Is it worth it to spend money on office space for a software start-up?

Tim makes a valid point about the financial implications, so if you get an office, I would certainly try and balance getting a nice place you can bring clients with getting somewhere affordable to keep the cost down. At this stage I would certainly try and avoid getting into a long lease - if you need to cut costs, you ideally want to be able to walk away with just a month or two of rent to pay. (One thing to bear in mind - at least in the UK, there are a number of additional costs to consider beyond the rent - electricity, heating, maybe local taxes, etc - these things quickly mount up beyond the marginal cost of working from home.)

I just started my second start-up and from day 1 I rented a small office (big enough for 3-4 staff), not too far from where I live. Although I have no income yet, I figured the cost was a good trade-off against the issues I would have working from home. I spent the first 3 months in my last business working out of my dining room, and my wife quickly lost patience with the stuff everywhere. I also faced the issue of being too accessible - as you can see from this question, working from home can put undesirable pressures on a relationship.

On a purely personal level, I also find that leaving the house and going to the office, although I'm still on my own at this stage, makes me feel like I am going to work, and I feel I need that mental separation between home and work. I agree it isn't an issue for everybody - many people work perfectly well from home all the time.

You can always meet clients at other venues. I work from home but joined the IOD, a London based club, which gives me plush meeting facilities when I need them. You can also hire offices/meeting rooms if you need them. The main reason to get an office is because it helps you organise and separate home from work. If you can do that at home, save your pennies until you need the space.

You need to weight the cost/benefit.

The external trappings (office, secretary, etc.) are the result, not the cause, of success. When in Startup mode you should be making a product the customer finds valuable (great article) . Anything that doesn't lead to a useful product for customers who are willing to pay is a waste of valuable time. If you don't know how a software company succeeds it's easy to look at the outside of successful companies and think "if I look like that I'll be like them. But those external trappings are the result of the success, not the cause.

It is very very easy to get off track with a startup. You have to stay laser focused on making a product that will be useful. Read the article Andy Brice (a successful software company owner) just published about 13 lessons from failed startups. Most failed because they were distracted away from creating value from the customer. It's rarely a technical or a marketing failure. If you correctly identify the customer's pain and use that as your compass to keep you on track it's a lot easier to be successful.

Costs There's an obvious cost in money but also in time, as you have to commute to your new office. Also, if you just need to pop in to do something (like start a backup or a 1 GB download) you now have the overhead of a drive to the office. The beauty of software is that you can probably have skills to get the whole thing off the ground (prototype product, basic website, etc.) with sweat equity. So time is your currency. Spend it wisely.

What are the potential benefits?

• Socialize with other people. This can be a huge distraction in startup mode. Unless you're socializing with folks who can help you understand your customer, design your product (to meet their needs) or market to your customer, it's a waste of time. During this phase you should be socializing (at work) with your customers.

• Socialize with colleagues. Unless they are directly helping to move your startup forward it's a waste of time.

• A place to meet with your customers. See the excellent suggestions above for meeting @ Starbucks, for lunch, etc. $600 in rent money buys a lot of lunches. You should be up front with customers and let them know you're a startup and that you are 100% focused on them and the product.

We don't know your company's financial situation or the logistics and benefits of having an office, so...

The only real question is can you afford it? By that I mean:

• does it cut your ability to do other high(er) priority things
• do you have to dip into savings?
• can you pay for a year in advance?
• will it otherwise put a strain on your resources or "runway"

Having a space to call your own, outside of your home, creates a sense that this is real. Working from home is great but if you will be interacting with employees or customers, it's best to have a space that is dedicated to your company. Of course, you have to be able to afford it but I think it's worth it.

I have worked from home and rented office space but I prefer renting.

There are several issues/perspectives to consider when deciding to work from home:

Personal:

• Are you social -- do you like/need the company of other people? When working by yourself after a while it gets lonely.
• Do you need the separation of work and personal space? If you work from home, you are always at work. At the very least you should dedicate a particular section of your home as "work" and don't go near it in your "free" time.
• Are you ok with sitting at home all day long? When it's 4 PM and you are still in your pajamas you may find yourself experiencing cabin fever.

Logistical:

• Do you have or are planning to have other employees? If so, are you ok with them becoming a part of your household? Working late? Working weekends? Keeping food in your fridge?
• Do you need to see clients face-to-face on a regular basis? You will probably need to make arrangements to meet someplace other than your kitchen.
• Do you need to receive business correspondence? If so, are you ok with customers sending mail to your home address/knowing where you live? Consider getting a private mail box for your business.

Financial:

• Can you deduct your home office? In the US there are pretty strict requirements for what can and cannot be deducted as a home office expense and how household expenses must be pro-rated.
• Is there affordable office space available? As mentioned in other posts there are many options: sub-leasing, using an incubator, sharing space or bartering for services.

I moved into an office almost a year ago and have no regrets. I got enough space that I can have three or four employees in this location but right now my staff is all remote. Couple of things I learned:

1) I'm much happier and so is my wife. It's nice to leave the house and my wife is very happy to have me out of the house. It does create that separation between work time and home time and has helped me mentally turn work off which is almost impossible for me.

2) I found it very hard to find less than 1000 ft unless I wanted to sublet. I didn't really want to sublet so I ended up with more space than I needed/wanted but it still worked within my budget. If you're not averse to subletting, it's not hard to find someone with an extra furnished office they need to rent out. I found a few smaller spaces but none really worked for me and none would have been much cheaper than where I ended up.

3) My 1000 ft. is still cheaper than the corporate office suite solutions in my area.

4) If you are going into an empty space, figure out what it will take to furnish it. I ended up getting a really good price on some nice ergonomic desks/cubes/chairs from a liquidator. For what I was planning to pay for one egonomic desk for myself, I got four desks, modular cube walls, nice erognomic chairs, and a small meeting table for my office. Of course now I'm stuck with four which hurts my mobility but I can sell all of these off on Craigs list for more than I paid for them. Find your local/regional office liquidators. (I tried to just buy two of the desks but he didn't really want to figure out how to break up the set/mess with setting it up for display so he just sold me everything he had in that set for what he was going to charge me for two. These guys will negotiate.)

5) Utilities/taxes can add up. I was able to keep the utilities low by using a hosted, pay-as-you-go voip service. I was able to drop phones on my employees desks and we can trasfer/conf call easily and it was a lot cheaper than trying to install a traditional phone system/buy traditional lines/trunks. Most months I'm paying less than I would for a single line/trunk, and my equipment cost was much lower.

6) I haven't started actively looking to sublet any of the space but it's something I've considered. If I can find some other tech entrepreneurs, I wouldn't be averse to it. I would start marketing the space at some of my networking events, so if you go to any networking events, you might ask other founders if they have any extra space you can rent. They may have space they'd rent but don't want to go through the hassle of renting it/aren't actively marketing it.

For me you left out the 3rd option which is the one that has served my few startups best. That is working out of a Starbucks (or Peets, or any other coffee shop). Surprisingly you meet many other people in a Startup situation, and you also realize that many business meetings happen in these places rather than the old-school conference room or office.

Also working by yourself can feel isolated and being out and about has helped to keep me motivated and stimulated. Also you always have easy access to caffeine. If you need privacy, putting on your iPod is the 21st century equivalent of closing the office door.

For years I rented office space via Regus, and from Craigslist .. once I got used to this I never went back. Especially when computing in the monthly savings (Regus was $800 a month for a tiny box ... and nickle and dime'd on everything). Also in the Starbucks in CA you tend to meet a lot of software folks, where as in the shared offices I seemed to only meet Lawyers.

Do your customers care? Some people may not feel you are a legitimate company unless you have an office with ample staffing. If all contact is over the web/phone, they may not care. Then it boils down to where you personally or the others in your company can get the most done.

Getting office space is really up to you. Some people enjoy working alone out of their homes while others would rather go to an office because they feel more productive being around other people.

There have been a couple of coworking space locations open up around town. There you can rent space by the day and get to work along side other entrepreneurs who like the vibe of working in a collaborative and creative space. Might be a good option for you to try out a couple of days a week and see if you like it.

There are also a few executive suites in town that rent offices. There are Class A options that are obviously more expensive however there are other less expensive options that would work well for you, however that depends on where you live and how far you are willing to drive each day to the office.

This site may help you locate some good options, including office sharing, hotelling, virtual offices, etc: abetteroffice.com

I personally feel during the development phase, don't spend money on an office as you don't need it and you can set up meetings in some coffee shop or over Skype.

Once when you think your product has all the features for launch then share an office space so that it would help you to set up meetings with your client.

Do it only if you absolutely need it and cannot do without it. You can always defer the office until your product is released and/or starts generating revenue.

Just a warning on renting your own office. Whilst it may seem cheap when compared to the relatively high cost of a services office, remember that there are numerous additional costs, not to mention the stress and time it takes to organise everything.

For example, the first extra cost is the landlord will probably want at least three months rent in advance, plus get you to pay for his landlord to draw up the lease agreement. Then you need to furnish the office, so as to make it liveable. Then you need to deal with the phone company, internet access (who won't give you an internet service until the phones are in), the electricity company and the myriad of other costs.

All this takes a lot of time, effort, money and commitment. So please be aware of this before committing to a lease.

Is it worth it for a software start-up to rent office space? "It depends on the needs of the individual's creative and management styles." Money should not be the only factor. If you get a million dollars to start up, new owners must think in the long term just as if the money was not available. Numerous businesses start out with deep pockets only to find them depleted before the software project has been completed.

For people seeking to move from home to a professional office environment, cost is not the only consideration. I hope someone in Austin will start incubators and shared office spaces geared towards small business owners who are also moms and parents who are seeking friendly, casual, and professional creative space. Is it worth it to spend money on office space for a software company? It depends. Read the discussions here and made a list of which factors are important to you. Fold a paper in half. One one side are pros. On the other side are cons. Do the math and weight the non cash costs then decide which path is best for your creative and business management styles.

A virtual office is a combination of off-site live communication and address services that allow users to reduce traditional office costs while maintaining business professionalism.

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