It may seem contradictory to say that you should pay for something even if it is offered for next to nothing. Generally, I would tell businesses that this is a good idea but for startups it's a bad idea. I will explain in detail what the difference is between a startup and a business.
You should pay for your office space because it gives you a motivator to be profitable. If you haven't seen my last post about not spending venture capital on trend office spaces, then you should go check it out.
When you have to pay for office space in someway shape or form you have to find a way to become profitable and fast. Bills come in on a monthly basis so you should start to find a way to make income on a monthly basis. That way you do not go into debt.
Certain business models favor the monthly income and others do not. If you want to make a AAA game you are going to have to find the funding for several years of development. If you want to make a website that sells good you can start selling very quickly. Of course anything with a membership is great because you get the money at a fixed time interval whether it be a month, a quarter or a year.
Some of you might be reading this and wondering where on earth would you get free office space. Well, depending on the city you are in it could be sponsored by the government in some way or it could be donated by a larger corporation. Either way, it does exist. Sometimes these places will have very inexpensive office spaces. This is much better for you because at least you are paying something.
If you live at home and you get the parental discount move out immediately. It sounds so counter intuitive but you should really try and make it on your own. Among millennials there seems to be this idea that if you do not get a good job you shouldn't settle for a regular job so because "I" am so awesome, "I" am going to start a startup.
That should be a whole other topic but if you really want to make it on your own then you should move out of your parents house and enter the real world.
When you start paying rent on a monthly basis you start to think profitability on a monthly basis.
Working for Google, Microsoft or Apple is really fun. They have a great office experience and they do it this way to keep people hooked on the company. Fun, trendy office spaces also make the job feel much better. It is certainly better than working in a cubicle in a big room.
So let's say you are an out of work millennial, who maybe studied underwater basket-weaving and is surprised when Google doesn't return your email when you apply for a job. Instead of getting a job you decide to come up with an idea that needs venture capital. Let's say this idea will bring underwater basket weaving to the masses with a trendy iPhone app. So you manage to secure a million dollar investment from an investor.
What should you do with this investment? Work on the product? Secure a distribution channel? Do market research? Advertise?
How about spending all of the money on a trendy office. The kind of office that you wanted to work at Google or Apple. That would be alright except for there is one major thing you forgot to take into account. Having a good office space is something you earn and you shouldn't expect it.
The first major reason you shouldn't get a trendy office is that office space is ridiculously expensive in major cities. Sometimes the trendy office spaces are more. Im sure there are a few exceptions people can find but office space can be your biggest expense and for most unproven startups, its an expense that you shouldn't take on.
Instead, find a room with a table in it and go from there. Even bad office spaces can cost several thousand dollars a month. Remember profitability should be your first concern as a startup.
Tomorrow we will talk about why you should pay for your office space.