How to Time Share Business Space to Reduce Overhead

The cost of overhead for any business attempting to hold on in a challenging economic climate can be the difference between surviving and closing shop. For the small business, the cost of overhead can sometimes be out of proportion to the business itself.

This can happen because of the rise of insurance rates on commercial property, insurance for employees, benefits, wholesale prices, utilities and numerous other burdens. In a robust economy, the mortgage, rent and other expenses can be taken care of, but many companies are going upside down in the ledger books with the color red appearing more and more on the bottom line.

Since the cost standards are not likely to change overnight, it is imperative for the struggling business owner to be creative in order to make the formula one that allows the overhead to become more manageable. Some businesses continue to rely on laying off more workers to lighten the load, but throwing workers ov erboard should always be the last choice if those workers have been an asset to your company

Deciding to share your physical work space can be a very smart decision. There are businesses that would not be going out of business if they could go halves with another business in sharing overhead costs. Time sharing business space maximizes the space's potential, whether you rent or own. The hours of operation for each business would be scheduled to not interfere with each other. This also means that the businesses would be quite different from each other as a rule in the customers they serve.

The idea and practice of sharing business space has been around for a long time, but oddly enough, few people think about it when business volume decreases and finances become an issue. This move has been incorporated by some of the most successful chains such as Dairy Queen (space sharing with convenience stores), Pizza Hut (space sharing with Taco Bell), and McDonald's (space sharing with Walmart and Home Depot).

During the day, an office could be a real estate office, and after 5pm it can change to a counseling center. Or, an automobile garage can close at 5pm and the space can be used by a local antique or racing car club. For restaurants that don't serve dinner, it can be rented for meetings of local groups and organizations or business meetings.

If you know someone who is preparing to go out of business, perhaps talking to them about moving to a space-sharing situation would help them. If you are the one who is preparing to go out of business, does thinking about sharing overhead (and perhaps even supplies/tools/equipment) make you wonder if this could be the answer to making it through a tough economy?

If you are considering starting a business, this model can help you produce a business plan that will help get you launched. Many new business owners do not realize exactly how much is needed for investment when starting out. This is a very good way to begin.

Consider some steps below to get started.

Write down some preliminary ideas you may have regarding hours of operation, equipment sharing (or not), costs, liabilities and potential problems or issues that may arise. This may also include desired locations, terms of contracts and length of contract.

Think about other businesses you know that might be in financial trouble and who you think might be willing to discuss sharing a business space. This can be your established location, their location or a third, neutral place that would be mutually decided upon. This might be for two already established businesses, one new and one not or both new start-ups.

Contact acquaintances with whom you would like to share your space-sharing ideas. As you approach others to review opportunities, you will refine some of your own preconceived notions and will modify somewhat your own ideas which will assist you in your search.

Consider whether you would rather share the location you already have with another business or whether you would prefer to move to someone else's location.

Have everything in writing if you enter into a business sharing agreement. This includes all financial responsibility such as damage to equipment or space, portions of rent/mortgage/utilities and security deposits or other outlays of money. Terms of contract also should include how long the agreement will be in place. Other conditions should be addressed, such as what is not permitted on the premises, the same as if you were entering a rental agreement for a home. Security is important. A lawyer may be needed to review your agreement as he or she will have suggestions to protect both of you. Have the agreement notarized.

Remember to clarify requirements or special conditions with insurance carriers, landlords and permitting authorities to ensure there are no code or zoning violations for the area.

Difficulty: Moderate