When Is It Time to Grow?

Taking your homebased business to the next level could mean abandoning that cozy home office for commercial office space. Are you prepared for the transition?

Working from home can be a real Catch 22. With little overhead, few (if any) employees and the freedom to run your office however you see fit, you've become so successful, now you've got more work than you can handle on your own. For many homebased entrepreneurs, this all-too-common scenario begs the question: Is it time to move out of your office in order to grow the business, or should you stay the same size--and risk turning down work--because you don't want to or you're unable to grow from home?

"When it gets to the point where you need an employee or multiple employees--you can't simply contract with somebody anymore, but you actually need an assistant, you need people to help you run the business--then you've probably outgrown the home," says David L. Deeds, an assistant professor of management policy and entrepreneurship at the Weatherhead School of Management at Case Western Reserve University in Cleveland.

For David P. Kowal, a sole PR practitioner in Northboro, Massachusetts, the idea of expanding his business outside his home office has come to him often during his 11-plus years of running Kowal Communications Inc. Through the years, he's increasingly found himself freelancing work to other professionals, needing the extra assistance. So a few years ago, he started looking at office space and even considered purchasing property--as an investment--to house his business instead of leasing. And not just any old office space, but something conducive to creativity. "I think anyone that I would hire would want something that has a little bit more character to it," says Kowal, who looked at about 20 different properties, ranging from an old railroad station to a former post office, to try to find the environment he envisioned.

Kowal almost bought an old home to house his business, but, after finding out it wasn't zoned as a commercial location, he decided to remain in his own home and expand in another direction by starting a second business, PR firm 3D-PR, to accommodate the increased demand for his services. Working with a network of independent contractors, 3D-PR allows them to work on larger accounts together, while they all continue to work for their own companies--and in their own offices. The new venture brought in sales of $58,000 last year, adding to 2001 sales of $352,000 for Kowal Communications and allowing Kowal to remain homebased without losing opportunities for growth. Says Kowal, "It's provided me with an opportunity to continue to grow my business, which is something I always want to do--to stretch myself a little bit and work with some people that I hadn't worked with in the past--and it's really starting to come together."

Although cost wasn't an issue for Kowal in considering whether to move into an office, that's not the case for most homebased entrepreneurs, according to Deeds. If you move into a commercial office, it won't be just the lease you'll be paying for; you'll have the added cost of purchasing equipment and office furniture as well paying for extra utilities, phone bills, and Internet and other services. And if you hire employees, you've got insurance, worker's compensation and their salaries to consider. When deciding to move from a home office, "it's the same decision of expanding capacity for any other business," Deeds says. "There's a whole new level of dollar you have to make every month to cover the expansion."

Deeds suggests thoroughly researching all the costs involved with making a move and even bidding on services to get a real feel for exactly what it will cost you, then weigh the benefits of moving against the costs.

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