Raizcorp | Workspaces to suit start-ups
Accelerating Success

Workspaces to suit start-ups

The cost of setting up a workplace in the ideal location comes at a steep price and is often beyond the reach of start-ups, entrepreneurs and SMEs. Flexible, shared, serviced and virtual office spaces, trends that began during the recession in the US, are popping up around South Africa, offering benefits for start-ups looking to grow their business cost-effectively.

“There is an accelerating trend towards flexible working in SA,” says Kirsten Morgendaal, Regus area director. Regus offers flexible office spaces fully equipped with everything expected of an established business – including the prestigious address. A space can be rented for as little as 30 minutes to two years. Grant Williams, CEO Ashbrook Commercial Properties, agrees that the demand for flexible office space is steadily increasing.

“This is evident in the number of expanding branches that have opened up in the past 12 months.”

Allon Raiz, CEO of Raizcorp, and a small business “prosperator” supporting over 300 businesses, says that specialized shared space rental companies have emerged specifically to serve the entrepreneurial market in SA. “Infrastructure and rental costs can be crippling for entrepreneurs as they start up their business.”

 How can start-ups benefit from this trend?

“Flexibility,” says Raiz. “This allows new companies to grow organically, without crippling office space wastage and inefficiency.” He adds that overhead costs associated with fixed-space leases can easily destroy cash flow.

Williams agrees that cash flow is king when a business is in its infancy. “The future is unpredictable and business risks are high,” he says. “Serviced or shared spaces provide lower overall income risk and no upfront capital expenditure. Instead, capital can be invested in growth strategies.”

Shared office spaces provide the benefit of a supportive, stimulating and collaborative environment where “business owners share lessons about doing business,” says Raiz. “The undoubted operational benefits that this type of infrastructure model brings to small businesses was the starting point for what I developed into the Raizcorp model, which is based firmly on a culture of sharing and support on all levels – not just cutting costs.”

However, Williams and Raiz warn flexible rentals may appear cheaper in the start-up phase but rental companies charge a considerable premium for this flexibility. “Companies should be aware of the additional costs associated with these spaces as printing and IT data usage can quickly add up,” cautions Williams.

Raiz advises companies to consider acquiring some form of permanent, fixed space once the business model is viable, sustainable, and has potential for growth.

Before affixing a signature on any lease agreement:

“Ensure that all the terms and conditions are explained clearly, with practical examples,” advises Williams. “Always reduce any verbal agreement down to writing and make sure the wording is easily understood.”

He also notes that the Consumer Protection Act protects smaller companies (<R2m turnover or asset value) when signing lease agreements, with regards to lease term and cancellation parameters. Raiz urges companies to peruse the document carefully to ensure all parties are protected. “If you sign a lease without reading it thoroughly, you may as well be writing a blank cheque in favour of your landlord. Misunderstood terms and conditions can have a massive impact on a small business’s long term viability.”

Tips for negotiating rates:

“All commercial terms are negotiable – rent, annual escalation, tenant installation allowance and the deposit,” notes Williams. “It’s advisable for any business entering into a permanent office rental to contact a commercial property brokerage first. Choose your preferred agency and then create a relationship with your broker who can guide you through the various legal and practical landscapes.”

Guidelines:

  • Ask for any history of damp/leakage.
  • Find out about security costs/concerns.
  • Check the age of the wiring and plumbing as well as the condition of other prominent fixtures.
  • Clarify which party is responsible for the rates on the building.
  • The air conditioning contract maintenance contract should always be at the expense of the landlord, unless otherwise negotiated.

“Be sure that the space you operate your business from is a positive, inspiring space,” says Raiz. “Those around you must accept that failure is – first and foremost – an opportunity to learn and grow. The entrepreneurial journey is challenging enough without having to waste time on petty squabbles.”

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