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Physical vs Virtual Offices for Online Businesses - Which is Better?

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Physical vs Virtual Offices for Online Businesses - Which is Better?
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When you take the first steps towards setting up your online business, you’ll be faced with a plethora of big decisions. After all, the decisions you make now will potentially determine the success of your business.

We’re not trying to make this sound scary, but it’s the reality of starting a business, so it’s important to look at the pros and cons of all options out there before you dive in.

One of the biggest decisions you’ll have to make is whether to base your business in a physical office or a virtual office. If your business is online, there are advantages and disadvantages to both. But, are virtual offices for online businesses really the best option?

In this article, we’ll explore everything to do with a physical office vs a virtual office, so when you come to make that decision for your business, you’ll have all the key points and considerations to hand. That way, you’ll help give your business the best possible chance at success.

What’s a physical office & why is it important for online businesses?

A physical office is a dedicated workspace that your business owns, rents or leases. It’s traditionally where you and your employees go to work together in your own environment, which could be laid out in an open-plan, private office or cubicle-style layout. There may also be meeting rooms, break rooms, conference spaces, storage rooms, restrooms and more.

A physical office gives you a chance to work face-to-face, build strong working relationships and create a positive work environment. It also gives you somewhere to invite clients and potential clients and ensures a strong professional image.

Many businesses with physical offices also operate in a hybrid working model, with employees given the flexibility to work from the office or at home. In the UK, 25% of employees work from home at least once a week.

A physical office allows you to grow and gives you somewhere to separate your home life from your work life. It can also make your business feel more real – not that it wouldn’t be real with a virtual office, of course. Once you have customers and clients and you start making money, that mindset will very quickly change.

This all sounds great on paper, however, there are two major downsides to physical office space. The first is that it’s expensive, and when your business is in its early stages those costs can be hard to swallow. The second also links to this, and it’s that physical office rental and lease agreements usually tie you into a minimum timeframe, which could be one, two or three years. These can be difficult and costly to change, so can be a risk during the early stages of your business.

Understanding virtual offices

A virtual office is a service that allows you to operate your business remotely, such as from home, but still have access to services that boost your professionalism. For example, a virtual office gives you access to:

  • A professional business address

  • Mail handling services

  • Phone answering services

  • Access to meeting rooms

  • Access to co-working spaces

Virtual offices are becoming increasingly popular with online businesses as they ensure professionalism and flexibility to your business while keeping costs down. Of course, if your online business is related to eCommerce and you need access to a warehouse or workshop, a virtual office isn’t for you – but if you can operate well from home then it’s likely to be your go-to option, especially as a startup.

For more information, read our article on the benefits of a virtual office.

Comparing physical and virtual offices for online businesses

Now that you know a brief overview of what physical and virtual offices are, it’s time to pit them against each other in a battle to work out which is right for you. Comparing a virtual office vs a physical office requires looking at various pros and cons of each, which we’ll break down below.


We’ve already touched on this, but for any startup business, cost is always going to be the key deciding factor. While a physical office does have plenty of advantages, such as a place to work closely with your team and give you a professional image, it can be expensive.

The costs involved with a physical office include:

  • Rent

  • Utilities

  • Maintenance and cleaning

  • Insurance

  • Staff amenities

These costs can vary depending on the size of the office and where it’s located. For example, a large office in a city centre will be a lot more expensive than a smaller space in a countryside business park.

The costs involved with a virtual office include:

  • Subscription fees

  • Meeting rooms (ad hoc)

  • Add-on services

These costs can also vary depending on the subscription you choose – the higher the monthly cost, the more services you’ll receive. However, these will invariably be far lower than even the cheapest office out there, but still provide your business with that extra level of professionalism.

Flexibility & scalability

When starting your business, things are likely to change quickly and unexpectedly. That might mean having to hire staff or quickly change your services to meet shifting customer demands.

So, you need to know that your office can change as your business changes and grows.

With a physical office, your company may outgrow it. Then what? You might be limited if your contract means you’re tied to it for another 18 months. As your team grows, it also means more office-related costs which can be a hefty expense each month. There’s usually less flexibility, so you’ll probably find that your employees work in a standard 9-5 workday.

Virtual offices have a high amount of flexibility, so long as you have the space at home to work – the same goes for any employees you hire. This means you can grow your team using experienced professionals who live anywhere, not just those within a commutable distance. In theory, you could run a completely virtual office with a team of dozens. You only pay for the services you use and can make changes to your subscription as and when they’re needed.

Productivity & employee satisfaction

Believe it or not, remote staff are more productive than office-based staff. This is due to the lack of distractions and a high level of employee satisfaction thanks to the increased flexibility and not having to spend time and money commuting.

This makes virtual offices incredibly desirable for employees as flexibility is a hugely in-demand perk.

That’s not to say that employees who work in physical offices aren’t productive – far from it. Collaboration will always be easier in person and a structured environment brings order and efficiency. However, this can come at a cost, as remote employees have a higher level of satisfaction than office-based employees.

Business image & customer perception

There’s no doubt about it, a physical office will give your business a strong, professional image. This will help with customer perception and give you a permanent location to invite them so you can collaborate.

A virtual office gives you the prestige of a business address but at a far lower cost. However, you won’t have a space to call your own. But, depending on your business and the services you offer, this might not be important to you.

Having a physical office isn’t necessarily a dealbreaker for most clients, but it could just give you that slight edge over your competitors.

Legal considerations

There are several legal considerations to bear in mind with a physical office and a virtual office. Depending on what your business offers or sells, you may be restricted by certain laws, regulations and building codes. You may also need to obtain relevant licenses or permits. For example, if you’re selling cupcakes online, you’ll need to make sure you have the relevant food safety certificates.

But, it’s reassuring to know that virtual offices are legal and you don’t have to worry about any additional legal headaches.

Your business must also comply with data protection and privacy laws at all times.

So, which is better for an online business?

With all these factors considered, which would suit your business better: a physical or a virtual office? Virtual offices for online businesses are often the safest option, certainly as you work to establish yourself, find loyal customers and help it grow. A virtual office provides a great balance between professionalism, flexibility and affordability. Then, once your business is established, you can make the switch to a permanent space to continue your growth.

However, if you have the funds available and you’re willing to take the risk, a physical office does have plenty of benefits. Just be prepared to pay a lot of money for it, especially if you’re based in a popular town or city.

On saying that, the nature of your business may determine which option is right for you. If you need a lot of space to store products or work collaboratively on a regular basis, a physical office space might be needed. But, if you’re a small team of graphic designers and spend 90% of your time working remotely, a virtual office is likely to be more than enough.

As a business owner, only you can say which is right for you. A physical space can be a risk, and a virtual office offers many of the same benefits but with far more flexibility. And don’t forget, with a virtual office subscription you’re not tied into any kind of long-term agreement, so if you give it a go and later decide you’d suit a physical space, you can make this change very quickly. The other way around, however – not so much.

Want a virtual office? Choose Start Up A-Z

If you’ve decided to use a virtual office for your business, depending on your circumstances and business plan, it’s likely to be a great move. It carries a far lower risk but gives you the professional edge and flexibility that’s so important for startups.

Ready to start your business journey with a virtual office of your own? Start Up A-Z can help, with our Manchester virtual office address from £9.99 a month – sign up today and give your business the competitive edge it needs.

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