Planning for Your Office Building Budget

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Now that you’ve assessed what your business’ needs are for a location, and what other factors to consider, it’s time to get down to the nitty gritty budgeting. It’s important to have a budget in place so you know how much you can expect to spend on operating your location, and you can weigh options based on how affordable they are.

The budget needed for your office building will depend on your needs and location, among other things. When pulling together your office building budget, keep the following expenses in mind to get the most accurate picture of costs.

Leasing vs. Owning

Depending on the nature of your business, there are different benefits and drawbacks to owning or renting office space. Which route you choose to follow will have a huge impact on your building budget because it’ll affect other expenses — like whether or not you’ll have to pay for maintenance and janitorial services or plunk down a security deposit or down payment.

Things to consider when leasing:

While there’s no down payment, you may have to pay a security deposit upfront.
While there’s no down payment, you may have to pay a security deposit upfront.

Things to consider when you own:

You’ll have to fork over a down payment, which can be a sizable sum of money.
Will you earn rental income from leasing out portions of your space?

Building Infrastructure

A potential hidden cost you don’t want to overlook is your building’s infrastructure. This includes the following:

Electrical air condition and heating systems

Is your office location in an area where the heating bill is going to raise utilities costs? Or are you lucky enough to be in San Francisco where neither heat nor air conditioning is an issue. Additionally, double check whether or not you have control of your heating and air systems.

Support for power outages

Regardless of where your business is located, plan for power outages. Whether it’s a nor'easter or tornado, the last thing you need is for the power to go out and business to end for the day. Research how long it takes for the power to be turned on in this event. If it’s a longer period of time than your business can withstand, you might want to budget in generators and other backup tools.

Security Deposits

If you choose to lease office space, your landlord will likely ask for a security deposit upfront. This covers any damages to the space if you don’t renew your lease at the end of the term. The amount is usually negotiable, but you should look into what the average deposit is for spaces similar to what you’re looking for, and build that into your building budget.

Taxes

You’ll have to pay property taxes on a building or office space that you own, so it’s important to factor these into your budget. Tax rates vary for residential versus commercial properties, as well as where you’re located, so it’s important to figure out what you can expect to pay in property tax. Your rate can also vary if you decide to rent out part of your space.

Economic Policies & Incentives

Depending on the location, some business owners qualify for government economic business programs that can help reduce costs. It’s an avenue worth exploring, particularly if you’re located in an underdeveloped community, and can lessen the strain on your office building budget.

Tax Incentives

Tax incentives represent a credit toward, or deduction against, the taxes your business will owe to the government. Depending on where your business operates, there are several location-based incentives you may be eligible for.

Economic Development Incentives

These are aimed at creating economic development in key, underprivileged areas. If you hire local residents or build or rehab a commercial property in designated Renewal Communities or Empowerment Zones, you can take advantage of these tax incentives.

Sustainability and Green Incentives

You can deduct the cost of energy-efficient and sustainable equipment within your business building. You can also get credit for efficient building design and use.

Utilities

You’ll be paying for utilities regardless of whether you rent or own so these definitely need to be included in your budget. Estimate what your monthly electric, gas, and water usage will be and use local rates to calculate monthly cost. Your usage will depend on how many people work out of the space, as well as devices in the building — like computers, copiers, and coffeemakers. Take special note of high energy items like data warehouses.

Renovations

If you own office space (or rent and are allowed to) and decide to renovate, those costs need to be factored into your budget, too. Try to imagine what you might need to change down the line, like adding an additional conference room or knocking down a wall to make room for more workspaces. Accurate renovation estimates need to take into account the cost of both materials and labor.

Decorating

Unless you plan to work on the floor with nothing on the walls, you’ll need to consider decorating expenses in your budget. These might include the cost of desks, paint for the walls, and conference tables, among other things.

IT System Setups

Whether you lease or own, you’ll be responsible for covering IT systems and the setup required. That means setup of your business phone system (unless you use Grasshopper, of course) and Wi-Fi, as well as hardware for these systems — like desk phones and wireless modems.

Conclusion

There’s a lot to think about when it comes to your office space. Taking the time to lay out costs and expectations in advance ensures you’ll have an accurate picture of your financial responsibilities, and you can rest easy knowing there won’t be an surprises regarding your office building and associated costs.

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