An "outsourced" space can be a cost-effective way to impress clients and get the support and equipment larger outfits take for granted
For small businesses in a never-ending fight for clients, first impressions mean a lot. So when a home-based financial planner wants to impress a CEO, a meeting at Starbucks (SBUX) just won't do. Yet many entrepreneurs aren't ready for the headaches and expense of leasing commercial office space. The solution for some: the "outsourced office."
The founder of one of several companies providing flexible work space is Mark Dixon, CEO of Regus Group, www.regus.com, a global firm with its U.S. base in Dallas. He recently told Smart Answers columnist Karen E. Klein how his entrepreneurial clients are able to cast a big shadow on a small budget. Edited excerpts of their conversation follow.
What's an "outsourced office," and how does it work?
Increasing numbers of small companies are realizing that they don't need full-time offices. Broadband Internet connections are very cost-effective, and with voice-over IP or just a regular telephone at home, why do you need to have people working out of an office? Occasionally, though, you need a place to entertain clients, meet with your staff, or just get away from the spouse and kids to work uninterrupted. That's what we provide.
What are the terms, and how does an entrepreneur arrange for an outsourced office space?
Say you or your team only needs a physical office location two or three days a week, or two or three days a month. Starting at $200 a month, you get access to the office space twice a month with a telephone number and a full-time receptionist to answer it all the time, use of a prestigious business address in one of 350 cities around the world, office equipment like copiers, printers and coffee machines, and Internet access.
The only thing we don't supply is computers; most of our clients bring in their own laptops. If they want filing cabinets, cupboards, and lockers to keep their things in when they're not there, we can arrange that for an additional fee.
That sounds awfully inexpensive. What's the top end of the price range?
The average price in the U.S. is about $600 a month, which includes access to one full-time office. That means you can put your family pictures up and leave all your materials there. If you're looking for a location on Park Avenue or Wall Street, or in Palo Alto, or Trafalgar Square in London, we have space in those prestigious addresses, but they're obviously going to be more expensive.
Tokyo is probably our most expensive location, and that's going to cost about $1,000 a month. Still, if you're a one-person company or a company that employs 10 or fewer people, our price is about 40% cheaper than you'd pay on your own. As companies get larger than 10 people, obviously, it becomes less cost-effective.
How much time and effort go into setting up an outsourced office?
It's actually just a one-page agreement like you'd sign when you're renting a car, and you can do it all online, including paying by credit card. You can walk into the office tomorrow, or next month, for a day or a year. You don't have to set up a long-term contract, and there won't be a landlord asking you for money when you leave.
How many entrepreneurs are taking you up on this deal?
We have about 100,000 companies and 200,000 individuals a day using our furnished offices, meeting rooms, conference facilities, videoconferencing suites, and business lounges internationally. Some facilities, like the videoconferencing suites and conference rooms, can be booked by the hour. Business lounges are furnished rooms near airports and hotels, where road warriors can go to do some work between client calls.
In the last couple of years we've seen unprecedented growth. This year, we're projecting 30% year-on-year growth over 2005.
Aside from the flexibility for home-based business owners, what are the major benefits for entrepreneurs?
Negotiating a long-term commercial lease is a time-consuming and even risky undertaking, because if your company hits a downturn, you'll be on the hook until the lease runs out. It also costs a lot to furnish and equip an office, and most people don't even realize that. They're calculating the price of the lease per square foot and forgetting about choosing the furniture, upgrading the wiring, maintaining the facility, and taking out the insurance. All that small stuff can add up to a large headache, and it's not productive time for the company.
How does your business model work?
The majority of our customers are taking the full-time packages, with the part-time packages in the minority. So we have a solid, long-term book of business from our full-time clients that covers our expenses. The part-time and virtual users maximize our profitability, so we can be very flexible with smaller companies and startups. We like to operate that way, because we see those clients as our future full-timers.
What are the virtual users getting?
They are getting a local address and telephone number, with a receptionist to answer the telephone, take messages, and sort and forward the mail. This is really a popular concept for small companies that want to venture into an overseas market, but are put off by the idea of braving their way into a different country and culture and trying to establish a physical presence there.
How do entrepreneurs set up international outsourced offices?
They can contract for part-time or full-time use of the office, which may be in London, India, China, or any one of 63 countries. I think our services overseas are even more valuable than they are in the U.S., because you've got the same ease of setup, but you've got staff who speak the language, understand the culture, and help you get started in business quickly and effectively.
Renting an office can be a minefield in a place like India. It can take months to accomplish. If you arrange for a place online, before you even get on the plane, you've got a local phone number, an e-mail account, and an address to go to. You're in business from Day One.
How does the pricing work overseas?
It can be quite different from place to place. An office in India is relatively cheap in dollars, for instance, while Japan is relatively expensive. The main thing is that you have an office where things feel and look the same as they do at home. Knowing where things are and feeling comfortable is really important when you're operating in another country.
Isn't that kind of homogenous "rent-an-office" feel sometimes criticized for giving off a cheap, unprofessional vibe?
Yes, but that's not what we're doing. We're providing high-quality offices with staff who are physically on-site. When a client walks in, it looks like any other quality office. This is not a call-center-driven operation. If you're a full-time client, we can do accent painting for you and have your logo printed up and hung over the door.
Where do you see your business going in the future?
Well, over the last 17 years, we've seen almost constant growth of mobile workers and home offices. In the last three years, it's really picked up. Our plans are to open many more centers in both urban and suburban areas, because a lot of home-based business people want a part-time office close to home.
We're even negotiating with a new home developer to put one of our centers in the midst of a new housing development. Everything would be connected up throughout the development with WiFi, and our center would be a hub available to all the people in the neighborhood who are working from home. We haven't signed anything yet, but the idea is promising.
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