Is it time to rethink your firm’s physical footprint?

With the pandemic demonstrating that employees can work from home and communicate virtually while maintaining high productivity, remote work appears to be here to stay. For individual workers, the benefits are obvious: They can potentially live anywhere in the country and still have interesting, challenging jobs.

But businesses also stand to gain. The rise in popularity of remote work means organizations that are facing high costs in crowded, expensive metropolitan areas or that struggle to attract and retain workers in a tight talent market have an opportunity to shift things to their advantage (see the sidebar “From the Coast to the Middle of the Country” at the end of this article.)

“We live in a time where just about every company has been able to take a step back and question their office use: Is this the right office, the right talent market? Does work from home work for us? All of that is happening at the same time,” said Darin Buelow, a principal at Deloitte who focuses on real estate and location strategy. “The corporate location world is extremely busy.”

The pandemic forced Jim Lange, a Pittsburgh-based CPA who runs Lange Financial Group, a tax preparation, investment, and legal services firm, to switch his business to a remote model. However, his employees have appreciated it so much that he plans to allow them to continue to work remotely in the future if they wish (see the sidebar “State Business and Licensing Laws to Consider” at the end of this article).

“It’s been a recruiting tool,” he said. “The market for CPAs is very tight, very competitive. I think it’s a major advantage for me to say, ‘Hey, you can work from home. And you don’t even have to live in western Pennsylvania.’ ” Lange’s firm has been expanding rapidly during the pandemic, and the ability to pull résumés from all over the country ensures that it can scale up quickly while still maintaining quality.

Kruze Consulting, which provides tax and finance help to startups, saw benefits to relocating even prior to the pandemic. The business was originally located in San Francisco and San José, but in 2018 founder and CEO Vanessa Kruze, CPA, decided to close the physical office and allow all employees to be fully remote. Her objective was to boost employee retention. “We were discovering that it was really difficult to retain people in San Francisco,” she said.

The shift has allowed the firm to identify and hire high-caliber workers, many of whom live in lower-cost regions and therefore require less compensation. But while no longer paying for office space in the Bay Area’s high-cost market might appear to be an added benefit, Kruze said the move has not saved the firm money. “Make no mistake, this is not a cost savings initiative: What we no longer pay in rent we make up for in increased IT costs, IT security, cultural initiatives, and off-site events,” she said.

Until the pandemic is squarely in the rearview mirror, it will be difficult to predict the exact ramifications of the rise of remote work. But with real estate and location wielding increasingly less influence over organizations’ outcomes, firm owners should invest some time reexamining exactly where they want to be and why.

HOW TO FRAME YOUR THINKING

Whether or not to move or to go virtual is a giant decision for any organization, with a huge range of factors to consider. Here are a few points of advice:

Be comprehensive

There are usually between 40 and 60 geographic-specific variables that need to be assessed when considering any kind of move, Buelow said — from the availability and cost of real estate to taxation policies, residents’ median education level, and the risk of natural disaster. “There’s a whole host of factors; companies need to think of everything before they do this,” he said.

“Don’t make a decision based on just one thing,” he said. For example, incentive packages some states offer to attract new jobs shouldn’t be the driving force in a company’s deliberations.

One way to begin weighing some of the factors, said Pierre Jinghong Liang, Ph.D., professor of accounting at Carnegie Mellon’s Tepper School of Business in Pittsburgh, is by examining what has made the organization successful and whether a move would affect that.

“What is your core strength, and how would a move impact it?” is a question he suggests you ask yourself. But be mindful of blind spots, he cautioned. “It’s so easy to see what you’re missing, but there may be other things you took for granted at your current location.”

Don’t overemphasize cost

Financial elements are only one factor to weigh when contemplating a move, said Maxim Sytch, Ph.D., professor of management and organizations at the University of Michigan’s Ross School of Business in Ann Arbor, Mich.

Don’t “boil all these conversations down to an issue of cost,” he said. After all, most organizations don’t compete solely on cost; they might pride themselves on the quality of their product, their innovation, or their strong customer service. Simply determining how to save the most money won’t necessarily enhance the organization’s strengths.

Realize there may be costs as well as savings

In some cases, a move — or a choice to go remote — can lead to unexpected costs.

After Kruze’s firm moved, for instance, it had to spend more on IT and security. With everyone using different computers, in dozens of different states, Kruze had to outsource the business’s security and human resources operations in order to get the expertise needed.

“IT and HR costs have gone up almost net-net with what we’d been spending on office [space],” she said. And that doesn’t include the cost of developing new systems that ensure accountability and annual in-person gatherings to strengthen company culture.

Still, she said, the benefits of the switch have outweighed the costs, even though they can’t be measured in quite the same way.

Be open-minded

Organizations pondering a move should not overlook smaller cities.

Emily Heintz is founder and managing director of EntryPoint, a Michigan research institution that focuses on small business and startup environments. She pointed out that many Midwestern cities, for example, have a range of advantages: They often offer proximity to nature, shorter commutes, and lower housing and child care costs. In addition, she said, “they might also have access to high-net-worth individuals looking to make investments and great tight-knit communities” where it’s easy to make connections. You can often take advantage of the underutilized capital that exists in a smaller city.

Know that a move doesn’t have to be all or nothing

But what about the cachet of being a New York- or San Francisco-based company? That’s a rational concern, Buelow said. “In some industries, if you’re not in New York, you won’t be taken seriously.”

Didi Caldwell, who leads site selection consultancy Global Location Strategies in South Carolina, agreed. “There still is that bias towards these marquee cities,” she said. “And there is some value in having your peers around you.” However, that doesn’t mean the entire organization has to remain in a major city. “Do you need everyone there or just a presence?” Caldwell asked.

An organization could move its headquarters elsewhere but retain a branch office in the coastal city. Or it could take a smaller step and open a small office in another city, taking time to feel out the environment before growing there.

And the importance of clustering on the coasts isn’t fixed: It could change dramatically over time, depending how employment trends go once the pandemic is over. It’s hard to predict, Caldwell said. “The dust hasn’t settled yet.”

To comment on this article or to suggest an idea for another article, contact Courtney Vien at Courtney.Vien@aicpa-cima.com or 919-402-4125.

From the coast to the middle of the country

Five years ago, the leaders of Xero, a firm making cloud-based accounting software, made a big decision. In 2017, after extensive deliberations and discussions, the company moved its North American headquarters from San Francisco to Denver. Eighteen months later, Xero — a publicly traded company founded in 2006 with 2.75 million paying subscribers — expanded the Denver office and moved into a large new downtown office building.

“San Francisco was the landing pad for our business when we launched into the U.S., and I loved it,” said Ben Richmond, Xero’s U.S. country manager and a chartered accountant; both he and Xero are originally from New Zealand. “But when we looked at the growth of our business, bringing on more and more talent, it had become incredibly competitive and expensive in terms of living costs.”

As the company weighed various potential new locations, Denver kept rising to the top. The city was becoming a tech hub in its own right, one characterized by collaboration rather than sheer competition, and without San Francisco’s skyrocketing costs or long-ingrained business environment.

And given its location in the center of the United States, the city is an easy plane ride to the coasts and smaller cities in the country’s interior.

Most importantly, Richmond said, “Denver is an amazing place to live and work for our people. The work/life balance is very good: I can finish work here at 5 and be paddle-boarding in the mountains in 40 minutes.” He and his team believed that Denver’s quality of life would appeal to Xero’s current employees and the kind of people it hoped to attract in the future.

Not everyone on staff is in Denver. The company has retained small offices in San Francisco; New York; Austin, Texas; and Atlanta, and remote workers are based nationwide. Allowing staff that freedom is intentional.

“Employee well-being is very important to us,” Richmond said. “We have to take a forward-thinking approach because people’s attitudes have changed. You can’t force them back to the 2019 normal.”

In the four years since Xero expanded its Denver presence, many other companies have relocated there, driving up the cost of housing and intensifying the competition for talent. But the growing cluster of like-minded companies allows for greater networking and knowledge sharing, and that’s a plus, Richmond said. “There’s a true global community starting to thrive here just in the four years I’ve been here.”

About the author

Amanda Abrams is a freelance writer based in North Carolina.

State business and licensing laws to consider

By James Cox

As your firm rethinks its physical footprint, it should also consider state business and licensing laws when transitioning into a remote status. Even with the ease by which CPAs and CPA firms can practice across borders, states may have unique licensing requirements related to a firm’s principal place of business, licensees’ residency, and holding out as a CPA in the state. CPAs and CPA firms are encouraged to always contact the board of accountancy in the states in which they are operating.

— James Cox is associate director–State Regulation & Legislation at the AICPA. He can be reached at James.Cox@aicpa-cima.com.

AICPA RESOURCES

Articles

“Rethinking Real Estate: The Benefits of Workforce Segmentation,” JofA, Nov. 12, 2021

“How Stack Overflow Raised Millions While Working Remotely,” CPA Insider, Feb. 8, 2021

“Housing Costs and the Talent Crunch,” JofA, Feb. 1, 2020

“Remote Team Building and Culture,” AICPA.org, May 9, 2019 (free for members)

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