SOP Friday: Setting Up an MSP Office
Karl Palachuk / Karl Palachuk
“I would like to see your thoughts on setting up an office for an MSP. How and where it should start. Though I started the business at my home (still the license is issued in that address), last year I rented a small cube in an office (to get a business address) and that has a conference room. Though me and others virtually work from our homes, think that I made a good choice. I would like to see your thoughts on setting up the first office. Thanks in advance.”
This is a great topic. It has a few different sub-topics to address. In a few weeks I’m going to address topics such as naming your business and getting the licenses straightened out. The big question here is when to move from home office to “real” office.
There are a few stages to getting set up. If you start out as a one-person shop, then starting at home makes perfect sense. Even now, after 18 years, our business could be run almost completely from our various homes. But we’ve had an office for almost ten years because we need a place to build our company culture.
Think about this: Why do you need an office?
And why do you need an office away from home?
You Need An Office To Be Efficient
You need a place where you can get your work done. It should be free from distractions. It should have a place to store company paperwork, client information, and the general “stuff” that any business accumulates.
Your office should be a well-designed refuge where you can study online or with printed books.
It should not be piled high with crap – even if you’re comfortable with that. You can have all the piles you want, but there should be a distraction-free zone that allows you to focus on the work at hand.
When you can no longer be efficient at home, that’s a sign that an outside office is necessary.
You Need an Office to Meet Clients
While strictly true, business clients tend to want you to come to them. So unless you do trainings, you probably don’t have clients coming to your office.
If you have a repair shop and clients are bringing in equipment, then you certainly need an office.
You Need an Office for Equipment Deliveries
Sometimes you get better service and even a lower price on shipping if you have a business address instead of a residential address.
But more importantly, you need a place where deliveries can show up any time and there’s someone to sign for them. And that’s really an argument for a mailbox address (e.g., the UPS Store) and not for an office. If you’re a one person shop, you’ll be running around making money and not hanging out at the office to sign for packages.
You Need an Office for Your Employees
This is true. When I started to grow, I had an employee show up at my house a few times. It was inconvenient. So we started meeting at a coffee shop. Less convenient.
Then I wanted to hire an assistant. Turns out temp agencies don’t want to send people to home offices. I understand that.
An office gives employees a place to go. They get to set up shop – even if it’s a box on the shelf or a drawer to call their own. When you have an employee, that’s probably the time to start looking for an office. When you have two, then you definitely need an office.
Note: You will probably start with part-time employees. You still need the office. But don’t drop that mailbox address because your part time employees will not always be around to sign for packages.
Having employees come together in a common place makes it easier to have meetings, trainings, etc. It gives you a place to build machines, stage deployments, and generally play with technology.
Then There’s the Downside
An office costs money. And unless you rent space in a furnished executive office building, it can cost a lot of money. You need desks, chairs, a filing cabinet. Someone will want coffee and it won’t be long before you decide you need a microwave and refrigerator.
If people have desks, they need computers and monitors. You need a white board, a network printer, paper, pens, staplers, tape, and all the other joyous things that go in offices.
You also need insurance.
We love the insurance program through The ASCII Group (www.ascii.com) has a great insurance program for liability, property, and even worker’s comp.
When you have employees you need worker’s compensation insurance. This can be very expensive. You also have various other expenses that I just lump into the category of “taxes.” These include Social Security (you pay 6.2% of the employee’s salary into this) along with Medicare, state unemployment, federal unemployment, etc. etc.
In all, plan on spending 10-15% above the hourly rate for employee expenses. If you offer medical or other benefits, then it’s more.
There Are Long Term Benefits
As I mentioned, we could probably work with no office whatsoever. America’s Tech Support and Great Little Book have shared the same office since GLB was created in 2003. If we all just went home and stayed there, we would lose quite a bit of what our companies have become.
In addition to the culture, having an office infrastructure in place makes it a lot easier to grow and shrink as needed. If you need to hire some folks, we’ve got a place to put them. We can get interns and have a place for them to show up.
With an office we have lots of great flexibility to work and play together. Again, building culture is much easier with a common meeting place.
Overall, my advice would be this:
– If you’re a sole proprietor, put off getting an office as long as possible (assuming you can work efficiently at home). This will save you a LOT of money.
– When you start to have employees, start looking for an office. If you believe you’re going to grow and have an employee for the foreseeable future, get an office.
– Buy things only when you need them.
– Create a realistic budget of what it will cost to have a “real” office outside the home.
Looking around my office now I realize that all the furniture and equipment is pretty nice and pretty new. When we started it was a collection of yard sale stuff that was good enough to get by. Over time we traded up and up as we needed more desks, chairs, etc.
At this point I think I might always have an office just because it’s so convenient for many things.
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About this Series
SOP Friday – or Standard Operating System Friday – is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.
Find out more about the series, and view the complete “table of contents” for SOP Friday at SmallBizThoughts.com.
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Next week’s topic: Inventory Management
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All material Copyright (c) 2006-2013 Karl W. Palachuk unless otherwise noted.