Q: My MSP business is run out of a rented space in an office complex. My landlord keeps raising the rent, and I’m wondering if buying my own space might make more sense?
You are asking a question that is common among small companies, but MSPs have special considerations that other businesses might not have, so you should give the issue its due diligence. As with many questions like this, there is no one-size-fits-all answer. You have to gather as much information as you can to make the best decision for your MSP business.
For some insight, Smarter MSP reached out to Ed Branson, a commercial real estate consultant based in Jacksonville, Florida, and who has many tech clients.
“One side issue that MSPs facing this decision need to think about is how much walk-up, or public-facing business they want to do,” Branson says. Some MSPs owners just want their techs out in the field servicing networks, providing cybersecurity, and training clients. “They don’t want the hassle of dealing with walk-in, customer traffic, and having to keep specific hours,” he adds.
On the other hand, some MSPs view public traffic as a way to get additional add-on business, whether it’s in-house computer repair, selling aftermarket products like computer cords and audio equipment, or just another way to drum up new clients for their services packages.
“The reason this is important is that if you decide you want a public-facing, walk-in customer element to your business, you’ll need to look at the location much more closely,” Branson advises.
While you can have a walk-up business in either a rental or owner situation, an MSP working from a nondescript office complex won’t get much walk-up traffic as a snazzy shopping center storefront.
MSPs often have expensive diagnostic equipment, servers, and technician’s tools on hand. When you own a property, you have much more control over access to your space. Under a rental agreement, however, a landlord or a maintenance crew can usually enter the premises at any time. While the thermostat may need fixing, for example, someone could inadvertently damage sensitive equipment when they are on premises or, while unlikely, steal equipment.
“Tech businesses have access to a lot of proprietary data and equipment, if you are selling security, you want to make sure your office is secure as well,” Branson points out.
If you own the property, you can make sure it is secured in the way you want it. Also, your signage and branding (as long as it is within your city’s code) can be yours and not subject to the whims of a landlord.
“Forget about economic factors, control is the single biggest reason to own your business property, if everything else is equal,” Branson says.
Of course, everything may not be equal, and then economic considerations enter. Other factors MSPs should consider when making a decision to rent or own include:
While you have may have more control over commercial property you own, there is more flexibility in renting. You can usually give a landlord 30 days’ notice and pack up. If your business grows, you can scale up relatively quickly by moving elsewhere. If the opposite happens, and you can get by on much less space, you can do the same.
You can maintain a network like nobody’s business, but can you replace that thermostat or fix the toilet that won’t quit running? Renting allows an overworked MSP owner to focus on their clients. If there’s something wrong with a physical component of your office, a good landlord will be right on it, so that you can focus on firewalls instead of fire alarms.
Renting an office space allows an #MSP to focus on the business. If a physical component of your office causes an issue, a good landlord will handle it, so you don’t have to.
“If you aren’t relatively handy when it comes to basic maintenance, you are going to cost yourself, both in time and money,” Branson notes. “I always advise my IT clients to make scenarios ahead of time and figure out how they’d handle it.” For instance, Branson says, a new HVAC unit for a small office can cost thousands of dollars. If you aren’t prepared or able to invest in that, you should probably be renting.
If you are handy, or can afford to hire someone every time a pipe leaks, then purchasing your own space will provide you with the opportunity to build equity. And replacing that HVAC system will add value to the property and your bottom line.
“And if the property is a growth area, then not only can you build equity, but you can look at the property itself as an investment. Some MSPs have invested in offices in the regions that were economically depressed only to ride the elevator up when the neighborhood started to boom,” Branson states.
If buying property, though, it is easy to get caught up in the excitement of the moment, he warns.
When buying property to run an #MSPbusiness on it is easy to get caught up in the excitement of the moment. Think of future considerations and if that property will best fit in your MSP’s plans. #MSP
Think of the future
Do you anticipate your business growing? Does this property have a place where a fleet of six of your MSP vans can be parked? If your business grows by 10, 20, or 30 percent over the next five years, will the commercial property you are looking at be able to absorb that growth?
There are many compelling reasons to buy, but also plenty of reasons to skip owning and instead become a tenant. But thinking through the issues of control, focus, flexibility, and equity will help you make the best decision.
Oh, and if you own, you’ll have to cut the grass. But, the good news is you can have your own sign. Good luck!
Photo: Doidam 10 / Shutterstock