Who needs a headquarters?

Forget leasing office space, virtual firms are efficient, nimble

Second in a two-part series

Craig Thompson was on the verge of signing a yearlong lease when it hit him: With three partners and several employees all working by computer, why did his new company need office space? 

After all, establishing a physical office meant a one-hour commute for Thompson and his Dallas-area partners, and would geographically limit their ability to recruit employees. More importantly, it would hike his firm’s operating expenses by 30% annually.

So Thompson backed out of the deal, huddled with his partners, and decided to launch Object Services and Consulting as a virtual corporation. This was in 1995. The firm, which caters to the defense industry, has been “decentralized” ever since.

 “Very often we work with people who aren’t near us anyway,” Thompson says. “If physical distance isn’t an issue, why require it?”

The shape of a growing small business can take many forms. Last week, explored firms that saved money by subletting traditional office space. Yet for those keen on staying home-based, virtual officing has become the norm. Last year, more than 34 million Americans occasionally worked from home. Home-based businesses numbered 14.3 million; 9.6 million ran full time, 4.7 million, part time, according to research firm IDC.

Going virtual has allowed Thompson to boost productivity by eliminating the commute. It’s also given him the flexibility to hire staffers from as far away as Minneapolis. While the firm doesn’t require broadband service in employees’ homes, most have it. The company reimburses up to $325 per month for supplies, computer equipment, software, communications services, and professional or association memberships.

Thompson’s team relies heavily on e-mail. To exchange data or deliver projects, they e-mail with security certificates or use the company’s intranet. They track their time and send standard weekly time reports to Thompson. He then gathers the data monthly for client reports.

The virtual office strategy has also helped the firm expand and contract with the market. In 1995, the company launched with three people. By 1997, it had grown to eight employees and included a part-time administrative assistant. At its peak, there were 12. But when business began slowing in 2000, Thompson scaled back without having to renegotiate a lease or equipment contracts. What’s more, since he had hired employees without relocating them to Dallas, those he laid off could pursue new work with minimal disruption to their lives.

“There was no cost and little pain,” Thompson says.