Forget leasing office space, virtual firms are efficient, nimbleSecond in a two-part seriesCraig 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?\u00a0After 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\u2019s 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 \u201cdecentralized\u201d ever since.\u00a0\u201cVery often we work with people who aren\u2019t near us anyway,\u201d Thompson says. \u201cIf physical distance isn\u2019t an issue, why require it?\u201dThe shape of a growing small business can take many forms.\u00a0Last 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\u2019s also given him the flexibility to hire staffers from as far away as Minneapolis. While the firm doesn\u2019t require broadband service in employees\u2019 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\u2019s team relies heavily on e-mail. To exchange data or deliver projects, they e-mail with security certificates or use the company\u2019s 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.\u201cThere was no cost and little pain,\u201d Thompson says.