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NOVEMBER 23, 1999

SMART ANSWERS
By Karen E. Klein

From Home to Office: The Shock of Moving Your Business
Entrepreneurs are often unprepared for the costs


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Q: How do I move my small business from my apartment to an office? I have eight employees and revenues just cover expenses.

---- R.S., New York

A: During any kind of business transition — whether it be a hiring phase, a move, or adding a new service or product line — expect increased expenses and stress, and prepare accordingly. Without adequate planning and sufficient cash flow to absorb additional expenses, you'll put your company in a very vulnerable position if you attempt a move. After all, if you work from home, you can have a bad month or two without fear of eviction. Once you sign a lease for commercial office space, you lose that safety net.

Before you scout locations and hire movers, evaluate whether you really need an office. What value would a commercial space bring to your company? Will it increase sales, eventually paying for the overhead of a lease, the furniture, telephones, and other equipment? How long will it take to recoup your capital outlay? Do you need a more professional-looking workplace or a place to entertain clients? Trying to manage eight employees in off-site locations — I'm assuming most of them work from their homes and don't crowd into your apartment every day — is undoubtedly tough. Creating corporate culture, holding regular meetings, and exchanging feedback about accounts can't always be done effectively by phone and e-mail.

On the other hand, many small home-based businesses do find alternative ways to expand without going to a commercial office setting. "If they've got more business than they can handle, some people are subcontracting it out or moving to a bigger home, renting storage space, or adding office space onto their homes," says John Knowlton, producer of the Business At Home E-zine and Web site, www.gohome.com. Don't forget that if you are taking a home-office deduction on your tax return now, you will lose it if your primary workplace shifts to a commercial location, he says.

Go back to your business plan and see whether a move fits into the goals and the time line you set for your business growth when you started out. If you never wrote a business plan, draw one up now so that you have a solid blueprint for the future. If you move without planning for it, you may quickly regret it. "It's easy to overshoot and then find that certain key clients go away and you've hired more employees than you can use. If you're going to count on being able to cover some extra expenses, you've got to make sure your business plan is solid and you're not growing at a faster rate than you can sustain," says Marty Schmidt, president of Solution Matrix Ltd., a consulting firm based in Boston.

Before you sign a commercial lease, you should have four months of operating expenses in the bank, plus money for your first and last month's rent, security deposits, increased insurance coverage, and new equipment, Schmidt recommends. That way, if you have a lean period in the business while you and your employees are distracted by the move and setting up the new office space, you'll be able to recover and get back on track without seriously straining cash flow.

If move you must, decide first what you need most in a new location. If you want all your employees to work together, you may want to lease all or part of a commercial space. If you mainly need a professional appearance and a meeting place, you could get away with renting space in a professional office suite — a lower-cost alternative that gives you an office, a commercial mailing address, use of a shared conference room and copying facilities, and access to receptionist and secretarial services that you only pay for as your need for them arises.



Have a question about running your business? Ask our small-business experts. Send us an e-mail at smartanswers@businessweek.com, or write to Smart Answers, BW Online, 6th Floor, 2 Penn Plaza, New York, NY 10121. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally.

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