When does an office make sense for a start-up?

Q: A lot of start-up businesses are not clear whether they need to get an office after working out of their homes. When should a start-up business consider getting an office?

A: The obvious answer is "when you can afford it" — but what does that mean? You can "afford it" when you are generating a positive margin from sales to customers. Using margin is a high standard, but my advice is no product and no customers? There is no validated business model, so no office.

What if you are pre-revenue with early stage seed funding? Even if your investors didn't ask "What are you going to do with the money?" you should be using that money to fund your business model. Spend it on product development, building your channel, human resources and customer acquisition. Not on an office.

I see companies start and continue to run as home-based businesses. But there may come a time when the home office no longer works for the business. Making phone calls or holding a staff meeting with kids playing in the next room, the dog barking at the delivery guy, or cranky roommates mean an office may be necessary.

One key factor is whether you need a place to meet customers. It can be awkward to meet them in your living room or basement. The first step is often the local coffee shop or restaurant. It's public space, no cost and has food, which makes it an attractive option. But the need for confidentiality and focus can make it untenable.

If you must rent office space, look for shared space in your community to split the costs with other businesses. Even better is if your community has a business incubator space for start-ups. You share office equipment and conference rooms, and the biggest benefit is the entrepreneurial culture of being with other start-ups.

The decision to spend limited resources on office space needs the same careful analysis as any other choice you make in your start-up process. You have to be brutally honest with yourself: Does my start-up really need an office right now, or do I want an office for personal reasons? That will help you spend your money wisely, and your business be successful.

Mark Spriggs is an associate professor of entrepreneurship at the University of St. Thomas Opus College of Business.