From home office to ‘real’ office

Advisor: I have been in the business for almost three years and I guess I am doing OK — considering that I became an advisor at just about the time the entire world’s economy almost collapsed. It was a struggle at first, but now clients are coming on board at a fairly steady rate and my revenue is becoming more predictable.

My dealer firm operates under the “no frills” model with a higher payout schedule, but I have to pay all my own expenses. I have always been an entrepreneur type, so I prefer this arrangement because it puts me fully in charge of my profitability. For that reason, from the beginning of my career, I have worked from my home to keep costs down. I have a nice, private setup with all the equipment you’d find in any other office and, except for a few instances, clients either don’t know or don’t care that I am not located in a formal office setting.

Here’s my dilemma: I am a strategic sort of guy and I recognize that if I really want to build a significant practice, it is probably time for me to “graduate” to the next level by opening a proper office.

I had anticipated this day would come. The trigger for it to happen now is that the growth of my business dictates the need to hire at least a part-time assistant, and it would be impractical for him or her to work from my home office. Aside from the physical space limitations, my spouse would not be too happy about having another, unrelated person in our home every day — sometimes by himself or herself if I am at an outside meeting.

I have pretty much made up my mind to make the leap but am still a little apprehensive. Perhaps I am just looking for someone to nudge me enough to make the actual commitment. Can you do that?

Coach says: The obvious first comment is: congratulations! Getting through the first few years of building a financial advisory practice can be challenging at the best of times. You have not only survived; you have grown your business under the unprecedented tough market conditions and restive consumer attitudes that had accompanied the 2008-09 stock market meltdown. That is a testament to both your determination and your capabilities.

The second commendation you deserve is for making this decision a strategic one — as part of a plan to grow your business rather than simply because you feel the need to make a change. Working from home isn’t for everyone. I have done it myself a couple of times in my career and loved it — most of the time. But it takes discipline to keep your personal and business lives separate and not let the intrusions on your time, energy and focus become overwhelming.

Funny, isn’t it, though, how so many office-based people dream about a life working at home, while people with home-based businesses long for the day when they will no longer work and live in the same place?

So, the basic question really is: why would an advisor who has built a successful practice so far while working from a home office want to trade his or her current 10-second walking commute for one that probably requires him or her to battle heavy traffic twice a day? Why give up the shorts, T-shirt and flip-flops you can wear (between appointments only, I hope) for daylong business attire? Most important, why vacate what is essentially “rent-free space” to take on the commitment of an office lease?

Although there may be personal reasons for wanting to locate your business outside your home (such as your spouse’s discomfort with an employee working there), there is only one good business reason to do so: you feel you can grow your practice at a rate that will offset the increased costs. In other words, you are convinced that you’re investing in the future value of your firm.

In that case, as with any other investment, you need to assess the potential risks against the anticipated rewards.

Let’s look at the risk side of the equation first. Here are a few things that could go wrong:

> You underestimate the additional costs of operating an office.

> You do not experience the increase in revenue you expect.

> Your fluctuating income doesn’t always match your fixed costs.

> The office space you rent turns out to be unsatisfactory. (Things don’t work properly, such as heating or air conditioning; you have noisy neighbours, etc.)@page_break@> You miss seeing your kids when they come home from school at lunchtime.

More optimistically, let’s consider the rewards that you can accrue:

> The ability to accommodate a staff person frees you to focus on business development.

> You are likely to conduct more client meetings in your office than you would at your home.

> Clients may be more willing to refer others to you because you now have a “real” office.

> You become more energized, disciplined and focused in your business activities.

> The move takes you through the next phase of your strategic plan.

The rewards are, obviously, good things. So, let’s address some of the broad-based risk issues:

> Revenue Not Matching Expenses. The best way to ensure revenue and expenses are in sync is through sound planning. I am not talking only about setting higher revenue objectives but about completing a detailed business plan built on a realistic assessment of what is possible, given your past experience and current resources. If you’re adding a team member, for example, how will you spend the time that is freed up for you? What business-development activities will you now employ? What results can you expect from those activities?

> Budget/Cash-Flow Management. Of course, your plan will include a budget — and I suggest you set one based on each of three scenarios: worst case, expected case and best case. Chances are good that there will be times when costs temporarily outpace income and that you’ll have to draw on your personal resources, such as cash in the bank or a line of credit — so, have one (or both) available in advance.

> Unsuitable Office Space. Renting office space is serious business. Your premises will have an impact on your brand’s image among both current and future clients. Your motivation also will be affected. If you are happy in your working space, clients and staff will feel your enthusiasm and everyone will have more fun.

So, take the time to determine your needs exactly, such as location (downtown office tower, suburban mall, midtown factory turned funky office space…). What about that commute and parking for you, your staff and, most important, your clients? If your target market includes people who prefer to use public transit, how far is it from the nearest stop to your door? (Think of a howling blizzard in winter.)

You can make the transition gradually by first setting yourself up in an executive office suite, for which a monthly fee gets you a private office, a working area for your assistant, reception area and telephone answering, use of a boardroom as needed and the standard office furniture and equipment. This is a way to gain well-equipped and well-appointed office space while keeping your expenses down. I know successful advisors who have moved into a space like this early in their careers and are still there after many years. They love the professionalism they project without the worry of managing the office facility itself.

The other extreme, of course, is to commit to some empty space in a commercial building on a two- to five-year lease, hire a designer to lay it out and contract an office furniture and equipment supplier to outfit it while you make all the other arrangements needed for telephone, Internet, signage, permits, etc. This way, you will truly own the space and it will perfectly reflect your requirements.

Once you move into a formal office — regardless of the out-of-home option you choose — you should mark the occasion with a little celebration. In many people’s eyes, you will have “arrived” as a result of this transition, so make a big deal of it. Send out a media release to get a little public relations; invite your clients, centres of influence and associates to a fun open house.

As I said at the beginning, the ultimate decision should be a strategic one. If you feel that moving into an office will allow you to take your business to its next level, then go for it. If you are not sure, rework your plan to define clearly the point at which it will make sense to do so. IE

George Hartman is president and CEO of Market Logics Inc. Send questions, comments and opinions on any aspect of practice management to george@marketlogics.ca.