[00:00:00] Hello, everyone. Welcome to The Testing Psychologist podcast, the podcast where we talk all about the business and practice of psychological and neuropsychological assessment. I’m your host, Dr. Jeremy Sharp, licensed psychologist, group practice owner, and private practice coach.
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All right y’all. Welcome back. Glad to be here with you as always.
Today, I’m talking about office space. These days, office space is a hot topic. Whether you’re going to the office or staying away from the office or trying to rent an office or trying to offload your office, there’s a lot of talk about office space. What’s available, [00:01:00] how much it costs and how to find it. So that’s what I’m talking about today.
Whether you are just starting out or trying to grow, finding office space can be a tricky adventure. I want to talk through some of the ins and outs of the office-based game. Talk about how to find it. Knowing how much to acquire. Figuring out when you’re ready to expand or take on more space and a variety of other things. So if you are in the beginning phases or you are looking to grow, this could be a good one for you.
Speaking of being in the beginning phases or wanting to grow, if you’d like some support in that process, I would invite you to check out The Testing Psychologist Mastermind groups. I have a beginner practice cohort and advanced practice cohort and a brand new intermediate practice cohort that [00:02:00] is really aimed at folks who have mastered the beginning phases of practice and have a steady referral stream, but they also have no aspirations to grow or hire or really expand their practice. It’s more just about dialing in systems and keeping yourself accountable for some of the goals you’re setting to get your practice to that next level beyond just beginner practice. You can get more information at thetestingpsychologists.com/beginner or thetestingpsychologists.com/advanced or thetestingpsychologists.com/intermediate, and you can schedule a pre-group call to see if it’s a good fit.
So, let’s get to this discussion about everything related to office space.[00:03:00] Okay, everybody. Let’s dive in and talk about office space a little bit. At this point, I have been in practice for just over 12 years. Just past that anniversary. I’ve had a number of office spaces over the years. I think I’ve had 5 or 6. And during that time, I have had a variety of experiences with office space. They’ve been quite different from one another. Different locations, different financial arrangements, different amenities. And I’ve had some good experiences and some not-so-good experiences. I want to tell you the bad experience first and then we’ll balance it out with a good experience.
I’ve generally done well with office space, finding it, planning for it, occupying it, landlords, et cetera. And [00:04:00] the time when I got in over my head was about 4 years ago when we moved to our current space. This was right after I decided to deliberately grow our practice significantly larger than it was. Actually not right after, this was a little bit down the road for making that choice. I knew that as part of that choice, I needed to find more office space.
As much as I tried to plan and do it well and budget and so forth, I ended up in an office space that at that time felt a little large. Just to give you an idea, I went from having a space with 3 offices plus an admin area for admin assistant [00:05:00] to a space that had 12 offices. So I roughly… no, take that back. I had 4 offices and then I moved to a 12 office suite. So tripled the space. 4 years down the road, it turned out to be a good choice. We are now busting at the seams and looking for more office space. So this topic is dear to my heart right at this moment. But in the first year or two, that was a real stretch.
I had gotten little… I didn’t get in trouble necessarily, but I cut it a little close financially, a little closer than I typically like to do. I’m talking a bit about the financial targets for your rent and how much that should cost you each month, but suffice it to say, I took on a little too much and it was made much worse by the fact that right [00:06:00] around that time, I think about eight months after we moved into the new office space, one of our primary insurance panels shifted their payments guidelines and processes and we went gosh, 3 or 4 months without getting paid at all from this panel. Those two things combined really created a little bit of a financial bind that has stuck with me ever since.
So, that’s a story of going a little too quickly. I think tripling your space is a little tough, especially when you’re going from 4 to 12. If you’re going from 1 office to 3 offices, that does not feel like such a big leap, but 4 to 12 was quite a big leap. Like I said, all’s well, that ends well, but for 2 years there, it was a little touch and go and [00:07:00] not so fun.
Now, on the flip side, I’ve had many good experiences and those experiences all shared the same thing in common. What they shared was going slow and being very deliberate in acquiring space.
I talk with people a lot about this when they’re getting started, but I was able to sublet an office when I first started out. That was a really nice arrangement where I was able to get first one day a week, then two days a week, then when I was ready, when I knew that I could feel three days a week is when I decided to take the leap and get my own full-time office. But all of the times that I’ve been able to go slowly and add space as needed, it has worked out much better for me than taking a huge leap.
Now, those [00:08:00] things are going to change depending on the health of your practice and how much you have saved and what your business plan is, and so forth. But generally speaking, being more deliberate, going slowly, being able to add as you need has proven to be a lot more helpful for me.
So let’s jump into some general principles of office space.
In the beginning, like I said, I think it’s great to start slow if you can. As testing practitioners, we are fortunate that a lot of the work we can do from home, especially these days. I’m working with a lot of folks in individual and group consulting and we’re talking about how office space is not the same as it was. You don’t necessarily have to be in the office for all of your appointments and you certainly don’t need to be in the office for the time that you spend writing reports.
So these days, I’m advising [00:09:00] people to only book the office or look for an office during the days that you actually have to be testing in person. So this goes nicely with some of the things that I’ve said on day theming and time blocking. So if you pick one day a week and say, this is my testing day or two days a week for that matter, you could easily rent an office for a quarter or a third or maybe half of the full month’s rent and still be able to maintain a relatively full-time practice if you’re willing to just go in the office on the days that you actually test in person.
This has been an interesting shift in our own practice where our folks are full time and everybody typically has their own office, but as the pandemic has set in and we’ve been doing so many remote intakes and feedbacks [00:10:00] and writing, a lot of people are preferring to work from home. So our office space has opened up a bit and we’ve had people start to share a little bit more. But as you’re starting out, if you can only book the office on the days that you need, that’s a great way to start out. So again, you can get away with 1 or 2 days and save some money on rent and do the rest of the home if you have the capability to do that.
Like I said earlier, I chose to take the leap to a full-time office when I was consistently booking three full days a week. So for me, that was about 20 face-to-face client hours a week. I think beyond that point unless you have a really nice subletting arrangement, you’re going to be paying close to what you would pay for a full-time office anyway. And it might be nice to have some flexibility. So, shoot for about three full [00:11:00] days a week, and then really consider taking that leap.
If you’re in more of an advanced stage of your practice, I am a big fan of maximizing your space before you decide to expand. What does that mean to maximize your space? One piece is not giving folks their own office if they’re not in the office five days a week. Most of, if not, all of my folks are in the office five days a week or they have the potential to be in the office five days a week, but if they are not, if you have part-time folks, making sure that you are not allocating an entire 5 days or 7 days worth of office space to someone who’s not there during those 5 or 7 days.
This is going to be a little tricky with employees to [00:12:00] have that conversation about needing to share space, but people get used to it. And I think as long as you make sure that people aren’t moving around all the time, that they do have a dedicated office space and they might just share that space with someone else on the days they’re not there, that can go a long way.
I think it does get tough, especially with the testing of folks who are having to move around all the time. Although I have certainly talked with practice owners who have just opened almost like treatment rooms where people pop in whenever they need them. And that works well too. Either way, the principle is to maximize your office space. So, try to have as many people in there as possible to take advantage of every hour that you can. This means, if you have someone who typically works in the afternoons into the evening, try to get someone in [00:13:00] thereon in the mornings. If you have people who only work 3 or 4 days a week, get someone in there the other 2 or 3 days.
One thing that trips up a lot of folks is the weekend issue. So if you have office space and the likelihood is that you’re probably not using it on the weekend, there are many testing clients and especially kids who may not be able to miss school who want to test on a Saturday or maybe even a Sunday. So looking to hire folks who can work Saturday or Sunday, at least one of those each week can be super helpful in maximizing your office space. So general principle there, again, just try to make sure that you have folks in your offices as much as possible.
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All right, let’s get back to the podcast.
The other piece to consider here is [00:15:00] the balancing act of growing. When you are looking for office space as a means of growing your practice, you do need more space but you also don’t want to get in over your head.
What I guesstimate is to try to anticipate your office space needs for 2 to 3 years down the road. And this is where you want to go back to whatever business plan you may have set forth. If you don’t have a business plan or a growth plan, a business plan gets confusing. It’s not that document necessarily that everybody says you’re supposed to create. I don’t really actually have a business plan. Your growth plan. So does it fit within your business hopes to expand? And if [00:16:00] so, how much? That’s really going to drive your office space needs as well.
First of all, if you don’t have a decent vision for what your business is going to look like 1 year, 2 years, maybe 3 years down the road, then you probably should not be leaping into office space because that might not match and then you could find yourself in a difficult scenario.
Once you have that in place, try to anticipate your needs for 2 to 3 years down the road. 2 to 3 years is going to be usually the minimum lease that you’re going to be able to sign at least for a longer-term space. There are, of course, month-to-month leases and maybe some year-long leases, but most landlords are going to want you to do about 3 years, many want 5 years, somewhat 10 years. So there’s a lot to anticipate there, but 2 to 3 years down the road, will at least give you a decent ballpark.[00:17:00] I feel like it’s an ever-shifting landscape where you anticipate your needs for 2 years down the road. You move into a space that’s a little big but hopefully gets filled up relatively quickly. Then you work on maximizing that space and then you are overflowing the space for six months to a year before you jump to a new lease, it’s sort of like this ongoing cycle of expansion and contraction and having too much or not quite enough. So, just know that that is normal. It is rare for me at least to be in a state of equilibrium with office space because we are constantly growing and that’s just been part of the journey.
As far as rates for office space, [00:18:00] things to look out for, it’s going to really vary according to region. But I think, we can set some targets for what you want to shoot for in terms of the overall cost of your space. I used to say, try to keep your rent under 10% of your gross revenue between or between 10 to 15% of your gross revenue but since I’ve been working with more financial folks over the years, I’ve come to settle on, you should really be shooting for 7% or lower of your gross revenue being spent on rent.
Just to give a couple of concrete examples, if you’re bringing in, let’s say $2500 a month, you should be shooting for about $175 in rent. If you are bringing in $5000 a month, shoot for about $350. If you’re bringing in $10,000 a month, shoot for about $700. You get the idea. Shoot for about 7% of your [00:19:00] gross revenue being spent on rent.
Now, it is going to fluctuate over time as you grow and expand, of course. That’s totally okay but shoot for that 7%. And if you can, when you get stabilized and when you’re doing the math to figure out how many offices you need, how many clinicians you’re going to have, try to keep that 7% number in mind.
Some other random considerations for looking at office space. These are just questions to ask. You want to figure out if utilities are included. So that includes, of course, lights, electricity and things like that. You also want to ask about things like common area maintenance. Are you paying for the maintenance for the space or are you going to take that on separately [00:20:00] or rather does the building manager provide maintenance or do you have to take that on separately? You want to ask about the internet being included. So you just want to make sure that you have a really good idea of what it’s going to cost.
Prices for spaces can be a little bit confusing in that they will give sometimes a base rent, but then they also add on what’s called triple in costs. And you want to make sure that you have a really good idea of what the space is actually going to cost you each month and not just go buy one or the other of those numbers because that can be a little misleading.
I would also want to ask if the lease is flexible and if so, how flexible it might be. I would think about, especially if you have your eye on expansion, [00:21:00] whether you’re a beginner practice owner who wants to expand to another day or two each week, or you’re an advanced practice owner who wants to actually add more office space, I would think about and ask about the potential to expand down the road. So whatever space you might be in, is there room to get bigger if you needed it?
You also want to ask if this will be a lease or sublease. Small differences there, but if you’re subleasing from someone else like another practitioner which is very common at least in our area, a sublease can be a little more volatile. If the original lessee moves on or breaks their lease, you might end up in uncertain times as you figure out how to navigate that if you are their subleaser.
So just a few things to think about. I think [00:22:00] negotiating is completely okay, especially right now. In many parts of the country, there’s a lot of office space open and it definitely does not hurt to try and negotiate some of your lease terms. You may be able to get a lower rent. You might be able to get lower maintenance costs. You might be able to get a lower rate if you do a longer-term. There are all sorts of ways to negotiate. You can possibly do a graduated lease where the landlord is enticed by the idea of some money versus no money. I just did this as we annexed a suite across the hall where the rate was very low in the beginning and then gradually increased over 3 or 4 months before we got to the full fee.
So lots of things to consider. But [00:23:00] when we think about what to take away from all of this, I hope that you might be tuning into the idea of starting slow, maximizing your office space as much as possible, not getting impulsive with adding space just because you think you might need it or because you have ideas to grow without any solid plan. So basically, just be deliberate and don’t be afraid to try to negotiate the terms. Again, keep that 7% number in mind to really keep a healthy financial picture for your rent as well.
All right. There’s a lot more to say on rent and leases and build-out and all sorts of things. We could really go down several rabbit holes with this, but I wanted to just touchback in [00:24:00] here as we’re sort of coming out of the pandemic and people are getting back to the office, kids are going back to school, et cetera and talk a little bit about leases and renting and what you might want to look for.
Like I said at the beginning, if you’re a beginner practice or advanced practice owner or an intermediate practice owner and you’d like to join an accountability group where you get coaching and support and homework and people to help you reach the goals that you have been trying to set or reach in your practice, you can check out The Testing Psychologist mastermind groups. I facilitate all of the groups. So, you get me and 5 other psychologists who are all at the same stage of practice. You can learn more on their respective web pages: thetestingpsychologists.com/beginner, thetestingpsychologists.com/intermediate, or thetestingpsychologists.com/advanced, and you can schedule a pre-group call to [00:25:00] chat with me, totally complimentary, and figured out if they would be a good fit or if it would be a good fit.
Okay, y’all. Thank you for listening. I’ll make sure and catch you on Monday with another clinical episode. Take care.
The information contained in this podcast and on The Testing Psychologists website is intended for informational and educational purposes only. Nothing in this podcast or on the website is intended to be a substitute for professional, psychological, psychiatric, or medical advice, diagnosis, or treatment. Please note that no doctor-patient relationship is formed here, and similarly, no [00:26:00] supervisory or consultative relationship is formed between the host or guests of this podcast and listeners of this podcast. If you need the qualified advice of any mental health practitioner or medical provider, please seek one in your area. Similarly, if you need supervision on clinical matters, please find a supervisor with expertise that fits your needs.