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The following interview was conducted with Brady Murphy, a Vice President for Alayacare Inc., an award-winning home health software provider.
We asked Brady about his experiences in leasing office space for this company and at previous positions.
Alayacare is a leading home care software provider. When a nurse arrives at a patient's home to provide care, they check in with software through an electronic visit verification system. We provide that software. We also do back end software for home care agencies, so they can provide remote patient monitoring, and all their clinical documentation can live on an electronic device, instead of on a clipboard. We also provide a family portal so that entire families can be involved in the whole continuum of care.
Correct. Our place of work is all about attracting and retaining talented people, and we rarely if ever have any customers come to our office space.
Correct. My experience as an in-house real estate director has always been at high-growth software companies. Nobody had any experience with real estate and somehow I ended up with those duties.
As you can imagine, when a start up moves out of the proverbial "garage" and into conventional office space, it is a little daunting. At the time we were not on the radar for any real estate brokers. So when we really needed the most help we were not being solicited by the industry. Luckily we had a friend in the business at a reputable brokerage who was willing to work with us for a small amount of space (and a short lease term).
The commercial real estate industry is a bit confusing. I found that there are quite a few jargon terms that I had to learn...like triple net leases, fixturing periods, overholding, makegood provisions, and the difference in concepts, like a right of first offer vs. a right of first refusal.
Great question. I suppose we would have just found signs on buildings and would have made some calls, but that would have been a big time commitment that I did not have.
If we had to do that, I suppose we would have ended up working with the first agent we met that we liked. I am glad we had a friend in the business because the trust was immediately there, and we were not leasing big amounts of space right away, so I question the commitment we would have received from a stranger.
I know other start ups that didn't have any contacts in the real estate industry and some of them struggled to get calls back and timely service by not have a broker work exclusively for them.
It would probably be the balance between keeping the three parties all happy...stakeholders, founders, and employees. The stakeholders want the lowest possible overhead, the founders want a convenient commute, and the employees want everything - easy commute, amenities, a great work environment, etc.
Initially while a company is small, it is normal to be overly accommodating to the stakeholders.
When you are a bit more established, it is easy to get a bit more self-serving. By justifying a location based on the ease of commute for the founders, sometimes you can pick a location that will not serve for the long term.
What we really discovered is that once you get to a certain size, the satisfaction of the employees really starts to take over. Employees really come before clients, because if you do not have happy and productive workers, you will not have happy customers. And if you do not have the right location and work environment, people will want to work elsewhere.
Pay attention to the cold calls you receive and make some notes. When it comes time to interviewing brokers, sometimes they have differing opinions. Since you are busy with your normal duties, how can you effectively know what questions to ask and who has the best answers? You will not have all the answers, but pay attention to the process to figure out who is credible and who is not.
The second piece of advice I have is to really trust your gut on who you like and who you think you can trust. Finding and leasing office space is a longer process than you think. You will need to rely on your broker to keep on top of the market and to defend your interests in sometimes long, drawn out lease negotiations. It is not all about who knows the most about the market. It is about who will be your best soldier on the battlefield. As a start up, you probably are not signing 10 year lease deals. So the broker will have to learn to grow with you. You may only want to commit to one year deals in the beginning. And for that you want to ensure you have someone working for you that is in it for the long haul.