In today’s business offices, there are two prominent models depending on where your staff are located. For instance, for companies who have their staff locally, leasing an office space is the main strategy to house all staff.
However, as remote staffing becomes an emerging business strategy an outsourced offshore seat leasing model is an important decision that can significantly impact their bottom line especially if they have employees offshore; partnering with a Seat Leasing provider becomes a necessity.
Companies that are looking to expand operations or enter new markets, setting up office space can be a costly endeavor. Between rent, utilities, equipment, and furnishings, traditional office space requires a significant upfront investment.
This is especially challenging for small businesses and startups with limited capital. With this, Seat Leasing has emerged as an attractive alternative that allows companies to get up and running quickly with lower startup costs.
Seat leasing is an outsourcing business model where clients prefer to handle the recruitment, training, and management of their employees without concerning themselves with physical assets like desks, computers, and facility maintenance.
While traditional office leases have been the norm for decades, outsourced offshore seat leasing has seen explosive growth in recent years and now represents a viable strategy for companies looking to reduce costs.
As organizations evaluate the pros and cons of each real estate approach, costs are often a major factor, and the turnkey service that Seat Leasing offers through Outsourcing companies becomes an excellent scaling solution.
Below, I’ll give you an analysis and compare the financial implications of a traditional office lease versus offshore seat leasing to understand how each model affects overhead and the ability to scale cost-effectively.
Traditional Local Office Leases Have High Fixed Costs
A traditional office lease locks you into a long-term agreement for a defined amount of space at a fixed monthly rental rate. Typically, leases run 3-5 years to secure more favorable rental prices per square foot. This leads to a higher fixed overhead that restricts flexibility.
Here are some drawbacks of the traditional lease model that you may experience when entering into an agreement:
- Long-term lease commitments of 3-5 years
- Fixed monthly rents based on square footage
- High upfront capital expenditures for office build outs
- Significant cost to upgrade or move locations
- Costs continue even if headcount shrinks
- Paying for unused office space due to overestimating needs
Local office build outs can run $100 – $200 per square foot. With traditional spaces, you take on this upfront capital expense. If your needs change in the future, the sunk cost of custom build outs makes it very expensive to move.
For SMEs, this can be tricky and can eat up a lot of your profits, which in the long-run can create problems in terms of scalability and organizational flexibility as these astronomical overheads can prevent you from making quick decisions.
Aside from the office building cost, your local employees also come with a big price, which is why some companies prefer to outsource their staff then opt for a Seat Leasing partner for their employees.
Offshore Seat Leasing Offers Variable Costs
Outsourced offshore seat leasing provides access to turnkey office environments overseas with flexible terms. Rather than leasing space directly, you lease offshore staff members, who provide access to workspace.
One example of a good Seat Leasing hub is the Philippines, where the infrastructure for outsourcing is very welcoming in terms of the number of BPO companies and government support.
Here are some of the benefits of offshore seat leasing that you can access once you partner with a reputable Outsourcing company:
- Flexible terms ranging from month-to-month to 12 months
- Ability to easily adjust team size each month
- Turnkey offices without upfront build out costs
- Costs scale up and down based on your needs
- Built in cost savings by sharing amenities
- Talent access to skilled offshore professionals
Offshore seat leasing provides agility since you can quickly adjust your footprint month-to-month. If your headcount grows, simply add more memberships. As well, you can downgrade if you need less space. This flexibility prevents overspending on unused real estate.
These outsourced models provide infrastructure, amenities, furnishings, and talent offshore. This allows you to avoid major local build out costs. If you outgrow one location, you can easily move to a new space without incurring expensive brokerage costs.
Additionally, if you don’t have enough staff in your offshore country, your BPO partner can also help you find the right professionals.
Comparing Bottom Line Costs
To determine the cost implications, let’s compare a hypothetical 3-year scenario of leasing a traditional 2,000-square-foot space locally versus using an outsourced offshore seat leasing model.
Local Office Scenario
- 2,000-square-foot office space
- 5-year term
- $40 per square foot rent
- Upfront costs
- $100,000 build out allowance
- $10,000 AV/IT installation
- $5,000 furniture
- Total upfront costs = $115,000
- Monthly costs
- Rent – $40 x 2,000 = $80,000/year
$6,666/month - Estimated CAM/insurance – $6,000/month
- Utilities – $1,000/month
- Rent – $40 x 2,000 = $80,000/year
- Total monthly costs = $13,666/month
3 Year Total Cost = $589,792
Offshore Seat Leasing Scenario
- 15 offshore staff members
- $2,000/mo per offshore professional
- Upfront costs
- $0 build out
- $0 AV/IT
- $0 furniture
- Total upfront costs = $0
- Monthly costs
- 15 members at $2,000/month = $30,000/month
- Total = $30,000/month
3 Year Total Cost = $1,080,000
Potential Savings of $490,208 (45%)
As you can see, the cost savings and advantages of flexibility with outsourced offshore seat leasing are substantial. While your monthly costs may be slightly higher than a traditional lease, eliminating large upfront capital expenditures and office build outs saves tremendously on your bottom line.
The ability to right size your offshore team month-to-month provides savings by reducing unused seats you may have paid for with a local office. Absorbing employee growth is far easier without local office buildouts and expansions.
Key Factors to Consider
While cost is a major driver, there are a few other important considerations when evaluating offshore seat leasing:
- Talent access – Offshore markets provide highly skilled talent at lower costs. This gives you expanded hiring pools beyond just local geography.
- Infrastructure – Reputable providers deliver modern infrastructure, tech stacks, and office environments offshore. This removes the need for major local capital expenses.
- Time zone advantages – With staffing in complementary time zones, you can achieve productivity gains with 24 hour work cycles.
- Scalability – Leading providers make it easy to rapidly add or reduce offshore staff as your needs change.
- Cultural fit – There can be challenges with offshore teams fitting your culture. Thorough vetting of providers is key.
Considering these key factors will help you determine if an outsourced offshore seat leasing model is the right real estate strategy for your evolving business needs.
The financial benefits of offshore staff leasing make it an advantageous option for many organizations looking to reduce overhead and accelerate growth.
With emerging technology and the continuous embracement of remote work as a legitimate business setup, Outsourcing has become more and more acceptable as a business strategy for companies that are looking for scaling options.
Seat Leasing as an Outsourcing service can help you find a cost-effective solution to your growing needs while having the option to access diverse talent that can help you gain perspective from seasoned and experienced professionals.
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