How important is it to have a physical office?

My start-up is made up mostly of home-based workers so having a physical office wasn't really a priority for us. In fact, it's one of the things that made us really competitive in our market (low overhead, better employee benefits). But now we're getting a lot of requests and inquiries from potential clients on why we don't have an office. Should we just get one for appearance sake? Is getting an office going to really help my business? I'm really worried that it's just going to drain my capital.

No you don't have to have an office. There are lots of successful startups that don't have one. (eg. Balsamiq have people working for them from home all over the world. So does Automatic who run Wordpress.)

Don't spend your precious capital on setting up an office unless there is sound business reason for it. You could however get an address at a serviced office that you could use.

It would be worth spending some time thinking about why your customers are asking this question. What do they need from you? Is it reassurance about your credibility, about your permanency or something else? How can you give them what they need so they are confident doing business with you?

I agree with Susan and would add that you can look into renting shared office and/or conference room spaces for those times when you might need to meet with clients in person.

This really depends on what sort of customers and prospects you are dealing with.

If the item/service you are providing is expensive, somewhat critical to your customer's operations or where you have to deal with bigger purchasing departments, you should have a physical location.

I'll give you a quick example:

I'm looking to buy stationery, I am not ordering a lot at one go and the vendor will deliver it to me. In this case, it makes no difference.

I'm looking to buy Accounting software that I will use to run the company, I need the vendor to be around so I can get maintenance for at least 3 to 5 years. I don't know much about accounts and the final reports have to meet regulatory requirements. In this case, probably not. You might be able to convince me that your product is superb and that I'm getting a good deal but it's going to be tough.

I'm looking to buy Accounting software again, same requirements but I'm the head of the purchasing department in a mid sized firm. In this case, almost definitely not. Can't imagine myself sticking my neck out and taking the risk if something goes wrong, that could be my career right there.

Hope this helps.

You should consider using a virtual office space. Companies such as Severcorp (www.servcorp.com) have plans under which you can use conference rooms and private offices for a set number of hours each month to meet clients.

Do you have a mentor? If you do, see about negotiating the use of a conference room a few times a year.

I think it’s all about your products and services that can generate business for you. Customers pay for their needs and if your products/services are unique and bring solutions to your customers then the winner is products/services. I think you need not to acquire a physical office and it is wise to invest your capital on R&D and improving your products because this is really that worth and gives you the business.

But above all, a physical office address can certainly attach credibility gains and makes your customers to trust in your business. But as I said above; it is about products that sell, not the location that can bring you back noting but overheads and non-ROI based investments.

In the UK there are plenty of companies offering virtual offices, so for a fraction of the cost you get a decent address, phone forwarding etc. So if you really need an office this may be a good alternative.

Also, many accountants in the UK allow you to use their address as the business registered address and for a small fee will forward mail etc. It does mean you can plaster their address on your website and may lend some credibility to your website.