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As the Coronavirus spreads from China to the rest of the world and brings a number of business sectors to a full stop, economists no longer feel they have to wait for data to confirm that the world is in recession.
Economists have removed their rose-colored glasses from the last 11 years and are beginning to price in scenarios for the world that are as bad or worse than the global financial crisis in ‘08.
The benefits of remote work are well documented by now. The carefully calculated rise of remote work, which had been projected to follow a predictably smooth growth curve over the next decade, suddenly spiked with the spreading of the Coronavirus.
Because of it, many people have jumped on the remote work bandwagon to regurgitate its known benefits ad nauseam at the risk of an eventual backlash given the current circumstances. This is because emergency remote work is not the same as an organized and deliberate remote work strategy, but that’s a topic to cover in another post.
The case for remote work that is worth diving into now is a capital-efficiency one.
Research indicates that businesses with smart control over their assets stand a better chance of success in a tough economic environment. The new economy is about speed and agility and fixed costs are the exact opposite. They are a relic of the industrial age.
Experience and data have shown that working remotely benefit both, employers and employees in material financial ways:
Here is a breakdown of average office costs for a 100 employee company, for example:
The average office rent in midtown Manhattan is $75 per Sq Ft/Year ($80 in San Francisco), and the typical space allocated per employee is 150 sq. ft, totaling 15,000 sq. ft. The average Manhattan rent is $1,125,000 per year, or $93,750 per month (10-year lease). Add a 3-month security deposit of $281,250.
6 months later the same company grows to 120 employees, with expectations to grow to 200 by the end of the year so it leases a new space for 180 employees, or 27,000 sq ft. The new rent is now $168,750 per month and the new security deposit is $506,250.
The money lost on subleasing the old space for 20% less than rent is $225,000 per year for the life of the lease. That’s $2,250,000 wasted over the total life of the lease!!.
The above figures don’t include attorney fees, build-out costs, furniture, moving costs, etc. It’s operational time and a massive amount of money out the door.
Because remote-first companies do not rely on legacy assets, they’re able to respond faster to changing economic conditions and new market opportunities.
Remote-first companies can also achieve scale faster in a more capital-efficient way. A remote-first company can hire the best talent anywhere in the world, without having to pay a premium to compete for it against Google, Facebook, Amazon, etc. in any local geography.
The building blocks of a global, home-based workforce are already in place: a combination of a growing number of knowledge jobs that can be done remotely with the near-universal ownership of cell phones, personal computers, and increasingly better collaboration software, all linked together by ubiquitous high-speed internet.
The impact of this recession will bring to light the capital efficiency benefits of operating a remote-first company and will showcase the competitive advantages that these companies enjoy over co-located organizations with rigid cost structures.
Traditional co-located work in commercial office spaces and local hiring practices have remained stuck 100 years in the past — not much had changed about the model since the shift from an agrarian to an industrial and corporate economy began during the first two decades of the 20th Century.
About GroWrk Remote
GroWrk Remote is building the infrastructure for the future of work. We help companies equip their remote employees and redistribute their office space into their remote worker’s homes, setting them up with premium ergonomic workspaces on a flexible and scalable low subscription. GroWrk Remote is the easy button for everything remote office-related.
With GroWrk Remote you will: