Office Space for the New IEC
Renting an office space is one of the biggest financial investments for a new IEC, and most initially choose between a home office and a coworking space. What makes the decision so tough (or at least it did for me) is that there are so many different options with no real “right answer.” Lots of pros and cons!
Home Office
A home office is a logical starting point for most new businesses, educational consulting or otherwise. However, it doesn’t necessarily need to be an ending point: there are some very successful IECs that continue to maintain home offices throughout the duration of their careers.
HERE ARE SOME CONSIDERATIONS TO KEEP IN MIND:
A home office deduction can be a great write-off with no additional out-of-pocket expenses. Make sure to follow IRS guidelines: the IEC must “exclusively use [the office] on a regular basis for business purposes.” I would recommend reading Publication 587: Business Use of Your Home.
There are two different ways to write off the cost: the “Simplified Option” and the “Regular Method” - you can compare the two of them on the IRS website.
Do you plan to meet with clients remotely or in-person? If remotely, this is very doable. I would recommend setting up a professional background for video calls and love this guide from Cultivitae.
If you plan to meet with clients in person, I personally think you have to approach it in one of two ways for the situation to be successful: (1) owning your life and making no apologies for a baby that might wake up, working at the kitchen table, and so forth - you really need to be confident in running your business this way to be able to pull this off, or (2) having a completely separate “wing” or suite with no connection to the inside of the house. I think the situation gets muddy when people try to blend the two - trying to make it look like an office when there’s a kid playing in the background. That’s where you’ll really look unprofessional.
A home office is not, and I repeat not, a substitute for childcare. I think that a lot of new parents believe that they can work from home while taking care of their babies at the same time. With an easy baby, this might work for a few months until they start crawling, and then it’s game over. You can work while the baby is sleeping, and this might be enough for IECs just starting out. But trust me - don’t try to deal with your awake toddler while you’re editing essays at the same time. It’s not fair to you, your child, or your clients.
Coworking/Hourly Office Space
My first office was located in a building in DC that rented out individual offices on an hourly basis, way before coworking was cool. I am secretly jealous of all the new coworking options available today. Unlimited snacks, fun music playing, lots of people around - if I was operating a smaller practice I’d be heading over to WeWork faster than you can say “collapse”! Just kidding, but I really would seriously consider a coworking option. That said, it’s not a no-brainer, either.
HERE ARE SOME CONSIDERATIONS TO KEEP IN MIND:
This is a great way to test the office space waters without a long-term commitment. You will be able to see whether or not the investment is worthwhile without needing to sign a 5-year commercial lease - in fact, you might be able to go month to month!
If you’re moving from no office space at all to coworking, this will be your introduction to some of the benefits - like no wasted time in the car driving from client home to client home. This alone can pay for the cost of the space if you’re able to spend that travel time performing billable work instead.
Along those lines, don’t forget that you’ll be able to write off the entire cost of the space. So Instead of thinking about the rent, think about the rent minus the value of the deduction. The financial hit may be less expensive than you’d think - even if you can’t cover it by billing more time as I suggested above.
A lot of coworking spaces come with freebies. Do you have a daily latte habit at $6 a pop? If you’re using the coworking space every weekday and can have your latte there for free, that’s about $120/month right there. What about free printing? Free snacks? No, it won’t cover the rent but it’s something.
Does the space have after-hours access? If so, how would your clients enter? Many coworking spaces lock their doors around 5:00 or 6:00 p.m. While they do typically all have some degree of after-hours access, it usually requires the tenant to go down to the lobby to buzz the client in.
Is parking free? If not, you will want to consider covering the cost of validating parking for your clients unless your office is located in an area where most people take public transportation. I certainly wouldn’t feel obligated to validate parking with a downtown Manhattan office, but I would in the suburbs where free parking is generally expected. I could see this adding up very quickly. This is also a consideration for regular office space as well.
Does the space have adult-themed after-hours festivities that may not be appropriate for teenagers? I visited a few coworking spaces that offer nightly happy hours, which I’d have loved! But I would also feel uncomfortable with teenagers roaming a building with free-flowing alcohol.
Make sure to examine the various costs compared against your current usage as well as your projected usage. For instance, if a certain space charges a flat rate of $500/mo with 10 hours of conference room time included, what would your total cost look like when considering the hours you used last month? What about your ideal month?
Don’t forget to check the general availability of the conference room space as well as the cancellation policy, and make sure that it lines up with your own client cancellation policy. For instance, if you have a 48-hour policy and the space will charge for modifications with than 72-hours notice, you could wind up with a significant bill on your hands if your clients cancel frequently.
If there’s a particular space you like, does a less expensive option offer reciprocal benefits? This could be an easy way to come in at a lower rate. For example, if another location is $200/mo cheaper but allows use of all area locations, by all means go with the cheaper option and work where you want. Additionally, make sure you aren’t eligible for benefits or a discount through alumni groups, credit cards, or any other organization. My American Express Platinum card comes with a WeWork benefit. I’ve never actually used it, but it’s there.
Ready to graduate from a home office/coworking space to the next step? Stay tuned.