Securing the Right Amount of Space for Your Growing Business

If business goes well enough for you, you may be fortunate enough to meet the challenge of a growing company: cramped office space. Here's how to meet that challenge in a budget-wise manner.

Eventually it happens to most successful business owners: Your office feels cramped. Maybe your productivity is waning because your employees keep getting in each other's way. Perhaps your conference room is becoming a scarce resource. (To identify other indicators, read our Ten Signs that It's Time to Expand Your Office Space.) If any of these apply, it may be time to start hunting for a larger space.

The need for a bigger office or storefront is a great problem to have: It means your company is growing. But upgrading to a bigger space presents a host of issues for small-business owners. Here are some important factors to think about:

Where Is My Business Headed?

Think about your company's potential growth before you start investigating new locations. For example, if you intend to double your staff soon you'll need significantly more space than you will if you want to grow your business at a more moderate pace. Either way, remember that most space is leased for at least five years. Don't lease a space that you will outgrow in two years.

Figure out how big an organization you want to manage. Then consider the resources it will take to get you there and the space you'll need. Include the following factors in your decision-making process:

• Employees
• Desks or offices
• Factory or production space
• Computers, scanners, copiers and other major office equipment
• Storage space for inventory or files
• Office layout

How Much Is Enough?

The following tips give you a good idea of how to calculate your space needs:

• Call your industry's trade association. They should be able to calculate average annual sales per square foot. For example, if the yearly revenue goal for your business is $200,000 and your trade group estimates an average of $150 of sales per square foot, you'll need between 1,300 and 1,350 square feet of space ($200,000 divided by $150). Remember that if you plan on growing your business rapidly, you'll probably need a larger space than this calculation calls for.
  
  
• Use your head count to calculate your space needs. Some experts estimate that you need 150 to 200 square feet per employee, plus an additional 15 percent for traffic flow. You also may need extra space if you intend to hold a large amount of inventory or if your business requires a lot of open space in your facility.
  
  
• Make sure your facility's size meets the needs of customers and potential customers. For example, a business with executive clients who visit frequently may need designated spaces for a reception area and several conference and meeting rooms as well as a vacant office for the visitors to work.
  
  

  Should You Lease or Buy Space?
  If you own a growing business, you probably want to lease a new, larger space rather than buy it. There are two reasons why:

• Your business probably will outgrow your current space, and it's a lot easier to move if you lease.
• Leasing means you don't have to deal with maintenance and upkeep of the facility.

  That said, you may consider buying a space for these reasons:

• The location is perfect. If you find a high-traffic area for your retail operation, for example, you may want to ensure that the place is yours for as long as you want it.
• You want control over the facility. This is especially important if you want to renovate or add on to the space.

For additional considerations in the rent-versus-lease dilemma, read Is It Better to Buy or Lease Office Space?

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