However, the first office selection process is always made on the basis of cost, convenience of location, or even size of the office. Expensive mistakes are normally discovered much later on in the process.

Based on experience of working with myHQ Spaces and dealing with thousands of office enquiries, there is always the same set of common errors that are made. It is not about selecting the wrong kind of office space. It is about jumping too soon, comparing incomplete pricing, and making decisions on assumptions about the way the business will operate in two or three years’ time.

Mistake 1 — Treating the Quoted Rate as the Cost

The work area offered at £300 per desk monthly does not have to be £300. The VAT is generally levied at the current standard rate of 20% in the UK for all products and services, which implies that the £300 work area cost will amount to £360 inclusive of VAT. This will mean that for a team of five individuals, the cost will be £1,800 monthly or £21,600 annually.

The real issue is whether the figure presented gives you an indication of what is actually included. Room usage could be capped at a certain monthly allowance, with extra hours billed on a separate basis. Other services such as printing, storage, visitor access, out-of-hours access, car parking, etc., could fall outside the stated price. Some organizations quote the price inclusive of VAT, while others quote the price exclusive of VAT.

Mistake 2 — Committing to a Lease Before the Headcount is Settled

It may be wise to go for a traditional commercial lease in case the need for space is quite predictable; however, if you have an uncertain number of employees, it might not be worth pursuing. According to business.gov.uk, company leases usually last 10 to 15 years, although shorter leases have become quite common. It also mentions that break clauses can be negotiated, depending on the terms of the lease agreement.

The commitment goes beyond just paying the rent. There are other commitments involved, like fit-out charges, maintenance, and dilapidations if the property comes back to the landlord in bad shape. This implies that a business will pay rent for office space which it does not need anymore and also the cost to bring the property back into shape. Flexspace can thus be termed as an insurance premium. It involves paying more for each desk, but in doing so, one avoids betting on something that has not even happened yet.

Mistake 3 — Choosing Location by Prestige Instead of Hiring Pool

A premium business address may be impressive for websites and business cards, but it may not be a convenient place for your employees. The office should be in a place that can easily be reached by people through a manageable commute, especially where the expectation is that the staff will attend often. Business.gov.uk identifies proximity to the employees, customers, and transport links as important considerations for business premises.

Such logic does not apply only to London. An enterprise from Bristol could be interested in a centrally-located office, but discover that an office in a less central position will be better because it will be closer to where their primary customers reside. It can happen in Manchester, Birmingham, Leeds or Glasgow. Should an affordable office cost employees an additional 40 minutes of travel time, then the saving on rent becomes meaningless.

Mistake 4 — Taking Space Before It is Needed

The existence of an office might indicate that the company has matured to the next level, but this should not be the factor that determines when the commitment should take place. Should a majority of the staff work off-site, having an office rented five days a week might result in a lot of capacity going to waste. Day passes, membership options, and conference room facilities might serve as other solutions until it becomes clear how much office space is needed.

An alternative approach would be to first create the company, test the market, hire the staff, and then measure the working system that has developed. The reverse approach is very common; get into a big office and hope the people will follow. This gets the order of demand and costs backward. Should the process of hiring take longer than anticipated, then the company is saddled with an office expense without the required number of staff.

Mistake 5 — Not Comparing Like With Like

Two different office quotes may share the exact headline rate but actually signify two entirely different costs. One may consist of meeting room credits, Internet connection, receptionist service, and some utilities, whereas others may not. The deposit amount, set-up fee, notice period, and other such factors may also influence the cost of the agreement.

It is important to first ask all providers the same questions before making a comparison. Questions include: What is included in the price per month? What is excluded from the pricing? What is the deposit amount? What is the notice period? Are the meeting rooms included and, if yes, for how many hours? All of this information should be presented in a straightforward cost comparison on a monthly and annual basis. The goal is not to look for the lowest price per desk.

The Practical Sequence

Making the first decision in regard to the office is much simpler once you make the distinction between the headline price and the real commitment. You need to calculate the total cost including VAT and extras, and align the term of the lease agreement with your level of confidence regarding future staffing. The location should be chosen based on where your team could reasonably do its work, and not simply by looking at prestige factors. In any case, take the permanent space only if you really need it operationally.

https://www.business.gov.uk/invest-in-uk/expand-your-business-in-the-uk/guide/detailed-guides/find-the-right-location-and-premises/

This article was written by

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The FTSE 100 sportswear retailer saw like-for-like sales slip by 2.8 per cent in the six months to August

JD Sports has reported a decline in both revenue and profit in the first half of this year, as subdued consumer confidence in its crucial US market creates a “tough trading environment”.

Régis Schultz, chief executive of the so-called ‘King of Trainers’, said on Wednesday that he is “encouraged” by the progress towards his growth plan, while acknowledging that cost-of-living pressures are “weighing” on its core consumer.

The FTSE 100 group recorded a 2.8 per cent fall in like-for-like sales during the six months to August, while pre-tax profit tumbled by a fifth to £282m.

The retailer’s overall sales were pulled down by a four per cent decline in North America. The region represents the group’s largest market, making up 38 per cent of its sales.

JD’s performance in the region had been supported by the US tax refund season and new product launches at the beginning of the year, but trading has “softened” in recent months, as reported by City AM.

The drop in North American sales was attributed to “weaker consumer sentiment amidst the broader cost-of-living backdrop and deferred ‘back-to-school’ demand into August,” the group said.

“Footwear performance remained challenged, reflecting softness in end-of-cycle product lines and a promotional market,” the firm told shareholders.

However, JD highlighted a recovery in sales of outdoor products. Revenue in this category rose by 4.2 per cent to £743m across the group, compared with a 3.1 per cent drop in sales of branded JD items.

The retailer’s UK sales declined by 1.4 per cent during the period, although the group noted that its momentum has picked up in recent months.

JD recorded a three per cent sales uplift in the Asia Pacific region, which represents five per cent of its overall market.

Schultz, who earlier this year weathered an attempted boardroom coup by JD’s then-chairman, has been under mounting pressure from investors to provide concrete evidence that his growth strategy is bearing fruit.

Speaking on Wednesday, he acknowledged that JD Sports continues to grapple with “cost-of-living pressures” and fierce discounting from competitors.

However, he reassured investors: “By staying close to both our customers and our brand partners, and leveraging our growing own brand capability, we continue to lead with the right products, in the right places and at the right prices.”

The group scaled back its full-year profit forecast by £50m earlier in the year, but confirmed on Wednesday that it remains on course to deliver between £700m and £800m.

Earlier this week, JD Sports revealed it would make its debut in Mexico, with plans to open more than 140 stores next year through a local franchise partner.

“Mexico is a market with a large, highly engaged consumer base and a demographic profile which aligns strongly with JD’s unique position as a curator of footwear and apparel trends across sport, music and fashion,” the group had said.

Richard Chamberlain, an analyst at RBC Capital Markets, said JD’s earnings met analyst expectations, adding that it is delivering “strong” cash generation amid a “muted” market.

JD Sports shares dropped 3.5 per cent to 75p on Wednesday morning.