After an entrepreneur signs a critical mass of customers or raises a seed round of angel funding, it often becomes time to get a formal office and start hiring. Only, getting a traditional office is usually a big time sink and expensive. Here are some of the standard costs for a 3,000 square foot office designed to accommodate up to 15 people (e.g five people in year one, 10 people in year two, and 15 in year three):
- Three year lease at $18/ft/year for a monthly rental cost of $4,500 resulting in a total lifetime cost of $162,000 (disregard a 3% annual rent escalation)
- $10/ft tenant improvement allowance resulting in a $30,000 budget for paint, carpet, and moving a wall or two (paid for by the landlord and amortized over time)
- 7% commission with 2% going to the building leasing agent ($3,240) and 5% going to the tenant leasing agent ($8,100) all paid for by the landlord
- Wiring for ethernet and electrical at a cost of $3,000 (assume $200 per employee)
- Fiber internet access providing 100 mb/sec for $1,000/month (so, $36,000 over three years)
- Furniture and chairs at a cost of $15,000 (assume $1,000 per employee for desk, chair, and collaboration areas like conference room furniture)
- Total for three years: $216,000
- Optional: parking at $60/employee/month for a cost of $900/month or $10,800/year when at full capacity
Now, this is a nice, semi-custom office designed in a relatively high density manner to support five employees per 1,000 and it costs over $200,000 for a small startup over three years. Costs, plus a serious amount of work over a 90 day period of time to put it all together, makes for a situation less than ideal in the volatile and time sensitive world of a startup.
What else? What are your thoughts on this breakdown of costs and what would you add/change about it?