Executive suites an attractive option for small-business owners

Succeeding in small business

April 06, 1992|By Jane Applegate | Jane Applegate,Los Angeles Times Syndicate

Joseph Riser considered basing his Emphasys public relations firm at home to save money, but he thought a more professional setting might help attract and keep his high-technology clients. Sitting in his small, 17th-floor executive suite overlooking Burbank, Calif., Mr. Riser says he made the right decision.

"My one-person business has access to a staff of seven, including a receptionist, telephone operator, office manager and word processing staff, to say nothing of the security guard in the lobby," Mr. Riser said.

For many small-business owners, executive suites offer an attractive alternative to working at home. The suite company provides more than office space. It usually leases entire floors, VTC providing tenants with a reception area, conference rooms and pay-as-you-go services, including word processing, telephone service, fax machines and delivery services.

"For a lot of businesses, starting out in the right location is important when they want to be taken seriously," said Maureen Murphy, general manager of the Headquarters Companies' Fox Plaza location in Century City, Calif. HQ, as it is known, has 110 locations around the world and is one of more than 20 executive suite companies operating in Los Angeles County.

If you are in a retail or manufacturing business, executive suites are not for you. Executive suites work best for service or professional companies with fewer than 10 employees, Ms. Murphy said. A typical office is small -- 150 to 400 square feet. Rent ranges from $600 to $2,200 a month in most big-city locations. About 40 percent of HQ's offices are leased by national companies for their sales staff.

As a transitional step, Ms. Murphy said, many home-based entrepreneurs pay about $300 a month for what's called a business identity package. This option includes telephone answering and mail services, as well as access to conference rooms and the support staff. Many executive suites also offer part-time access to offices for a reduced fee or temporary space for special projects.

With companies looking to cut costs, the executive suite industry has flourished. While life in an executive suite seems sweet, Mr. Riser and other tenants admit there are negative elements. The major drawback is that you have no control over the people hired to help you run your business. In Mr. Riser's building, the management changed two or three times, and each time the quality of the support staff deteriorated.

You also have little say over how your office is set up, because tenant improvements are rarely provided. Expect to sign a lease for at least six months. And, if you conduct frequent meetings, be aware that conference room rental fees can add up quickly.

When Jeff Eisenberg quit his family business to start his own magazine advertising sales firm, he started on the kitchen table. After a few months, he moved Eisenberg Communications Group into a suite in Century City. Sometimes the company receives more than 100 calls a day, keeping three operators busy.

"I pay a little more to be here, but if I were to open my own office, I'd have to hire a secretary and a receptionist," said Mr. Eisenberg, who pays about $4,500 a month for four small offices and support services.

"After working in some very uncomfortable offices, I wanted nothing but the best for my staff," Mr. Eisenberg said.

If you are interested in moving into an executive suite, shop around to get the best price. Landlords are hurting right now and there are excellent deals on rent. Expect to be interviewed and be ready to provide landlord and credit references. Most companies also require you to deposit first and last month's rent, plus an additional sum to cover the support services.

*

A plan to revitalize the Small Business Administration's Small Business Investment Company program was unveiled recently by a blue-ribbon panel appointed by SBA chief Patricia Saiki. Alarmed at the drop in venture capital investments to $1.1 billion in 1991 from $4.2 billion in 1987, Ms. Saiki is seeking incentives to stimulate investment in small companies.

The panel suggested that SBICs issue a more attractive kind of security -- a preferred stock with cumulative dividends -- as an alternative to the current interest-bearing debentures currently offered.

SBICs, which are licensed and regulated by the SBA, are privately owned and managed investment firms. They use their own capital and funds borrowed with SBA loan guarantees to provide risk capital to small businesses. Since 1958, the SBIC program has invested $9.7 billion in businesses, including Apple Computer, Federal Express, Rolm and Teledyne.

Ms. Saiki convened the review panel after several SBICs failed, owing the SBA millions of dollars.

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