Month: September 2013

Don’t Be Fooled-DIY Office Renos and Office Moves Can Add to Your Operational Expenses

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Ok. So your business needs to undergo some form of physical change to remain competitive in its market –maybe an office “facelift” or maybe an expansion into a new office.  Whatever your decision, you know you don’t want to incur too many additional expenses to have your office renovated or moved. You decide that you and your employees will be able to do the work on your own with little, if any, external help.

At first glance this might seem like a viable option.  After all, your expenditures wouldn’t go to interior designers or consultants, and if moving, you may only need to rent a truck especially if your staff does all the packing.  Big savings, right?

Wrong.  You may not realize it, but DIY office renovations and office moves can actually add hidden costs to your operational expenses.

How?  Glad you asked.

First, let’s consider the term “operational expenses”.  By definition, operational expenses are “day-to-day expenses incurred in the normal course of business”1. In other words, operational expenses are the moneys spent to keep your business functioning each day, every day.  This includes materials as well as labour costs.  While DIY office renovations or moves may not have a direct affect on some operational expenses, they would have a direct effect on others.   For this blog, let’s focus on the effect on labour.

According to Statistics Canada, the average hourly labour wage for in August 2013 is $23.86 per person2.  Based on a 40-hour week, that translates into an operating expense of $954.40/person/week.  Multiply that by the number of staff you have in your company and you have your weekly operational expense for the labour category.  (For the sake of the chart below, let’s assume a staff of 150 people) You pay those staff to do particular jobs that propel the functioning of your company.  Imagine taking those same staff and redirecting their attention to fulfill office renovation or move tasks.  Your physical operational expense for labour will not change, but the time taken away from your staff to do the job(s) you originally hired them to do add at least one  hidden cost—the cost of their jobs not getting done!  This may lead to

  • Your overall business operations being placed on hold
  • Delays in production or project completion
  • Missed business opportunities (new and recurring)
  • Loss of business to your competition
  • Increased risk of consumer or stakeholder dissatisfaction
  • Overworked staff

Place a dollar value on each of the above and sum it up.    You may find that the total hidden cost of DIY office renovation or move adds up to millions, maybe even billions of dollars—at least 10 times the cost of hiring a space planning and relocation specialist firm to do the full job for you.

So do your business a favour.  Don’t risk adding hidden costs to your operational expenses in the face of an office renovation or move.  Instead take time to contact a space planning and relocation specialist in your area and have them do the job.  It will actually save you time and money.

 

References:

1 Investing Answers Financial Dictionary, “Operating Expense”, http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/operating-expense-2792

2 Statistics Canada, “Average hourly wages of employees by selected characteristics and occupation, unadjusted data, by province (monthly)”, http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/labr69a-eng.htm

 

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The BIGGEST MISTAKE Tenants Make When Their Commercial Tenancy Agreement is up for Renewal

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It happens more often than it should. Once commercial tenants sign a lease, they tend to put it to the wayside for five or 10 years…when they know their Commercial Tenancy Agreement is due to expire or be renewed. Some tenants may start reviewing their Commercial Tenancy Agreement approximately six months to a year prior to the renewal date, but then find themselves either scrambling to negotiate and make physical changes to the current facilities or moving into new facilities in order to meet the new standards or needs of the company, or simply renewing the same Commercial Tenancy Agreement for another five to 10 years in the hope that the current agreement will be sufficient to meet their current and future business needs.

The truth is making such important decisions in a relatively short amount of time could prove to be costly in the long run. Not allowing enough time to explore and consider all the options available to the organization in relation to their facilities is the biggest mistake tenants make when their commercial tenancy agreement is up for renewal.
So, how can commercial tenants avoid this mistake?
First, do not take your commercial space for granted. Believe it or not, your commercial space contributes to the current and future success of your business, so you need to allow enough time to consider whether or not your current space is designed to meet your current and future business needs as well as explore other commercial spaces that could potentially meet those needs. This alone could
take anywhere from six to 12 months.
Second, recognize that if you are considering alternate commercial facilities, your current commercial tenancy agreement may contain a notification clause stipulating a time period by which you must inform your current landlord of your intentions. Similarly, if you are choosing to stay, it will take time to renegotiate the terms of the agreement. Either decision could involve anywhere from three weeks to six months of time prior to the actual renewal date.
Third, consider your team– Not just your internal team who could eventually be affected by your decision to renew or not renew the commercial tenancy agreement, but also your external team—the commercial real estate agent who would be involved in researching commercial facilities, arranging property analyses and negotiating or renegotiating your commercial tenancy agreement; the design,
construction and moving teams or full service renovation and relocation company that would be involved in your relocation or renovation of your facility. You not only need time to find the right team members, but every team member involved would require sufficient time to do their part in making the final result of your decision happen.
So how much time is enough time to review your commercial tenancy agreement? We suggest a minimum of two years prior to the renewal date. That way, your company is in a better position to thoroughly consider all its options and be confident that the final decision whether,renewing or exiting a commercial tenancy agreement, is the best decision for the company.

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