Joel Kotkin recently posited on Forbes that America may have reached “peak office,”  that as a nation we are building far less office construction than we have historically, and that much of existing office space is being converted to other uses because demand is low.  As the recovery from the Great Recession stumbles along, it’s clear that with rising rental, heating, and benefit costs, businesses, and particularly small businesses, are making do with less.
So how are small businesses surviving now?

  • They’re outsourcing everything that can be outsourced.  This is the age of the freelancer and the consultant.  Gone are the days of in-house accountants, lawyers,and other specialists.  The employees that you rarely see aren’t just the after hours cleaners.  If managers can hire someone outside of the company to develop an app, maintain its Twitter, or take a fine tooth to a long, dull spreadsheet task, then the work gets done, but they don’t have to provide ergonomic chairs, unemployment insurance, health benefits, or pay them to surf the web or text friends on work time.

  • They work from home.  Many small businesses do not have inventory, and services can be ordered and organized on a cell phone as easily as on an office phone.  This cuts out all the expenses associated with the upkeep of another property: rent, maintenance, building insurance, heating and cooling, and lawn care.  With all of the kitchen makeovers done before the bottom dropped out of the housing market, smaller bakery and catering businesses can easily operate in many residential settings.  Many states have passed cottage food laws, allowing for the production and sale of some foods outside of a regulated, commercial kitchen.  Handymen can work out of their garages.  And anything that can be done from a laptop can be done from home, or from a cafe or coffeehouse.

  • Their employees work from home.  With the enormous improvements in telecommunication, businesses whose stock in trade is information have the option of letting their workers stay home too.  This, of course, depends on hiring and retaining responsible employees, but studies have found that employees work more happily and more productively from home.  And if all or most of the employees work from home, an expensive human resources department is unnecessary too, as are time consuming seminars on office etiquette.  The risk of a lawsuit goes down as well.  Win-win-win.

  • They carefully design and use their office and retail space to maximise utility.  Wasted space is money down the drain, which is why you see small shops and boutiques with shelves stocked clear to the ceiling and open office spaces are all the rage.

Many of the things once considered necessary for running a business are in this new economy considered luxuries, and small business owners know they need a healthy bottom line before splurging.  But economizing isn’t all bad; it makes you aware of what is working and what isn’t and where resources are best allocated for maximum profit.