Virtual Office

1995: “Most things that succeed don’t require retraining 250 million people.” Wired magazine

I hesitate to give free advertising to companies, but I have used Regus for many years to balance the need to be frugal with the need to portray a strong company image. Here is their video advertisement. I have not asked them for a contribution but I have used them for over 14 years and my experience has been positive, so maybe they deserve the free recommendation.

We already discussed the transition to home. Here we must consider how we can portray an image of success and growth to the world while also working from home. Imagine someone running a pharmaceutical company with FDA approved products while working off an upturned door on a spare bed. If anyone at FDA or any patient or pharmacist had seen how I was running QOL at the beginning they would have cut all contact and run a mile. The truth, however, is that a desk is a desk no matter where it is situated. A phone is a phone no matter where you use it.

We need to play a bit of ‘smoke and mirrors’ here. Let’s get the trick revealed immediately. Our home-based office is for us. No one else sees it. When we need to meet clients we use a syndicated virtual office (of which there are thousands available in the world). A monthly subscription of a few dollars gets you a fancy address, a live receptionist to triage calls, and access to impressive office facilities worldwide.

Regularly I get asked where my company is located. Even though it has never been anything more than a virtual office service address, I reel off the name of the location to nods of approval and expressions of admiration. Seeing the address (which is the address of the syndicated office) on my business card, an ex colleague once said “You must be doing really well if you can afford an office there.” I didn’t confess that it was just a mailing address and mail forwarding service, and that I worked from home.

If, however, I was to tell them I work from home, and that I have not hired an employee my company status diminishes in their perception. People are conditioned to associate shiny steel and glass buildings with success, and working from home as some hopeless pie-in-the sky idea that is doomed to fail. I don’t understand why. We use the same electricity, buy computers and printers from the same vendor, sit in similar ergonomic chairs, and I also have a water cooler and coffee pot in the corner.

A few years ago I was involved in a deal with a publicly-traded company. Down from a high of ten dollars the share price languished under a dollar. Frustrated by poor decision making, the board of directors fired everyone from the CEO to the whole sales force.

The new management chose to change the company strategy. They “shelved several old pharmaceutical products, and I was interested in buying them.

…Let me take a time-out here for those who are Transformation Course graduates; my company was not growing very fast, but I had huge Intentions. It felt like the “winding staircase.” I was stressed and having to work doubly hard on my mentality control. I attended an industry meeting and while walking along a corridor to the restroom I overheard two unknown investors talking sarcastically about one of their clients. “Well, if you can’t succeed do another deal is a way to avoid the appearance of failure,” they said, laughing at the same time.

At that time the investors in my company were starting to show impatience with our slow growth. I was way off forecast. In a short while we would miss a milestone and get hit with a financial penalty that would hurt. That night the sentence uttered by the investors in the corridor reverberated around my head and I could not sleep. The next day I decided to look for a new deal which I thought might distract my investors enough to buy me time. Where to look? Online there was a website for 250 Southern California Biotech companies formed into an association. Surely one of them had something of interest I could convince an investor to think about acquiring for us… just to buy me time. The companies were listed alphabetically, so I stared with the first “A” company. I read its SEC filings but saw no interesting products sitting on their shelves. After about six hours of this mind-numbing exercise I had progressed about 10% through the “A” named companies. I was ready to shoot myself.

The next morning after I took quiet time I had the quite brilliant idea to start looking at companies with unusual names. That way I would at least feel some kind of progress. My company was called QOL so I looked up all the “Q” named companies. I was delighted to find only one. I opened their latest SEC filing and lo-and behold management described their doubt about being able to continue in business (a distressed company means easy negotiation and low prices), a change in focus onto one product, the shelving of three products. I did a couple of hours due diligence on the shelved products and I knew I had not just a distraction for the investors, but a hot target desperate for cash. It was an easy sell to my investors. OK, on with the story…

After a successful couple of phone call discussions, I visited the company in San Francisco. Because of their recent events and the rapidly falling share price, I expected a humble facility, but the company name and logo could be seen on a tall building from a mile away. I pulled into the empty parking lot and entered a plush lobby area where a polite receptionist greeted me. The company was all but out of business, but they still kept a receptionist. I took a seat and waited for twenty minutes, during which time the receptionist did not receive any phone calls or other visitors.

Eventually an executive personal assistant, who had worked at the company for years and seen several CEOs come and go walked into the lobby to escort me to the office suite. The space was more than 20,000-square-feet, most of it empty. It felt as if aliens had abducted everyone during the night. All the lights were on, the office was warmly heated, and I was led to a luxurious boardroom. Thick pile carpet, marble walls, and mahogany desks gave a feel of a Wall Street bank.

After introductions with the new management team that consisted of a CEO, five VPs, (nearly two million a year in salary and bonuses according to the prior year’s SEC 10K annual report which I had read again on the flight) they told me that they were stuck with a three-year office lease that previous management had negotiated.

That lease was sucking almost a million dollars a year out of the cash reserves. They had tried to sub-lease it, but in that area during a recession there were no takers. The executives and the office lease were costing the investors $3 million a year. If I had taken $3 million from their bank account and set fire to it in the parking lot, they would have me arrested. Yet that was exactly what was happening to the shareholders.

To cut a lengthy story short we agreed a deal quickly and my investors bankrolled the purchase of their three shelved products. The new financing removed all milestone penalties and from that point on we soared. The distressed company focused on their one remaining product, raised the price 28-fold, took a lot of flack but survived through it. In 2015 they were sold for several billion dollars with a share price over $100. Everyone won because of that one chance conversation I overheard on the way to a restroom while attending a meeting I didn’t want to be at.

Back to the point of this activity: regardless of your ambition for a company, it is wise to avoid taking on an office lease. As well as the cost to rent, there will usually be a minimum rental period of perhaps six months or more. For most of that time it will be empty space.

Then there are the costs of:

- Security

- Utilities

- Repairs

- Receptionist

- Business property tax

- Customizing signage and configuration to your company

- Heating, ventilating, air conditioning

- Furniture & equipment

- Office supplies

- Janitorial services

- Maintenance and repairs

My office setup has never been much more than a desk and a computer. At different times I have worked from a spare bedroom, or a separate cabin in the garden. I just don’t see the point of taking on unnecessary overhead costs.

Virtual Office Services

These days several companies provide office space solutions for virtual companies. Many of them advertise on TV and online. Rather than lease a dedicated space under a prohibitive contract, these companies make it possible to purchase monthly memberships that allow you to use sophisticated, syndicated offices nearby whenever you have a need.

They provide a professional local address, telephone answering services, mail support, and the opportunity to use a variety of office setups when you need it.

The companies provide clients with flexible and cost-effective workplace options to meet their specific needs. Whether using a fully-furnished office, a virtual office, meeting room or video conferencing facility, businesses are able to establish an immediate presence at prestigious business center locations in business hubs and capital cities around the globe.

Their flexibility allows you to use a professional, peaceful office space when and where you need it. Cash is king, and it is a much better solution than renting a full-time office space when you are likely to be on the road meeting customers most of the time.
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Although I mainly used the virtual office setup for its well-recognized address and mail forwarding service, I sometimes needed to hold meetings with clients or groups of customers. I have never used my home office as a business meeting place. Firstly, it is an invasion of privacy for the rest of the household. Secondly, you are inviting unknown people into the security of your home. Thirdly, it makes your company looks amateurish. Whenever I needed to meet someone, I simply used one of the virtual offices.

Setting up a meeting takes no more than an email or phone call. When I arrived at the location, my company name was there for everyone to see, and my customers arrived at reception greeted by a friendly receptionist. She  showed them to the conference room I had booked. It never dawned on any of them that the thirty other people milling around the building, all holding their own meetings for their own companies, had nothing to do with my company. They were impressed by our size and set up. I have held meetings this way all over the US and abroad.