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Location, Location, Location

First, though, is a highly recommended way not to save money: Prime real estate comes with higher costs, but as the MoneyMini Blog points out, there is no question that location plays a major role in how well a business does. The best locations, though more expensive, are usually a better long-term option.² Furthermore, off-the-beaten-path offices may end up facing hidden costs due to internet dependability issues or distance from post offices, for instance.³

Still, there are ways to save money when choosing where to locate. Inc. magazine, for example, recommends opening up shop in economic development zones that offer incentives like low interest loans, tax abatements, and other ways to help businesses save money.⁴

Other experts suggest that once a practical location is chosen, one way to save money is to be thrifty about how the office is stocked. Luxurious furniture, for example, is unlikely to generate return on investment (ROI), so keeping office furniture simple or even buying used, when possible, is a good idea.⁵ Careful utility usage and going paperless can further help that more expensive office in a better location to pay off.⁶

The office space information blog 42 Floors recommends SMEs make sure to get the right amount of square footage (i.e., not too much nor too little), as well as the right layout. One office with 2,000 square feet is not necessarily the same as another, and choosing the right space could save money on renovation.⁷

How to Save Money When Signing a Lease

The Balance SMB recommends negotiating lease terms with landlords as another potential way to save money. Whether renewing a lease or signing a new one, the worst that can happen is the landlord says no.⁸ And experts at 42 Floors suggest creating a sense of competition between potential landlords. Since a business is likely to be shopping around anyway, simply mentioning to a landlord that other options are available can help curry favor.⁹

Another way to help save money when signing a lease is teaming up with a broker or lawyer, since legal representation can help find opportunities in the renter’s favor, according to Inc.¹⁰ More leasing tips include inserting a cap on rent increases if possible, establishing a cancellation clause (especially if the business is expected to outgrow the location), ensuring the option to renew, and minimizing restrictions on subleasing.¹¹

Subleasing, Subletting, and Sharing Can Save SMEs Money

Minimizing subleasing restrictions can be crucial. If a small business grows beyond a space’s capacity, it could sublease the space and move while losing as little money as possible.¹² Similarly, subletting another company’s space can save an SME as much as 25 percent on rent and sometimes more, according to Inc.¹³

SMEs may also wish to consider renting out any unused office space. If the office is only used on weekdays, try renting it out on weekends. Meeting rooms, for example, can be rented to freelancers who need to meet with clients.¹⁴

Smaller businesses can save money—and potentially gain other benefits—by sharing office space with other companies. Inc. describes the example of a small sound-mixing studio in California that joined forces with a much larger video post-production business in the latter’s office space. In doing so, the smaller business not only saved money on rent, but gained access to the kitchen and lobby. And, the larger business began to take care of the SME’s administrative needs.¹⁵

Working From Home Can Pay Off, Too

One of the best ways for a very small business to save money is for the owner and any employees to work from their homes, since full-time office space can be so expensive. Instead of waiting to raise cash to rent or buy office space, a home-based business can be an effective first step in saving capital since it saves on insurance, utilities, rent, and more.¹⁶

Home offices can also save money through tax deductions. SME owners can deduct a portion of rent or mortgage and utilities as a business expense, for example.¹⁷ However, experts say it’s important to pay close attention to local bylaws like zoning to ensure a home-based business is legal.¹⁸

Not all businesses can benefit from working from home full time, but even giving employees the option to work from home for part of the week can save money on office space and equipment. A 2018 report by Global Workplace Analytics found that one employee who works from home for half of the week can save a business over $11,000 per year.¹⁹

There is a large variety of expert-recommended ways to save money for SMEs that need brick-and-mortar office spaces in which to conduct business, including carefully choosing the right space, rigorously negotiating leases before signing, opting for used or less-expensive office furniture, subletting, and sharing space with other companies.