OFFICE SPACE: Eastbiz Inc.'s "virtual office" at 3155 Hickory Hill Road allows small-business owners to lease part of an office part of the time for a fraction of what the entire space would cost at market rate. The company targets sole proprietors hoping to get out of their home offices.
-- Photo By Eric Smith

Small-business owners hoping to make the transition out of their home offices have a new option thanks to the arrival of Eastbiz Inc., a Las Vegas-based company that expanded into Memphis this year with the purchase of a Hickory Hill office building.

Eastbiz offers "virtual office space," a concept that allows business owners to lease part of an office part of the time for a fraction of what the entire space would cost at market rate.

Eastbiz owner John Vanhara launched the company in 1999 when his own startup software company became a victim of the dot-
com crash. He remembered how difficult it was to save money as he struggled to find his entrepreneurial way with the new venture.

And, as he weighed leasing options, Vanhara realized he didn't have the capital to pour into a long-term lease for an office he didn't know how long he'd need.

"I was afraid to sign the big lease because what if it didn't work out for me?" he said by phone this week. "When you're starting something, you have no idea if it will be successful, or after a couple of months you find out you don't even make money. If you have the lease signed for five years, it's disaster."

A room of one's own

Sole proprietorships comprise the vast majority of small businesses in this country. At last count, there were 26.8 million businesses in the U.S., and close to 20 million didn't have employees, according to the U.S. Small Business Administration's Office of Advocacy estimates.

That leaves a lot of one-person small businesses that might need a place to set up shop away from the trappings of their houses or neighborhood coffee shops.

"These are the people who work from home and they get tired of people coming to their homes, they don't want to meet at Starbucks or Barnes & Noble," Vanhara said. "They want to have their own space. That's what we are getting."

In April, Vanhara purchased a 17,000-square-foot building at 3155 Hickory Hill Road, not too far from the bustling Tenn. 385 corridor. And when creating Eastbiz, Vanhara used his past experience to create the company's business plan.

"I was thinking, 'What didn't I like? What did I need help with when I started? What was the difficult part? What would be the service I would use myself?'" he said.

He remembered needing an office to meet with clients, but only occasionally. He remembered needing a workspace part of the day, not all of it. And he remembered needing minimal copier and fax machine usage but hardly his own equipment.

Mostly, he didn't need anything fancy - or expensive.

"It's not always about having a prestigious, beautiful place with marble on the floor (and) glass windows, because that doesn't help you," Vanhara said. "What helps you when you're starting the business is having money in your bank account, turning a profit, saving every expense you can save."

Dirt-cheap digs

So he came up with Eastbiz, which leases space in a variety of offices as low as $75 per month or $540 for the year at a 40 percent discount - and no down payment or long-term commitment. Compared to the going rate of almost $18 a square foot in that submarket, it's dirt cheap.

Memphis office manager Natasha Waite said that's the kind of deal new business owners are seeking when they inquire about space.

"What I've been seeing is people looking to not get locked into long-term leases," she said. "They're small and just trying to come out of their living rooms. It's a giant leap."

The Eastbiz virtual leasing arrangement includes phone, fax and Internet service. The company soon will debut a "live answering" service, whereby calls to a local phone number would be directed to Waite, who would be able to tell which company was receiving the call and answer using that business' name.

The company also leases more traditional and more permanent office space starting around $95 per month up to $1,800, depending on size and amenities.

Cash flow for everyone

This is Vanhara's first venture outside Las Vegas, which he said is a nod to Memphis' commercial real estate value. He plans to use the city as a test market, where he'll determine if the business plan is suitable to further expansion.

"It has some challenges, but it's a good experience to learn how to grow the company from one office to multiple branches," he said. "When I do well in Memphis, then I want to go to other cities."

Vanhara admits that he saw Memphis as a good bet - not necessarily because of a thriving, dynamic small-business community, but because of affordable property that offered a chance to minimize his investment risk. He bought the Hickory Hill building for $465,000, a steal compared to other locales Vanhara considered.

"I wanted to risk as little as possible," he said. "If I go to California and I buy commercial real estate, I would pay five times more money - maybe even more than that. It made good business sense."

He also likes the Hickory Hill location, especially for what he can charge compared to other office submarkets in Memphis, most notably the Poplar Avenue corridor. That's because Vanhara wants the small-business owners who use the company's virtual office to succeed and make the next step of entrepreneurship.

"When you're making money and you're doing well, then after a couple of years you can get whatever office, whatever beautiful place you want," he said. "To start, the biggest risk is running out of money."