Weekly Thoughts: Office Space 2.0
Here is something that caught our eye this week:
Office Space 2.0
As some of our readers know, the Chenmark team will be moving to a new location when our current office lease expires in September. When evaluating our options, we were sure not to skimp on square footage and paid up for a larger space which according to rules of thumb for this sort of thing (125-225 usable square feet of office space per person) should allow us to grow the team comfortably for the next couple of years. While being located in a smaller city generally means cheaper rents compared to our counterparts in larger cities, the same is not true for interior decoration (desk prices are, sadly, not priced off of cap rates). Since frugality is one of Chenmark’s central tenants, deciding how to set up our new office space from a decor perspective caused some angst within the team.
On one hand, we can see the appeal of high-end outfitting since we spend a lot of time in the office and research supports the notion that nicer offices lead to higher employee productivity and lower stress levels. Additionally, most argue that pricier office furniture allows companies to recruit the best talent (apparently analysts paid to identify cheap securities seem only able to do so while sitting on a $1,000 chair) and to portray a sense of seriousness to third-parties visiting the space. These arguments are fairly linear, in that there is an assumption that the fancier, the better. Inc.com outlines the current market standards for office space:
“Google the term ‘coolest offices’ and you’ll find no shortage of results (likely including Google’s headquarters itself). Articles like ‘The 25 Most Beautiful Startup Offices’ and ’10 Tech Offices You Need to See’ could keep you clicking through images of nap pods, rock climbing walls and Swedish-inspired conference rooms for hours. It’s enough to make cubicle dwellers dust off their resumes and CEOs start plotting space for an indoor slide.”
Although we’ve visited and enjoyed our fair share of fancy offices, we’ve never actually had to pay for any of that aesthetic ourselves. Armed with Silicon Valley-esque decor ambitions for our own office move, we initially reached out to office “solutions” providers to help us design and outfit our new space. Very quickly, however, we were turned off by what we consider to be outrageous pricing as outlined below:
Partner Desk: High End: $6,000+; Mid-High End: $4,000-$6,000; Standard: $2,000-4,000
Workstation: High End: $2,500 – $3,500; Mid-High End: $2,000-$2,500; Standard: $1,500-2,000
Conference Seating: High End: $800-$1,300; Mid-High End: $500-800; Standard: $400-500
Boardroom Table: High End: $8,000+; Mid-High End: $5,000-$8,000; Standard: $2,000-$5,000
While this furniture is undoubtedly nice, our perspective is that beyond a minimum acceptable quality threshold, spending money on this type of thing has rapidly decreasing marginal returns. When an available dollar of free cash can go towards building our small business portfolio, it frankly seems outrageous to consider spending tens of thousands on desks – not to mention chairs – which lose value the moment they are assembled. Furthermore, our commitment to frugal office outfitting actually serves to advance our core values. As capital allocators, we constantly preach the importance of a solid understanding of ROI and prudent cash management. We also emphasize that attention to detail and commitment to small wins is paramount. Despite the temptation to do otherwise, by keeping our decor spartan and our budget small we reinforce both points.
Ultimately we believe the most important aspect of building an enduring business is authenticity. We expect our portfolio companies to treat our capital as precious and we feel it is important that we do the same. So if you come to visit us in Portland and don’t think our $119 chairs from Target will suffice, you’ll have to bring your own Herman Miller.
Have a great week,
Your Chenmark Capital Team