Home Office or Commercial Space?

In the first of this two-part series: Working at home vs. setting up a commercial office. In the second: How to plan and execute such a move

by Karen E. Klein

I am contemplating moving my business from a home office to a commercial office space. What pros and cons should I weigh? Any tips on making the transition?

Home-based entrepreneurs typically start looking for commercial office space when their businesses overflow the spare bedroom. Either sales volume or staffing needs have grown to the point where they can't be accommodated at home, or the company wants to present a more polished image to its clients and business associates.

Sometimes, entrepreneurs just don't like working at home, with all the distractions of family nearby. They want an atmosphere that's closer to what they may have experienced in a corporate setting.

All of these motivations are legitimate, says Gene Fairbrother, small business consultant for the National Association of the Self-Employed. But a longing to leave home isn't a sufficient basis for making such a crucial move.

First, you must objectively answer several questions: Will the move benefit your business growth? Will it enhance your business atmosphere and your quality of life—business and personal? Can your business afford the financial requirements of a commercial office?

"Pros and cons will vary from person to person. Of course the biggest con is the direct and associated costs of maintaining an office. However, if having an outside office can generate more income and profit—such as by expanding staff—then the costs become irrelevant," Fairbrother says.

Look at Future Revenues

Operating costs are just one of the critical issues that you should evaluate. Don't forget to factor in the loss of the home-office deduction if you're claiming that now on your taxes.

You'll be paying more for gas to accommodate a daily commute (see BusinessWeek.com, 1/17/06, "The Ins and Outs of Homesourcing"). And you'll probably have to purchase office furniture, additional equipment, and insurance, as well as pay the one-time costs associated with the move.

Still, money isn't the only consideration, says Robin Lasher, a consultant with the Tarrant County College Small Business Development Center in Fort Worth, Tex. "Although you must recognize and be able to afford all the related costs, it would be short-sighted to base your decision on costs alone. What are the current and long-term benefits to both the company and its clients? Does moving provide immediate or future opportunities that will generate revenues and profits not available to you as a home-based business? Has the convenience of home allowed too many distractions that interfere with developing efficient and effective work processes?" she asks.

The other wrinkle is that one person's "pro" is another's "con." For instance, some entrepreneurs love the ease of working from home. But others find that convenience too tempting.

"The home office and its attendant quality family time can be hard to leave. By having an office away from home it is easier to separate your business life from your family life," Fairbrother points out.

Alternatives Available

If you are hiring employees, bringing them into your home is generally not a good idea, says Jeffrey A. Landers, a serial entrepreneur and the owner of Offices2share.com. "At the very least, it can present many awkward situations and privacy issues. Also, there may be legal and insurance ramifications. Many communities have zoning laws that restrict or prohibit businesses operated from residential properties," he notes (see BusinessWeek.com, 6/12/06, "Best Places for Entrepreneurs"). Meeting with clients can also be awkward if you work from home.

But there are alternatives you might consider that don't involve moving into full-time commercial office space, says Paul Edwards, a small business consultant and author, with his wife, Sarah, of 16 books including Working From Home.