How to afford a hedge fund location with a shoestring budget

I recently read some research that will leave many business owners speechless. It showed average rents for the most expensive office locations worldwide, and the figures are mind-boggling. They are particularly hard to contemplate when 76 per cent of business people think that lack of access to cash is an obstacle to entrepreneurs, according to Regus research. In Kigali, one would enjoy elegant surroundings and prestigious neighbours, but they would still be facing maintenance and utility bills, reception salaries and set-up costs on top of that. Businesses in Kigali are chocking on the heavy weight of high rental charges despite a steady increase in the supply of commercial housing that has seen big complex buildings erected around the Central Business District in recent years. The high cost of construction in Rwanda forces real estate developers to raise rental fees so as to meet the cost of operations as well as make a profit. Rwanda imports almost 80 per cent of construction materials from neighbouring countries and overseas. Monthly rent for a shop in the market is Rwf350,000 and a tenant is required to pay for at least three months ahead. One metre square space, for small-scale traders, is Rwf40,000 a month, which is seen as expensive. Rent is also stratospheric in a number of emerging and frontier cities, where a shortage of international-standard office space and/or a boom in a sector such as oil can lead to stratospheric rents. Not everyone needs an office in Rwanda, but for young businesses, office location is important. Prospective customers and partners judge your business address and where you hold meetings. However, good your elevator pitch, your image can be greatly tarnished if you work out of inconvenient or scruffy offices or your phone rings unanswered. The other real-estate issue small companies have to grapple with is fixed overheads. Even those lucky enough to afford the rent when they first start out may struggle at times if customers are slow to pay, or they lose a key client. Traditional fixed leases don’t give the leeway to navigate such blips. Fortunately, there are other options for small-and-medium enterprises (SMEs) fazed by the cost and inflexibility of traditional office space. They include serviced office space, flexible and co-working spaces, walk-in business lounges and virtual offices, which offer SMEs the chance to do business at premium locations without breaking the bank. There are several different possibilities for SMEs to raise their profile by using flexible and virtual workplaces, including: Virtual offices can provide a top-flight business address, with telephone answering and mail forwarding, without the expense of physical workspace. Staff at the company can then work wherever it suits them. So the business ‘base’ could be at the City Tower, but the owner could work on the beach in Gisenyi with a laptop, knowing the phone is being answered. Flexible workplaces offer a physical presence in prestigious locations, with built-in flexibility to move, upscale or downsise rapidly. Costs for staffing, maintenance and so on are all included, so budgeting is easier and there are no unexpected bills if the heating breaks down. In addition, business-ready workplaces spare SMEs from the costs (and time delays) of setting up IT connections, buying furniture and equipment and hiring support staff. With less money spent on set-up, there’s more to invest in other aspects. Drop-in workspaces such as business lounges and pay-as-you-use meeting rooms allow entrepreneurs and others to work at some of the best business locations in the world, without paying per square foot. For example, Regus’ 100-country network of business lounges allows people to hire meeting space on Fifth Avenue, meet a colleague in a business lounge in Geneva’s Rue du Rhone or touch down at office space in London’s Mayfair, as well as helping them expand into frontier markets like Nairobi. For most SMEs, though, expensive rents are never going to be an option. And that doesn’t matter at all – because they have plenty of other ways to access these top-flight districts. The writer is the Regus vice-president for Africa