One of the most important decisions you'll make as an entrepreneur is deciding where to put your business. Real estate is one of the biggest costs for any business, and can have a huge impact on your ability to attract talent. That's true today more than ever, with startups and many legacy companies feeling pressured to offer the world's coolest offices as a way to lure and retain employees.
David Inns, CEO of GreatCall, a San Diego-based provider of digital home healthcare services to seniors, recently shared some things every business owner needs to know about real estate.
Earlier this summer, GreatCall moved its headquarters for the third time since its founding in 2006. Along with views of the Pacific Ocean and Torrey Pines Golf Course, the company has roughly 1200 employees in over 56,000 square feet in its new space at 10945 Vista Sorrento Parkway.
Inns offers the following advice for any CEO looking for a new address:
- Don't spend on real estate in the early days and keep leases short: "You very quickly may need new space," Inns says. "If you've got some inefficient, long-term lease it's going to really cause problems with your cash flow and your ability to move."
- Subleases are ideal: Subleasing from another company in the early days of GreatCall was "a key part of our strategy," Inns says, suggesting you can save 25 percent to 40 percent "if you can find another company that's put themselves in a bad situation."
- Build enough space to grow...a little. "I'm always trying to be careful but want a big enough space where we have some options to expand in the near future if necessary."
- Limit the openness. Open floor plans are all the rage but "people like to have a place they can call 'home' even if they're only spending only part of the workday there," Inns says. "We're opting for a happy medium between 'hoteling' and having some ownership and the benefits of collaborative space."
- Mind the perks: High-end real estate with fancy furniture, on-site chefs and baristas, gyms, beer taps, and other perks are now standard at tech giants like Apple and Google; many venture-backed startups are offering similar enticements. But all those goodies will eat into your cashflow -- literally in the case of on-site catering. Think carefully about what your employees really need -- and whether candidates who expect all the trimmings are a good fit to work for you.
- Employees' routines matter: "We literally did move across the street," Inns explains. "We didn't want the drama of even moving two miles south which could add 15 minutes to people's commutes. People get used to the space, the facilities [and the surrounding area]. Even the physical move [was] much easier."
(In mid-August, BestBuy agreed to acquire GreatCall for $800 million. Best Buy says GreatCall will operate independently for the foreseeable future; Inns was unavailable for additional comment.)
The Goldilocks Test
On the other side of this equation is the property management company, a.k.a. your landlord. Historically, this has been an adversarial relationship -- built on mutual mistrust. But it doesn't have to be that way.
"Landlords matter," says Bob Silver, CEO and co-founder of The Bravitas Group, a Montclair, New Jersey-based developer that manages 11 properties.
Silver, who became a developer after a successful Wall Street career, says tenants should expect more from their landlords.
Most clients have "had a home office...and now they're making a big leap with a big risk," he says. "They're scared to death and they don't trust anyone [but] the principals at smaller businesses I'm seeing really want a non-vanilla space, with great infrastructure."
According to its website, Bravitas "creates green, architecturally interesting spaces through the adaptive reuse of existing, outmoded structures."
In sum, the company's properties are blank canvases.
At an initial meeting, Silver asks potential clients to "tell me what their dream office would be."
He then works with an architect to design a layout of what the space could be, which is presented at the second meeting.
"I'll say 'based on this space and layout, it's going to cost you X-dollars per month,'" Silver explains. "Once they're in we bend over backwards to service most anything. The biggest hurdle for a startup is capital but it's all built into the lease," including costs for the architect and custom 'fit-out', along with other services
"What we do is rare," Silver admits. "I'm not sure why."
One obvious reason is this kind of service comes at a cost, which many business owners don't want to incur. But given how much your office says about your company, don't settle for just any old space: keep searching until you find something that feels 'just right'.