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Brick-and-Mortar vs. Virtual Offices: A Cost Analysis

Should you work in an office, or should you work at home?

Posted: 3rd November 2023 by Finance Monthly
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Brick-and-mortar offices have long been the traditional way of conducting business, but in recent years virtual offices have become a popular alternative

One of the primary considerations when deciding between a brick-and-mortar office and a virtual office is cost, which we’ll take a look at in this article. 

The Costs of Brick-and-Mortar Offices

Traditional brick-and-mortar offices are physical workspaces where employees come to work. They are usually situated in commercial buildings and include private offices, meeting rooms, and common areas. In this section, we will delve into the expenses linked to physical offices and how they can affect a business's financial performance.

Rent

One of the most significant costs associated with brick-and-mortar offices is rent, which will vary depending on the location, size, and quality of the space. For example, an office situated in an upscale location in a major city will cost more than an office in a suburban area. 

Utilities

Aside from rent, energy bills are another fixed cost that will turn up monthly. The average expenditure on electricity for office buildings in the U.S. is $1.44 per square foot annually, while the average expenditure on natural gas is $0.30 per square foot annually, as per the data from the Commercial Building Energy Consumption Survey.

Maintenance

Maintenance is another cost that business owners must consider when making their financial forecasts. This includes regular cleaning, repairs, and upgrades. For example, if the air conditioning system breaks down, the business must pay to have it repaired or replaced. Maintenance costs can be unpredictable and can vary widely depending on the age and condition of the building.

Infrastructure

Infrastructure costs include things like furniture, equipment, and technology. For example, on the furniture and equipment front, costs include desks, chairs, computers, phones, and other equipment to ensure their employees can work effectively. On the technology front, costs include servers, software, and security systems to protect their data and ensure smooth operations.

Commuting Costs

One of the biggest advantages of virtual offices over brick-and-mortar ones is the elimination of commute costs. Commuting to a physical office can be a significant expense for employees, and it can also be a cost for the business if they provide transportation or parking reimbursement.

According to the U.S. Census Bureau, the average American worker spends around 26 minutes commuting to work each way. This translates to an average of 4.3 hours per week spent commuting. For those who live in urban areas, the commute time can be even longer.

In addition to the time spent commuting, there are also direct costs associated with it. These costs can include gas, tolls, parking fees, and public transportation fares. The cost of these expenses can add up quickly, especially for those who have a long commute.

The Costs of Virtual Offices

Virtual offices are a modern solution for businesses that do not require physical office space. They provide a wide range of services, such as a business address, phone answering services, mail handling, and access to meeting rooms and physical office space on a pay-as-you-go basis.

Virtual Office Address Subscription

Instead of paying for a physical office space, businesses typically will only pay a monthly subscription fee for the virtual office address. According to Investopedia, monthly virtual office costs range from $40 to $200 per month, depending on the service. 

Collaboration Software Subscription

If you’re a sole proprietor or a solopreneur, then this may not apply to you. However, if you have a team of employees, you will need to consider a software subscription that will allow you to collaborate online. Collaboration software includes services such as Slack, Zoom, Monday.com, Google Drive, etc. Collaboration software ranges from $20 to $100 per month, although some free versions are available. 

Data Storage Software Subscription

Data storage software refers to programs, tools, or systems specifically designed to store, manage, and protect data. These software solutions can handle various types of data, including structured data (like databases), unstructured data (like documents), and semi-structured data (like XML files or emails). Services include Dropbox, Google Drive, Microsoft OneDrive and Amazon S3. Data storage software ranges from $30 to $100 per month. 

Questions to Ask When Choosing Between a Virtual Office and Physical Office Space

Before making a decision, ask yourself the following 3 questions:

What Can My Business Afford to Spend on Office Space?

Virtual offices are generally less expensive than brick-and-mortar offices. They require no lease or rent payments, and there are no utility bills or maintenance costs to worry about. However, virtual offices may require additional expenses such as software subscriptions and virtual assistant services.

How Much Flexibility Am I Looking For?

Virtual offices offer more flexibility than brick-and-mortar offices. They allow employees to work from anywhere, which can increase productivity and reduce commuting costs. However, brick-and-mortar offices offer more structure and may be better suited for businesses that require face-to-face interaction with clients.

Is There Any Aspect of My Business That Requires Physical Office Space?

brick-and-mortar offices offer a more professional appearance than virtual offices. They provide a physical address and a dedicated space for meetings and client interactions. However, virtual offices can also provide a professional appearance with a virtual address and virtual meeting rooms.

Conclusion

When it comes to choosing between brick-and-mortar and virtual offices, there is no one-size-fits-all solution. Each business has unique needs and requirements that must be considered before making a decision.

For businesses that require a physical presence, such as retail stores or restaurants, a brick-and-mortar office is the obvious choice. However, for businesses that do not require a physical presence, such as consulting firms or software development companies, a virtual office may be a more cost-effective option.

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