Entrepreneurs get the big corporate look on a small budget
When Ernie Gershon decides to expand his medical insurance operation, he estimates that his up-front monthly cost to set up a regional office will be a mere $400 — give or take $100.
The president and chief operating officer of Toronto-based CAPCO Health Group Inc. says he discovered the advantages of the "virtual office" around 1999. Rather than having to pay overhead on a full-time space, Gershon uses Regus — a virtual office specialist — to handle switchboard services, mail and the occasional backroom chores.
Regus also gives him access to premium downtown office space when he needs to hold meetings and conferences with customers or staff.
Although Gershon started out with his own full-time office space in 1997, he says, "the combination of costs — and the fact that staff had to travel into the city from miles away — made me realize it didn't make sense."
A new virtual reality
The basic virtual office concept is nothing new. People have been outsourcing phone answering and administrative services and booking meeting space at hotels for years.
With technology transforming the whole notion of the mobile workforce, however, the new virtual-office model has turned into a first-class, full-menu proposition. You might think of it as an upscale office time-share for business owners.
Depending on the model, membership with some virtual office organizations gets you a designated number of hours in office space at any location on demand; mail handling (including a downtown business address); call answering and forwarding and other reception services; as well as access to administrative services on a pay-as-you-go basis.
According to Wes Lenci, vice-president for Regus's Canadian operations based in Calgary, it's feasible to set up basic services for a single virtual office for as little as $99 a month and "grow it" into a national or even international network over time.
"A client could set up an office location in Toronto, Vancouver, Los Angeles and New York and still have their costs come in at less than $1,000 a month," he says.
"If businesses need solutions to save costs, or a start-up needs to test the waters, a virtual office can help them do that, because it's based on a short-term rental contract — not a long-term lease," adds Lenci.
As the master franchisor of Intelligent Office in Canada, Brian Monteith is in the process of opening virtual office centres for members in the Greater Toronto Area, Ottawa, Hamilton and Waterloo, with plans to expand to Montreal, Vancouver and Calgary. Since the recession hit, he says, demand for these types of offerings is higher than ever.
"Customers are getting out of leasing brick-and-mortar office space because it directly affects their bottom line," Monteith reports. "With a virtual office, they can meet clients at an address that they only pay for when they need it. They simply choose the list of services they need that meets their budget."
To each his own
Whether it's to keep a business afloat or expand operations on a shoestring, everyone has their own reasons for going virtual.
For Kevin McLaughlin, president of AutoShare, a self-serve, hourly car rental business in Toronto, holding meetings at the Toronto Board of Trade's newly refurbished Telus Business Centre in First Canadian Place instead of at his own understated downtown office is helping him avoid the expense of moving to accommodate a growing staff.
Now he can convert the rarely used boardroom in his office into an area for more workstations — and use the centre, just up the road from his office, for entertaining out-of-towners and as a place to hold larger meetings in a very well-appointed setting.
"We have been growing at a rate of 25 to 40 per cent each year, but our office is relatively small," McLaughlin says. "It's a lot cheaper to use the business centre for a couple of hours rather than wasting extra space in the office. And the services at the centre allow me to punch above my weight class."
Scott Martin, president of Recce Inc., an IT consulting firm in Toronto, is augmenting his shared office digs with live-attendant and boardroom-booking services from Intelligent Office to maintain his professional image.
"Having an attendant screen calls instantaneously gives us a bigger company persona," he says. "It's a good way to start a business, because you can have a professional presence and not be locked into massive leases. And when you add employees, it's a nominal charge."
Gershon says that virtual office services fit the bill when he wanted to expand his sales reach and test the international waters. He has set up another "regional office" in Calgary and is looking to establish more in Mexico City and Panama.
"It gives me the opportunity to expand to other cities and countries as a start-up operation — and if it doesn't turn out to be successful, it's cost me nothing to speak of," he says.
"Everyone is looking for efficiencies and flexibility regarding their cost structure and managing their cash," says Carol Wilding, the Toronto Board of Trade's CEO and president. "The virtual office is becoming increasingly relevant these days because it takes the costs out of running your business." She reports that the board of trade business centre used to have "a couple of people come in and out in the course of the day in the early part of 2008.
"Now, I'm seeing 10 to 40 people at a time on a constant basis."
Dan Golberg, vice-president of small business for Telus notes that with cost control becoming the No. 1 business issue, "businesses are getting very, very careful about cash flow and looking at environments where they can access industrial-strength technology like videoconferencing and only pay for it by the hour.
"These are more like touchdown stations than offices where people can replicate an office environment when they need it."
Monteith estimates that over the past six months, inquiries have tripled as a result of the credit crunch. "Virtual offices are becoming more and more the norm — and not just for small businesses. There are also Fortune 500 companies doing it as a way to reduce physical space or support teleworkers."
Empty spaces for a few dollars more
Even businesses that have never considered themselves landlords are getting into the act of offering up their spare space.
Mark Skapinker, co-CEO of Toronto-based software venture-fund company Brightspark, recognized the business opportunities that virtual offices represented when his firm was planning the launch of a web-based room-sharing service called iStopOver.com. The idea was to help homeowners with space to spare to connect with travelers looking for cheaper digs than a high-priced hotel. When the markets took a tumble and businesses started downsizing, interest from the business sector grew, said Skapinker.
"A lot [of businesses] had all sorts of excess capacity in the way of offices, meeting rooms or boardrooms. They loved the idea of being able to defray the costs of that," he said.
Skapinker reports that those looking for space have been equally positive about the idea, from global recruiting companies to small professional firms looking to set up branch offices on a shoestring budget to interview customers, hold meetings while in a specific location or get back on their feet financially. Even when the economic cycles improve, Gershon predicts, there will be no turning back.
"We started as a simple domestic operation but have been able to expand anywhere through this virtual office system. I couldn't have started the business without it," he says. "Now I've done it, I don't intend to change it. For me now, this is a management style I like."