Startup Savvy: Moving From Your Dining Room to Rented Space

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As with so much of entrepreneurial life, the answer for when to move from your dining room table to legit office space is a firm, “It depends.”

George DeCourcy, a finance professor at The University of Texas at Dallas Naveen Jindal School of Management who teaches real estate, says three issues should guide startups on leasing space:

  1. Do you need office space to confer legitimacy? The prime example, he says, would be lawyers who need to show they are worthy of your trust and their fees.
  2. Do you need space to do business? Do you need a place to receive deliveries or make shipments? If you’re a custom furniture builder, it’s going to be a strain on the neighbors—and possibly with local zoning codes—to have trucks making deliveries of wood, paint and supplies at your garage and then picking up finished furniture for delivery.
  3. Do you need space to manage your business? DeCourcy says there are two different issues at hand. First, your business might be at three or four employees and it’s just getting hard to squeeze everyone around your dining room table, or, if you’re all working from home, to meet at the local coffee shop. “At a certain point, it’s important for everyone to be in the same place to improve synergy,” he says. In his own experience with startups, he’s found that getting office space can grow the startup exponentially just by getting everyone together.

 

The other management issue is how space impacts hiring. Sometimes, DeCourcy says, space is used to attract the right employees to make your business successful. “Basically, your office space becomes a recruiting tool,” he says. That could mean potential employees want space with a cappuccino bar or near a fun night scene or on a mass-transit line.

Sometimes, DeCourcy says, space is used to attract the right employees to make your business successful.

Leasing options are plentiful in the Dallas area, including office suites in what DeCourcy calls “Class A” buildings: “These are very nice office buildings in great locations,” he says. Tenants rent just a single office but the rent pays for a full-time receptionist, an address (rather than a post office box), a conference room and Wi-Fi and possibly other amenities.

An alternative, DeCourcy says, is a company that has spare office space in its own property. It might be using just six or seven of its 10 available offices and willing to lease out the remainder to a good tenant. These less formal arrangements might—or might not—include services of the office receptionist, mail clerk or conference room. These arrangements are almost always found via word of mouth.

Some entrepreneurs find space to sublease from a company that has completely vacated a property but has time left on its own lease. “There are some brokers for this,” DeCourcy says. But again, word of mouth is often the best way to locate this space.

For some entrepreneurs, the first step is getting space at a local incubator. There are lots of options in the Dallas area, including The Dallas Entrepreneur Center, GeniusDen and FortWork. At these venues, entry can be as little as $20 a day or $200 a month with no contract required. The atmosphere is upbeat and hip and the ability to be with people—whether they’re in your industry or not—is better for creativity than if you were home watching HDTV all day.

Most startups postpone leasing space as long as possible. That can be a mistake.

DeCourcy, who has worked with entrepreneurial technology startups as well as multinationals, says most startups postpone leasing space as long as possible. That can be a mistake.

“If you’re a post office box guy, the need for credibility will drive your options,” he says. “If clients are visiting your office, this will force your hand.”

DeCourcy’s own technology startup is now part of Intuit. DeCourcy spent most of his pre-UT Dallas career in the finance field and has experience that includes corporate debt financing, venture funding, joint ventures and IPOs. He says getting the right location and mix of amenities and balancing that against the cost per square foot takes some study. In the end, he says, “good office space can change the competitiveness of your business almost overnight.”


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