Facility Watersheds

Introduction

Some decisions are simple and insignificant, like deciding where your desk should be in the big corner office. Others are difficult, but less significant, like what title to give your “new business” person. Others are watershed decisions because they have far reaching implications.

One such decision is your facility arrangements. The typical lease term is five years, and since any build-out associated with moving to a new facility usually requires a solid three months, you’ll find yourself forced into thinking about larger business issues as the six month mark approaches.

This is a good thing, since some of these larger issues wouldn’t appear on your radar screen without a fixed deadline. We have several clients who regularly reevaluate their decision to be in business at these five year marks.

Questions You Ask at Critical Facility Junctures

You might find yourself asking questions like these:

• Am I comfortable making another five-year commitment to this business?
• How do I want to position us differently with a new facility?
• How will any later changes in the economy make these lease rates look good or bad?
• How many people should I plan for? Do I want to grow? How will my role have to change?

Three Guidelines

If you are near a facility decision, here are three guidelines that might be helpful.

First, calculate your AGI (fees plus markup income on pass through items) and allot no more than 6% of that to your total facility expense. That includes your lease (or loan payment), taxes (if applicable), utilities (heating, cooling, etc.), security, and cleaning expense.

Second, calculate the space you need by starting with 500 sq. ft. and then adding 200-250 sq. ft. per person. Thus, for 10 employees, you’d need 2,500-3,000 sq. ft. In expensive real estate markets, you’ll find creative ways to make do with less space. In softer markets, you’ll have the luxury of much more space.

Third, consider getting a “right of first refusal” on contiguous space as it becomes available, just in case you underestimated your needs and don’t want to move again. Another alternative is to acquire more space than you need and then sublease a portion of it over a shorter term, allowing you to expand into the remainder of the space if necessary. Recently the average firm has been growing at 30%/year. But growth is a neutral decision, and don’t just let it happen to you. Be deliberate.

So you end up moving and your address changes. Those marketing materials are the next watershed decision. Now they must be changed. Creating/changing your marketing materials is another watershed event if for no other reason than their development forces you to position the firm. That’s what typically delays them.

Until that ink hits the paper, it’s tempting to vary your approach with each pitch. That’s like putting your message on an erasable chalkboard rather than carved in stone. The former is a piñata that gets batted around. The latter is a beautiful statue that feels substantial and weighty.

There is an interesting connection between these two watershed events (changing facilities and developing your marketing materials). When clients do move into a different facility, more times than not the announcement that accompanies such a move becomes the most effective marketing piece to date. That is not, of course, reason enough to move!

But if you move and are still living within your facility allowance, the move might spark a new commitment on your part...and create an effective marketing opportunity to boot.