What you will learn
When you start making some money and look into hiring some help, a question is going to cross your mind: Should I have an office or should I keep running my business from my living room?
This is the question we will be answering in today’s podcast. Here are our quick Pros & Cons for each business model:
Having an Office
Going Full Remote
Which one should you chose?
This is the ultimate question.
But this largely depends on your business and lifestyle aspirations. What we recommend is that you go remote first because it is cheaper to start (you are better off spending money on your business instead of office space) and you can later move into an office if you want.
Going from office to remote is much harder and as we explain it in the episode, many of your employees will simply not make the transition.
We hope you enjoyed this episode and let us know what you think in the comment section!
Welcome to the Authority Hacker podcast, the place to learn field tested, no BS tactics to grow hack your online business, and finally, live life on your own terms. Now, you hosts, Gael and Mark.
Gael: Hey guys, welcome to the Authority Hacker podcast, today I have Mark with me, how is it going Mark?
Mark: Fantastic, thanks.
Gael: Cool. Today we are going to talk about something that people don’t necessarily think about when they are getting started, but as soon as they start making a little bit of money a lot of people ask us about that, and that question is “Do you need an office?” And more broadly, should you structure your business kind of like the traditional way, i.e having an office, having employees, like a full time employment, and that kind of stuff, versus going full remote, using more freelancers and so on. And actually, Mark and I have run both sides of the spectrum here, when we had an agency, it was very much traditional, we had a big office, we had a lot of people, and now we are actually running full remote, so I think we are in a good place to talk about that. Do you want to just kind of like give the pros and cons of both aspects Mark?
Mark: Sure. Ok, so I mean do you want us to start with our story, wouldn’t that be better?
Gael: Sure, go ahead.
Mark: Let’s just give it some context. Actually, before I do that, what I mean by traditional versus remote structures is kind of like it’s based on the idea of having an office and a team that comes there every day, versus a team that is perhaps based worldwide and works on their laptops. We’ve ran both kinds of businesses, and of course, there is something of a mix in the middle, you can do as well, but this whole idea for this podcast came because someone asked us about should they have an office and what would you recommend, and these kinds of questions. So it actually brought up this kind of bigger discussion in our minds, we are trying to think about how to answer it. So, just to give some context, our story. We actually started full remotely, when you really think about it, before we had an office, it was the three of us and we had a bunch of freelancers, and I say a bunch, we had like three or four, they would do writing and a bunch of article spinning, this was way back in the day, we were doing gray hat SEO. Fun times, yeah. And this kinds of link building activities, but all of the client stuff was managed by you and I.
Gael: And a team of imaginary people if I remember.
Mark: Yeah, that’s right. [laugh] But I can’t actually remember, like why we decided we should get an office, but we were basically, we started doing pretty well, and we wanted to grow the company, and it was-
Gael: How much were we making when we started thinking about that?
Mark: I think it was like $20, 000 a month in revenue, but I can’t actually remember like by the time we were paying all the bills and salaries, it was not much left probably, yeah. Definitely less than half of that was left, but, we come from basically nothing to that in a few months, we were like, “Oh, well, we’ll just keep growing by this amount every three or four months, what could possibly go wrong?” So, the idea was, in order to scale, at that point, we were reaching I would say some constraints in our own capabilities, the number of clients we could handle between us and well, actually, I guess that was the main constraint we were facing. We were like, “Ok, how do we get people who can handle our clients for us?” We thought about hiring on oDesk, but to be honest, at that point, we didn’t have so much experience doing it, and the kind of people that we were hiring were just not suitable for this kind of role.
Gael: I’d say we were not very good at hiring back then too.
Mark: Oh, not at all. We were absolutely terrible, shockingly terrible. What led us to sort of get the office like, “Ok, we need to hire team of people and train them up and get them to be good at dealing with clients and executing all the work tasks and just this kind of stuff.” So, our thought process, we needed to train people, and we didn’t believe that it was possible to really train people up thoroughly, remotely, we thought we needed to be in the same room, we needed an office, we needed to kind of have a more traditional company structure.
Gael: Actually, if I remember, short after we opened the office, we had some people working with us in the UK as well, we flew everyone in and did like a formal training session for an entire week, which was very tiring for me, and didn’t yield in much results actually.
Mark: Yeah. I guess that was just more our personal viewpoint at that time. And, going through the story- I’m about to get to the really bad part, but it may sound as if you should never get an office or anything like that, but there are definitely pros and cons to both. So don’t write off either option until you listen to this whole podcast and have think about it for yourself. So, to get back to the story, we opened this office, and it was kind of a big deal, it was like a status symbol almost for, it felt like we had a real company. But, we started encountering all these sort of problems we didn’t really expect, in terms of hiring people, and I guess this was to do with the fact that we weren’t really very good at hiring people, we conducted our first interview in a bar, drinking beers, which wasn’t probably the best approach.
Gael: And smoking cigarettes back then.
Mark: Yeah, those were the days. We started hiring people and we were training them, we thought we were training them, and it was going- how would you say it was going like, it wasn’t terrible, at first, but it wasn’t great and it still felt like we were doing a lot of work to keep things going.
Gael: Yeah, I mean, first of all, everyone we hired was completely junior, right, they didn’t have much experience working in general. It’s more about experience and small trainings rather than a big training session, and I think we tried to put too much too soon in the hands of people. And they got overwhelmed, and in the end, we just had to take things back so it was still a lot of work for us, we painfully scaled up but we could have done it a lot smarter if we knew what we know today.
Mark: Yes. So there were definite failings in our the way we train people here, but as we grew more and more, over the next two years, we ended up having at one point, we had over 30 people in an office, we then ended up moving to a bigger office partially because we needed more space, but also because we, essentially it wasn’t really an office, it was like a large apartment which we had rented and just stucked a bunch of desks-
Gael: This is pretty normal in Budapest, I think we need to say that, in this part of Europe, it’s-
Mark: I think it happens everywhere in the world, but the issue is, it had really bad internet and it was like us and we had one room and two other companies were in another room so there was like a lot of people like using this 15MB connection and we had really bad internet, we couldn’t like Skype call our clients.
Gael: If I remember well, we actually used to run some days on 3G internet because the internet couldn’t cope, and I think we should spend some time talking about all this logistics of offices and stuff.
Mark: Yeah, I’ll get into that when I talk about the pros and cons actually, but just to finish the back story, we moved from this kind of like starter office and we ended up moving into like a proper office building, that had like a reception and they charged you per square meter, and it’s like a corporate office kind of thing.
Gael: We were big shots back then.
Mark: Yeah, totally. It didn’t change anything at all, like moving to that, well the internet was better or it worked. But suddenly, it became really expensive.
Gael: How much?
Mark: Because we were paying half of the space at the start, I think we were paying something like 3000 euros, a month.
Gael: Which is a lot for Budapest but not a lot for the rest of the world.
Mark: Huge amount of money, yeah, for the office space.
Gael: How big was it?
Mark: 120 square meters I think, was our section. But it wasn’t just that, it was a lot of extra costs like we were paying like $400 a month for internet, to have like a business line so to speak, which was pointless because it was essentially just the same as home ADSL line, but actually a little bit slower. So it was a stupid idea, but yeah, there is all this extra costs, that come in, and that’s one of the sort of cons of having an office.
Gael: How much extra cost would you say?
Mark: Whatever you are spending on your actual rent, add 50% extra to that for all these extra costs.
Gael: So you say we spent almost $5000 a month?
Mark: Yeah. When you add in the cost of the cleaner, and the buying all these extra extension cords and cables and just birthday cakes for people, and mugs for the kitchen and forks, we had like a fork thief at one point, that kept stealing all our forks, and so it was-
Gael: I’m pretty sure it was Simon, but-
Mark: 3 times we had to buy new forks, it was just bizzare, like these things you don’t really think about it just sort of happen.
Gael: Yeah, and it doesn’t feel like much, but even like the birthday cakes, it’s really stupid but when you have 30 people you have like two or three birthdays every month, so every week is a birthday almost.
Mark: Yeah, we had to stop it at one point, because it was like I am just going to get fat from this much cake. So, after that. we sort of a few things changed, we had a really big guest posting team in our agency, we wanted to, an update came along, like two years ago and basically killed guest posting, or killed guest posting on scale.
Gael: Killed the perception of guest posting.
Mark: We ended up having to get rid of quite a few people and scale down a bit, and as we did that, we moved to- I mean, there was a few other reasons as well, like the landlord kept turning off our air conditioning at 5 p.m. at night, or something like that, so we ended up breaking the lease in that place, losing our deposit and moving to another office which was-
Gael: And paying an extra month of rent before we moved out, right?
Mark: Yeah, by mistake, it wasn’t my fault but, yeah.
Mark: Then, we moved to another place which was essentially another apartment kind of style office, although it had proper internet this time. And but still, it was there was something just not quite right about it and even though it was much cheaper it was still like an expense and there was still all these extra expenses that you kind of didn’t have, you didn’t sorry expect to have, and whenever the bills would come in, we would all be surprised how much electricity we would actually use, but when you think about it, when you have 20 computers on, five days a week-
Gael: And nobody turning them off at night.
Mark: Yeah, these kinds of things, staff just don’t really care about that, so you’ve got to consider that as well. Then what we did, is we actually decided to go remote after that and we decided that we didn’t want to have an office anymore, but we still wanted to keep most of the same people, who were in that office but we would all just work from home, and the idea was, “Ok, we’ll pay you guys like an extra allowance which will cover buying a new laptop” I think it worked out so that you could buy like a new Mac Book Pro every 18 months or something like that.
Gael: That’s pretty good, yeah. These last five years no problem.
Mark: You had like a $100 or something like that extra to your salary, something like that per month, and another like small amount to cover if you have to buy like 3G extra larger 3G data plan or something like that, if you want to work from wherever. And we thought this was a great idea, people love it, they will get so much freedom and they can go wherever they want and do whatever they want. But actually people hated it. The type of people which we hired, I mean most of them just did not like couldn’t like basically process how to operate, how to work in that kind of-
Gael: They didn’t have the self discipline necessarily, to do the work.
Mark: Yeah, we even had people a couple of guys started their own business, behind our backs and started to try to poach a few of our ex clients, while they were still working for us, just because like, “Oh, we now work remotely we are more free…”
Gael: “We are entrepreneurs,” I remember that.
Mark: “We are not employees.” So I think it’s very difficult to go back, like form having the office to go-
Gael: Do you think it’s the kind of people or do you think it’s the transition that created that?
Mark: Both. Because there were people who didn’t really handle it well, who I thought really would, but they just didn’t.
Gael: Do you think also it’s a central European thing, because we did that in Budapest for those who don’t know where we live, we live in Budapest.
Mark: No, I think you take any sort of group of people anywhere in the world and you’ll have maybe 30% of people, 20% of people will really like getting rid of your office and working remotely, and the rest of them will struggle.
Gael: Yeah, I think a lot of people just don’t want to work from home actually, it sounds like a good idea, but once they actually do it for a month or two they get kind of bored with their lives or something, and they would much rather just go and hang out with people at the office.
Mark: Yeah, you don’t realize as well, people waste a lot of time at the office, like talking to each other and I think they probably less than half their days spend actually doing their work. And this is, ok it depends on the person for a start and it depends on what they are doing and what their days are like, but I really think that there is a massive time waste factor of having an office you don’t sort of understand. I remember when I had a job, sure, not just the commute in the morning, but like while I was at work, I would talk to the people on the next desk to me, all the time about lots of stuff, and easily would waste an hour, or an hour and a half a day just chatting. But when you are home you tend not to do that quite as much, you tend to focus more on your actual work.
Gael: You are facing your procrastination a lot more when you are alone, it’s like it doesn’t mean you necessary work more, but it’s so obvious that you’re procrastinating when you are. And I think it plays on the nerves of a lot of people actually, it plays on my nerves sometimes when I just can’t get anything done that day, so I can see how it would do that to people. Is that the story?
Mark: Well, basically after that, as we mentioned in one of the other podcasts, we sold our agency, one year ago, in January 2015, and then it was just basically Gael and I running the authority site part of it ourselves, and for that, we had everyone was sort of freelance, all the stuff we had were freelancers that were working remotely, mostly hired through UpWork.
Gael: Yeah, let’s just say it’s not the same people that worked for the agency, and worked on our sites.
Mark: Yeah, it was kind of different people, there was an overlap at the very beginning, but for the last two years it’s been different people.
Gael: Yep, so how did that go?
Mark: So far, I am pretty happy with it, it does have negative sides, I mean on the plus, it’s much cheaper, and I think because it’s cheaper we can afford to hire better people, more specialist people, so for example we are just getting this powerpoint presentation done the other day, and I hired this really good designer to do it, and it was like $30 an hour which is more than I normally pay for something like that-
Gael: We would not hire someone full time for this price basically.
Mark: Yeah, but because he only did this one thing and it was something I was going to reuse a lot, it was worth it. So there is that and plus if we want to scale up or scale down it’s quite easy so it’s quite flexible having that kind of setup where everyone is remote, if you have say bad spell, and you don’t want to have all these people costing all this money, you can scale down. It hasn’t happened to us, since we started the authority site, but it’s an option. And certainly, when we had our agency, there were times when that would have been probably something which we would wanted to do but we couldn’t because we had all these full time staff. So yeah, that’s basically where we are right now. How do you find it?
Gael: There is one thing that I find annoying with the current model which is the model where we have freelancers working by the hour essentially, or by the task, it’s that because people don’t economically rely on you to pay for their most vital expenses, such as their rent, or the food, or whatever the loan they have to pay back etc, they find it a lot easier to quit or go MIA on you, missing in action, and it does happen quite sometimes, when you are working with someone and they just stop replying and they just disappear on you, and you have this project that is half done, and that person is just gone. And you need to find a replacement, and it takes forever, and it takes a lot of time and energy. And we have something like that happening to us right now with our check our redesign for example, and it’s very frustrating. I agree with everything you said and I still personally like better hiring good people for just a few hours for like high quality tasks etc, but it’s true that these kind of MIA thing that seems to be a thing in the freelancing world is happening sometimes.
Mark: Yeah, so I think there is like taking ownership of tasks it’s not something you can really give away, quite so easily when you are operating in this kind of model, but when you think about it, whenever we have given ownership of task, like full ownership of tasks away to some of our full time employees half the time they didn’t really work out very well either, did they?
Gael: Yeah, but they didn’t disappear.
Gael: They still showed up for work in the morning and you could follow up and fix things, whereas right now, it’s like I’m waiting on that guy for the check out thing, and there is literally nothing I can do, the guy is literally not replying, for like five days and I am just waiting and there is nothing I can do about this. This did happen for the person that was helping us write the blog posts on Authority Hacker as well, completely disappeared over night, and it was very frustrating. It is something that we are going to have to learn to manage, and I think the most important thing in these things is to actually for any job we should have like 2 or 3 people we can rely on, not one, so that we can just switch the tasks really easily, but it does take time to build up.
Mark: Yeah, something I am thinking off as well is like having I guess like a VA, someone really smart-
Gael: A project manager.
Mark: Yeah, like a full time project manager someone from maybe like Philippines or something, I think we are kind of getting close to this stage where that would be quite feasible, now, and training that person to do a bunch of the stuff which we need and follow up with people and that way we could sort of giveaway ownership of some of the more simpler tasks.
Gael: I think repetitive stuff when you figure out a process and you want it done like a 1000 times, then that’s when you give it away I think.
Gael: So, let’s just go into the basic pros and cons of each model, right. What are the pros and cons of the traditional model?
Mark: Ok, so it can often seem that the traditional model that it’s much easier to communicate with people because you are face to face, so if you need something done or you want to follow up with someone or especially if you need to train people, like whenever we have done face to face training, I felt it’s much easier to do that. Although, having said that, I’ve since gotten a lot better doing virtual training, but it seems to take longer to get where we need. If you sit down with someone face to face in like a day you can really achieve a lot, but online you need to do it in steps, you need to spread out over more time, at least that’s been my experience. And, it also, it feels like, when you have a traditional business, you can actually find, when you find good people, you can like almost train them to run your business for you in many sense of the way. And that hasn’t really been something which we have come close to being with having like a virtual team. I don’t know if it’s like you just don’t trust people remotely quite as much or what it is. So, in terms of the negative of the traditional model, I’d say the first and foremost is- it’s very expensive, running an office costs a lot of money.
Gael: And the figures we talked about, for a lot of people they won’t seem so high, but if you got to consider that is in a place where real estate is very cheap, if you are doing that in more expensive city, triple it, so like it would be like 15000 dollars a month, or something for a nice office.
Mark: Yeah. Full time people cost money as well, you may think that someone’s hourly rate is a lot versus, “Oh I could hire a full time person for what would be 20 hours a week for that person.” But, are you really getting 40 actual work hours out of your full time person? That’s debatable, I would say almost certainly not. Say 20 productive hours of work per week from a full time person is going pretty well. And there is all these extra costs I mentioned, add 50% extra to whatever your office rent is and that’s going to what you probably end up paying in other costs. Even like little things like having a Christmas party, or taking people out for drinks, it really, the cost went up very quickly.
Gael: Like the beers are really cheap here, how much is a beer in Budapest?
Mark: It’s like $2.
Gael: So actually taking people out and just paying one round was like 50 or 60 dollars at some point.
Mark: When you have 30 people in your office, it’s like really, it’s a lot.
Gael: Yeah, it does add up, it sounds stupid but if people drink like 3, 4, 5 rounds here, boom, it’s like $200, $300 and that happened like once a week or something in the summer.
Mark: Yeah. The other negative thing is keeping good people is hard. We weren’t particularly good at it, but getting good people to stay and to stay like doing the job that you want them to do is difficult, the difficult thing particularly with online marketing is that it’s very easy, there is very low barrier to entry, what do you need to go into the online marketing- you just need to start your own website and anyone can do that. So if you are training someone how to run your entire business what is to stop them replicating your business and just doing it for themselves? Like, the smartest people will do that. So it’s almost like you have to hire people who are like not the smartest people because you know they will stay on for longer or something.
Gael: And you only give them a tiny part of the process, and you need a lot of people.
Mark: Yeah. So you definitely got to be worried about that. And I would also say that for me, at least, it felt at many times, like sort of getting stuck into this position of being like an office manager, like dealing with holiday requests and just all this bullshit that wasn’t actually-
Gael: People’s drama and stuff.
Mark: Yeah, two people had an argument about something and I had to resolve it. It was like, this isn’t helping me to run my business or to grow my business, and times I was spending a 100% of my time managing stuff like this.
Gael: Same with me, I would just come to the office and sit down and just help people do their job properly. And, that would be my entire day for sometimes several months. When we were under pressure and had a lot of clients. And, I just had to plug the holes all day, which first didn’t have the business grow and second, built that kind of culture of people being able to just turn around use me. But we had to do that if we wanted to keep the client.
Mark: Yeah. So, all in all it’s kind of less flexible I would say, those are the cons of the traditional model.
Gael: Ok, how about the remote/ officeless model?
Mark: Yeah, so I mean basically all the opposites of what I just said, I mean, the pros of having the remote model is there is less fixed costs, so you don’t need to invest a lot of money to get going, you can-
Gael: Actually, I have a question just to get out of this a little bit, like when should someone hire the first remote person when they are running their business, like they have a website that makes some money like, when is a good time to start hiring some people?
Mark: Probably when you are doing something that feels like oh my God, this is such a waste of time, I totally shouldn’t be doing this. If you are saying that to yourself, then you should hire somebody to do it. There is a better way I think in the 4 Hour Workweek, Tim Ferris breaks down a method of working out what’s the cost, what’s your own cots per hour, and then you sort of attribute like an hourly rate to your own work and then you say anything that costs less than that to outsource you should outsource. So, if you have some kind of idea what that might be, than kind of go that way, although that does rely on you having some kind of income already to do that, because if you are not making any money, then you shouldn’t be outsourcing anything.
Gael: Ok, so these are the pros and cons of the outsourcing model.
Mark: Yeah, so the other pros of the outsourcing are that because it’s cheaper and because you are spending less money, you can afford to get really good people for like certain specialist’s roles because you don’t need to hire them full time, if you just need like a few hours of a designer, you can get a really good designer, because you don’t need to like hire a full time designer and you can scale both upwards and downwards very easily, it’s very flexible model, and I mean this is something more personal for me, but I just really liked, I have a really weird schedule, like I tend to get up quite late in the morning and I work really late at night, so it’s just much better to be able to do that at home, and deal with my team on Skype as opposed to only between 9 and 5 at the office.
Gael: If you want to travel as well, like I was traveling Taiwan for six months when we had the agency and I could only work with people for like half the day which means that I am pretty sure my team was slacking the other half of the day. And, if I could just have had them to work when I was awake, then we would probably have saved a lot of money. So I think the ability to kind of like modulate the work times and work amount to your lifestyle and how much you are available, is a massive saving in resources I would say.
Mark: Yeah, for sure. And there is always that thing whenever you are not monitoring people are they really working, but with freelance people, at least if you are using Upwork, then generally, you are going to be time tracking people and using these tools to sort of monitor them, and so there is an extra kind of like technology layer of oversight there which I always feel quite comfortable having in place. The downsides though to having this remote setup are as I said, it’s harder to train people, although it’s not impossible, if you are using screencasting software and you are working with what is that called- that annotation-
Mark: Skitch, yeah, to kind of point out things and just if you have a bit of patience, you can actually work pretty well, I would say like 85% as well online as you can face to face, but still, it’s never going to be the same. But if you do want to meet up with people to train them then go to wherever they live or fly out there, fly them to where you are and once a year, and do that, that’s an option.
Gael: Still cheaper than an office.
Mark: Yeah, massively. So, the other thing, last point is, it’s harder to find managers. So it’s harder to find people on UpWork or somewhere to who you can just say ok, go manage this part of my business for me. Because they can just disappear, and there is a little bit less kind of-
Gael: Single point of failure, right. So people can just disappear and this part of your business can just be left unattended after that, and if you are busy with something else, that could be a little bit of mess. So, I guess the question that everyone is going to be asking at this point is when should you go for the office and when should you go for the remote lifestyle?
Mark: Quite simply, you start with the remote lifestyle and only if there ever becomes a compelling need to have an office, should you get one.
Gael: Do you think we’ll ever have an office for our authority sites?
Mark: It would need to grow to serious like 6, 7 figures monthly before it’s worthwhile, you would probably need to have 5 to 10 full time people but we are quite far away from that at least where I am in my head we are quite far away from it. So I can’t see it, I am determined to go as long as possible without it. And some of our friends, they run this software outsourcing company called Toptal they are worth, the company is worth like really-
Gael: Half a billion of dollars?
Mark: I think it’s almost 1 billion dollars now. They started five years ago.
Gael: Yeah, we used to just start in the same room actually.
Mark: They are running it fully remotely, so their entire team is remote and they say they will never have an office. So if they can do it and they are looking at- they are doing really lots of meetings with lots of clients, worldwide, they have people in 30 different countries, and like hundreds of people in the core stuff, and if they can do it, so there is no reason why we can’t as well.
Gael: Fair enough.
Mark: I would say no, I don’t think we’ll ever have an office.
Gael: All right, so no office for us and I think I am happy with that, I like working from home. I especially like working in a quiet environment, and it’s something that if you are creative mind, working in an open space full of people buzzing and talking around is very tiring and it makes it very difficult to work. I actually remember going home half the day just because I couldn’t even work in the office, despite the fact we are paying over $5,000 a month for it. So, that is another argument on my end, to not have an office. So, Mark, do you have any final words?
Mark: No, I think we covered everything quite nicely there.
Gael: Cool, well, basically, you see what we think about that now, we don’t think we should have an office for our business model, but there are some cases where it may apply for you guys, if you have any question, if you want to check all the show notes etc, go on authorityhacker.com/15, and you will be able to find all the links we talked about and all the show notes. And, we’ll see you guys in the next episode. Have a good day!
Thanks for listening to the Authority Hacker podcast! If you enjoyed this show, don’t forget to rate us on iTunes, and send us a screenshot on authorityhacker.com/bonus to claim your free, premium Authority Hacker training.