Start-up Expenses
There are many costs associated with opening an office. Not only will you need desks and a phone system, but you will need computers and other equipment as well. Your start-up expenses will also include your image. Are you planning to purchase secondhand desks or will everything match and look slick and modern? What name will you use? Do you have a logo?
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Researching the true hard costs for starting a business, and assuming that they will be higher, can keep you out of financial trouble. Once you have determined the costs you believe to be accurate, add
The primary reason most businesses fail is lack of planning. Believing that you can go forward and start a business without a plan, especially without a financial plan, is a sure ticket to disaster. To get an idea of what your expenses will be, make a list of all the expenditures necessary to open your office, including:
A good location
Tenant improvements and upgrades
Creating an image, branding
Business license
Membership to the local Board of Realtors
® and/or MLSPhone system
Copier
Fax machine
Computer
Necessary software
Printer
Scanner
Digital camera
Desks
Chairs
File cabinets
Office supplies
Forms
Stationery
Logo and image design
Spend some time scouting out possible locations and the costs of rents. Find out if there are any additional costs associated with renting an office space. Commercial rentals are usually priced on a per-square-footage basis. How much square footage will you need? You can determine your square footage needs by deciding how many agents you will have and how much space is needed for each desk (the number of agents you need is explained later in this chapter), how much space is needed for a conference room, storage for files, a place for a coffeepot and small refrigerator, as well as other spaces you feel are necessary.
Ask the landlord if there are additional costs, over and above the rent. Utilities are rarely included, so you will need to include these costs in your budget. Many rentals are priced at what is called “triple net,” which means that you pay your rent as well as a prorated portion of all the expenses based on your square footage in relation to others in your commercial complex.
Alert
Alert Some commercial rentals charge a percentage of your profits. If this is the case, the commercial landlord will need to see your financial records and they also have the opportunity to audit you. This is not a recommended scenario. It opens you up to liability for incorrect postings of profits and it gives someone access to your financial picture.
Once you have determined a location and the cost of it, you will also need to determine the costs of potential tenant improvements. Do you need to make the bathrooms handicap accessible in order to get a business license? Will you need partitions, a kitchenette, or other additions? Are items installed by a previous tenant taking up valuable space? Can they be removed? How about paint and carpet? Find out what type of deposit is necessary to secure the rental as well as how much you will need to pay the day you move in. Be sure to have at least six months of expenses set aside, because you don't want to be evicted just because the market is slow for a few months.
Determine the costs of each of the other items that you need to open the office. Go to the office supply store and price out desks, chairs, and supplies. Check with your local printer for the costs of stationery. Contact a design or advertising firm to determine the cost of a corporate identity and logo treatment. Once you have a realistic handle on the costs of opening and running an office, it is time to decide how many agents you need to help you keep the office running. You won't know if you can afford the overhead until you know what your income will be.
