The Hidden Cost of Running a Distributed Company
By: Jody Grunden
With a brick-and-mortar company, there are a number of standard costs that you would expect to have, such as rent or mortgage, utilities, building repairs, furniture, technology, etc. The total amount of these kinds of costs typically falls in the range of 3-4% of the company’s annualized revenue. That can be pretty significant for a lot of companies.
Some business owners may think they can save the company all of that money by going remote, but I personally believe that’s a terrible idea. While it’s true that a distributed company doesn’t have the same costs that come with having a physical space, the very nature of a remote work environment results in a completely different and unique set of needs that should be considered in the company’s annual budget.
Human interaction is still important for remote workers.
The money saved on things like rent and utilities shouldn’t simply go toward profit. Instead, those “savings” should be reallocated to things like company retreats and meetups. At Summit CPA we believe it’s important for remote workers to get together throughout the year—whether it be an annual company-wide retreat, a leadership retreat, a project get-together or simply a meet-and-greet.
We have an annual retreat where we get the entire team together for a week. This helps us get to know each other on a more personal level and creates a dynamic similar to what you would find in a traditional office setting. We also have a leadership retreat where we get our leaders together to discuss the vision and future of our firm. These types of get-together deepen our bond with one another and help us work together more effectively as a team.
We’ve found that the cost of in-person events roughly accumulates to the same 3-4% of annualized revenue that a company would “save” by not having a traditional brick-and-mortar office. It may be a wash from a financial standpoint, but it’s a strategic use of company funds that will help the company become stronger and healthier as it grows.
An Accountant on our team, Alyssa Colf, shared, “I have benefited greatly from every in-person interaction I've had with my coworkers. It's just a different kind of connection that you can have when you're face to face with someone. I think it’s an experience that people working in brick-and-mortar companies wouldn’t really understand. They are together every day, so it can be taken for granted. When they get together, it's no big deal. But when we get together it is something really special and I think everyone cherishes that time together and makes the most of the time to connect on an entirely different level.”
Get-together can be powerful bonding events for remote workers, and they are an important part of doing business remotely. If a business owner thinks that they can save money by running the company as a distributed model, they are doing a disservice to the company and its employees. Not investing money in healthy human interaction will only have a negative impact on the company in the long run.
Jody Grunden is a CPA with a passion for changing the way people think about accounting. He is the Co-Founder and CEO of Summit CPA Group, the leading provider of Virtual CFO Services for creative agencies as well as one of the largest Virtual CFO firms in North America.
Summit CPA’s Virtual CFO Services partner business owners with a dedicated CFO and a team of accountants, CPAs and tax professionals to help guide their business to success through cash flow management, business tax planning and financial forecasting.
Author of Digital Dollars and Cents, Jody literally wrote the book on helping digital companies create a financial road map to success. Jody co-founded Summit CPA in 2002 and transitioned the company to a distributed accounting firm in 2013. As the owner of a distributed company, Summit CPA fully understands the accounting, bookkeeping, cash flow management, and business tax nuances that come with being distributed, and the team loves helping clients overcome these challenges through their own experience and expertise.
