pocket to have a space modified. Finding a space that checks every box is always a challenge, and even more so when looking for a space that doesn’t require too much refitting.
Remember that companies should try to find matches with the basic desired look and feel, with landlords willing to contribute to modifications. If you can, make offers to more than one location to create negotiating leverage. Doing this helps make the next step, making a deal, much easier.
Negotiating a lease
This company ultimately decided on an approximately 2,500 square foot space in SoHo. It took some creative problem-solving to come up with a deal that the landlord could agree with, especially with all the extras they wanted. Ultimately, the landlord agreed to knock down two walls, put new polish on the restored wood floor and paint the entire space. Remember that in order for the landlord to do work, they’ll expect a reasonable security deposit to protect their assets.
Beating the time crunch
When starting a new lease, your company should also take time into account. Keep in mind that too much of an overlap in a current lease could be costly. Companies can help manage this time crunch by coordinating with the landlord to get most of the physical work done before getting to the new office, and setting up additional services beforehand to keep things running smoothly.
Securing a seamless setup
A lot of young companies have difficulty finding and anticipating for security, cleaning and office management, especially when moving to a new space. Startups are heavily focussed on their products and often overlook many details to get their offices set up for business. But when startups come to us for new office space, it’s never just about the four walls. Most companies need help finding all the other services required to get their business up and running. We connected this company with several services and providers for post-lease items, like Managed by Q, a smart office cleaning and management company. We also helped them get customised key card locks for their front door and IT/Telecom service. In the end, their move was seamless.
Currently the Co-founder and CFO of TheSquareFoot, Aron Susman began his career in the International Mergers & Acquisitions group at Deloitte in Houston. Most recently a Vice President with MDTech, a healthcare technology company, Aron oversaw the company’s financial, accounting, and business development efforts. He graduated cum laude from the University of Texas at Austin, where he earned a masters degree in accounting and holds a CPA licence.
The Young Entrepreneur Council (YEC) is an invite-only organisation comprising the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship programme that helps millions of entrepreneurs start and grow businesses.
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