Small Business

The Case for Staying Put


By Karen E. Klein Q: I'd like to rent office space to expand my home-based engineering consultancy, but with my small clientele, I'm worried about cash flow.

---- T.B.M., Randburg, South Africa

A: Before you sign a lease, meticulously plan the financial details of your move. Research expenses and then charge yourself rent as well as expenses for equipment and utilities for six months, banking the money, suggests Phil Borden, a consultant with the Women's Enterprise Development Corp., a nonprofit small-business training center. You will amass savings and get a feel for how the added expenses will curtail cash flow. Have your accountant prepare a cash-flow analysis to determine how much additional business you'll need in order to ramp up for the move. Don't forget you can improve cash flow dramatically by collecting your receivables in timely manner.

Consider subletting or sharing space with another engineering firm or an alliance partner who will share referrals and equipment with you -- and help you keep your upfront costs to a minimum. Or go into an office suite, where desk space with secretarial support, furniture, telecommunications, and copying are included in a monthly fee, suggests Paul Ratoff, a Placentia (Calif.)-based certified-management consultant.

GO OR STAY? If you want your own offices, seek out a short-term lease with an option to renew in an area where vacancy rates are high. Some landlords in low-occupancy districts offer limited-time free rent, but make sure you don't take an offer tied to an unreasonable lease extension or rent increase to compensate. You can pick up furniture and equipment cheaply at business auctions, or lease the trappings you need and spread the costs out over time.

Finally, ask yourself why you need an office if you can grow your business at home. With virtual-office software and teleconferencing, it's possible to communicate with off-site employees and work closely with subcontractors, all from your home office. With a Web site and a mail drop, your clients don't have to know how small your firm is. And in times like these, there's no place like your spare bedroom.

CLARIFICATION: A "Smart Answers" column published on Aug. 2, 2001 (A Partnership of One )

answering a question from a reader whose partner backed out of a franchise contract, understated the time frame for franchise contract rescission as 60 to 90 days. Some states may provide a right to rescind the agreement if the franchisor violated the state's franchise law or committed fraud in the sale of the franchise. In fact, you may lose your right to rescind if you don't act promptly, but the time for rescission would usually be longer than 60 to 90 days. 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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