To Expand Your Business, Go Home

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Jack Nilles, who first popularized the idea of telecommuting in the 1970s, says Stoakes' estimate of cost savings and productivity are in line with research on telecommuting. The president of Los Angeles consulting firm JALA International, Nilles says a company's savings for each remote worker can equal 20% to 30% of the worker's salary, mostly in the cost of office space, while productivity can rise by 15% to 20%. (JALA's site offers a tool to estimate how telecommuting could affect your company.) With gas topping $4 a gallon, Nilles thinks other companies will follow OrganizedWisdom's lead. "I would expect to see a jump, if not a bubble, in this over the next several months," he says.

Loss of Spontaneity

Beyond saving on rent and commuting time, Stoakes says having employees work from home lets OrganizedWisdom "focus on innovation rather than operations" in a crowded space where competitors include WebMD and Google Health (BusinessWeek.com, 2/29/08). "If we need to hire 20 people tomorrow, we don't need to worry about, 'Oh, where are we going to put them?'" Stoakes says.

Taking a brick-and-mortar company virtual has its own complications. New hires have to be set up to work from home. OrganizedWisdom doesn't provide them equipment, although Stoakes says bonuses based on productivity help offset the cost. Stoakes also understands that not everyone is a good fit for remote work, so he asks job applicants if they have ever worked from home and tries to determine whether they'll like it.

The biggest adjustment to eliminating the office, Stoakes says, was losing some of the spontaneous interaction that occurs when teams share space. To remedy that, the company has quarterly team meetings and brainstorming sessions at an investor's office in New York. OrganizedWisdom's full-time staff has doubled to 18 since the company went virtual, and the meetings help maintain face-to-face connections. (The company also pays hundreds of freelance contributors to help curate content online.)

Of course, not everyone can make a virtual office setup work. As a company that used to have an office, OrganizedWisdom is actually more likely to succeed compared to startups that have never shared a physical space, according to Stephen Barley, an engineering professor at Stanford and co-director of the Center for Work, Technology & Organization. "They may find that the lack of face-to-face coordination may give them trouble, but probably not as much as someone who tries to do this without ever having face-to-face contact," Barley says. Assembling remote workers in person at the start of a venture or project can make them more effective when they work from home, he says.

No Going Back

The greatest risk of going virtual is that companies may not plan enough to keep workers connected when they're apart, says Nilles. "You need to find out whether there's some people who simply cannot work this way," he says. "You need to train them how to work together when they're not together."

The approach seems to be working for OrganizedWisdom. The company raised a $2.3 million Series A investment round led by ETF Venture Funds in June. Stoakes would not disclose the company's revenue, but says he expects to turn a profit in 2009a year earlier than it would have if it still had to pay rent. For Stoakes, there's no looking back to the office. "We've gotten pushback from investors, we've gotten pushback from different friends who think we're crazy, and we've told people, 'This is the future of building companies,'" he says. "We will definitely build our next business this way."

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Tozzi covers small business for BusinessWeek Online.