First Thing, Daily Maverick's flagship newsletter

Join the 230 000 South Africans who read First Thing newsletter.

A South African Hero: You

There’s a 99.7% chance that this isn’t for you. Only 0.3% of our readers have responded to this call for action.

Those 0.3% of our readers are our hidden heroes, who are fuelling our work and impacting the lives of every South African in doing so. They’re the people who contribute to keep Daily Maverick free for all, including you.

We need so many more of our readers to join them. The equation is quite simple: the more members we have, the more reporting and investigations we can do, and the greater the impact on the country. We are inundated with tip-offs; we know where to look and what to do with the information when we have it – we just need the means to help us keep doing this work.

Be part of that 0.3%. Be a Maverick. Be a Maverick Insider.

Support Daily Maverick→
Payment options

Twenty lessons in 20 years: Lesson Nine – Finding the...

Defend Truth

Opinionista

Twenty lessons in 20 years: Lesson Nine – Finding the Goldilocks zone, where the size of your premises is just right

mm

Allon Raiz is the CEO of Raizcorp. In 2008, he was selected as a Young Global Leader by the World Economic Forum, and in 2011 he was appointed for the first time as a member of the Global Agenda Council on Fostering Entrepreneurship.

Over the past 20 years, Raizcorp CEO Allon Raiz has learnt many tough lessons and overcome many entrepreneurial challenges. He has also had the privilege of learning from the journeys of more than 13,000 entrepreneurs who have passed through Raizcorp. In this series of articles, Raiz shares 20 of some of the most important lessons he has learned using a sequence that mirrors the typical stages of any entrepreneurial journey, from ideation to scaling a business.

First published in the Daily Maverick 168 weekly newspaper.

One of the first paradoxes a start-up entrepreneur faces is choosing the size of their first rented – or purchased – business premises, along with the duration of the lease.

If you are efficient with scarce cash resources, the ideal approach is renting premises that are appropriate for the current number of staff and functions in your business. But when you start growing you will soon run out of space and be forced to either take on new rental space in the same location or terminate your lease agreement, which will most certainly come with penalties or, more likely, a demand for full payment of the lease for the full period.

If you’re signing a three- or five-year lease agreement, you in effect have to guess how much you’ll grow in the next three to five years.

This guesswork is almost always inaccurate – in either direction. This means either you have superfluous space which is costing an arm and a leg which, in turn, is reducing your capacity to grow, or your lack of space is constraining your capacity to grow. A paradox indeed.

It has been my experience that startup entrepreneurs tend to overestimate their growth trajectory and, as a result, take on premises that far too large for their needs. If they then fill this space with expensive and unused furniture, the problem is further exacerbated.

In the past few years, the flexible working space industry has grown in popularity and solves this problem quite elegantly for small businesses.

The entrepreneurial business can expand and shrink its footprint in a pattern that closely resembles its growth or contraction. There are even flexible working spaces these days for a manufacturing context.

What you may lose in egotistical independence (the ability to tell your friends and clients that you have your own offices), you gain in terms of more efficient use of scarce cash with the added benefit of a reduction in headcount and salaries for the likes of receptionists, cleaners and IT support.

Another common mistake entrepreneurs make with their premises is overcapitalising on immovable fixtures and fittings. There needs to be a careful balance between aesthetics and functionality, particularly when it comes to immovable fixtures such as drywalling, air-conditioning, paint, carpeting and tiling, lighting and so on. The cost of this over-capitalisation once again reduces the amount of finance available to support the growth of the company.

When starting a business, get used to the “industrial’’ look and save cash for more important growth investments in your business.

Become creative in how you can use the current drywall floor plan as opposed to knocking everything down and building the offices from scratch. Even floor tiles do not need to be completely lifted and replaced. Often there are just a few carpet or hard tiles that are damaged, stained or worn out which can be removed and replaced, once again saving you that currently scarce resource – money.

In summary, be creative, ego-free and frugal when setting up your premises. There will be plenty of time for building a fancier work environment once your business is profitable and sustainable. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for free to Pick n Pay Smart Shoppers at these Pick n Pay stores.

Gallery

Comments - share your knowledge and experience

Please note you must be a Maverick Insider to comment. Sign up here or sign in if you are already an Insider.

Everybody has an opinion but not everyone has the knowledge and the experience to contribute meaningfully to a discussion. That’s what we want from our members. Help us learn with your expertise and insights on articles that we publish. We encourage different, respectful viewpoints to further our understanding of the world. View our comments policy here.

All Comments 1

  • Well done. That is genuine good advice. Better than you would get in business school. I would add that the longer you make do with premises that are “too small” the more profitable you will be. As they say in Lancashire: ” Get a quart out of a pint pot”.

Please peer review 3 community comments before your comment can be posted