When to open another office as a startup
You are the COO or CHRO of a fast-growing tech startup in an expensive city, and you need to hire more people (and expand your real estate footprint). But the cost of talent and real estate in your city are so high that you want to scale elsewhere. But where? And how?
In one of our latest blog posts, we talked about how to know where to open a new office. In this post, we’ll talk about when.
Many companies wait until it’s too late to start looking for a new office. It’s easy to wait — when a company is growing, there’s no time to think about anything that isn’t an immediate matter. However, waiting causes many companies to make quick decisions about two of the company’s costliest expenses: real estate and talent.
Together, talent and real estate typically make up around 80% of a company’s expenses. We’ve heard of too many companies being sunk simply because they didn’t have the expertise to open an office. (They paid too much, moved in at capacity, didn’t negotiate a termination clause, the list goes on.) But this can be avoided.
Planning early makes it much easier and less stressful for a company to find the right office and people for its growth needs. There are many factors that go into planning a successful expansion, so how do you know when and where to start?
What to consider
What is the capacity of your current space?
If you’ll hit capacity long before your lease is up, the time to think about getting more space is right now. Employee experience plays a huge factor in attracting and retaining the top talent. It may be tempting to cram more and more desks into your shrinking office, but there’s a balance between saving on costs and showing your team you care about their workplace experience. They will be much happier and more productive if they have enough space to do their work, and you’ll increase retention in return.
When is your current lease up?
It can take months to find the right space and secure the right lease terms. If you want to find a new space, or if you don’t have a renewal right, you’ll want to start looking for a new office as soon as you can. The earlier you start, the less stressful (and likely less expensive) the process will be.
If you’re re-signing your lease soon but projections show that you’ll outgrow the space before your next lease term is up, you’ll want to start looking for additional or new space 9–12 months before you are at capacity in your current office.
What is your growth rate?
Your growth rate will help you determine how much space you’ll need and when. If you sign a lease for an office and outgrow it too quickly, it can take a toll on productivity as you start the search for a new office all over again. If you commit to a space that’s too large, it will negatively impact your bottom line.
If you’re growing at a modest but healthy rate, you may want to consider hiring a small team and putting them in a coworking space in a city that has all the resources necessary for scaling. As your company continues to grow, you can scale by opening your own office. It will save you time, money and productivity if you won’t have to find more talent in yet another city or relocate your team.
If your team is growing rapidly, you may want to commit to opening a larger office where you can scale over time. This will enable you to establish roots, make a name for yourself in that market, and create an environment that attracts talent and promotes productivity. You’ll be much better off financially if you approach your real estate strategy this way.
We made this calculator to help companies like yours see what your burn rate would look like in an upcoming tech hub compared to that in SF or NYC. The calculator below shows the burn rate for a team of 25 engineers in Atlanta. Compared to the same team in San Francisco, a company could save $625,038 over the course of 6 months.
What types of hires do you need to make?
Depending on where your current office is, it may be difficult to get the hires you need because there’s fierce competition for the same talent. Can you find these people somewhere other than headquarters? There are cities across the country with highly skilled untapped talent that doesn’t want to move to traditional tech hubs for work. Keeping your current office but opening another one in a location where you’re sure you can get the best people is a smart move now and in the long run.
Are you personally ready?
Expansion takes significant time, effort and capital. It can be a huge drain on a team’s productivity and morale if not done correctly. Between finding a city, signing a lease, and getting the office up and running, there are hundreds of decisions to be made. Communication with vendors alone could be a full-time job. You and your team have to be fully committed in order to get it done.
If you don’t already have the expertise in-house to open a new office and choose to task current employees with the responsibility anyway, you’re taking a big risk. Make sure you have the right real estate/workplace operations team so you can focus on your own responsibilities and have peace of mind that the job is being done right.
When should you start thinking about opening another office?
There’s no one-size-fits-all answer. Depending on your growth rate, financials, and timing of your lease, you may want to start looking for another office today, in the next few months, or in a year or two. By starting early, you’ll be able to make better decisions in the long-run.
If you’re a fast-growing company and are looking to expand beyond major tech hubs, BeyondHQ can help you figure out where to go. When you’re growing, you want to put all of your effort into making the best product, hiring the best people, and creating the best culture. We can take on the burden of finding and opening your new space so your team can continue focusing on making your company successful.