The Real Costs of Running a Remote Business

  
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One truth about remote work that’s become a cliché is that it saves you money. Many remote entrepreneurs I’ve spoken with say that their choice to be remote was, at least in part, due to the costs of an office.

The challenge I have with this statement isn’t about its truth. Instead, it ignores the other, very real expenses that pop up when you run a remote business. I want to shine a light on those for two reasons: 

  1. A lot of bashing around remote work stems from the idea that companies are reaping massive savings while forcing employees to pay for office expenses (in the words of Laurel Farrer - “will no one ever be satisfied?”). 

  2. Entrepreneurs thinking of going remote - you need to go in eyes wide open. You’ve probably experienced some of these costs as you navigated COVID, but there are others that will come up if you want to build a thriving remote culture

I’ve broken down this article into three categories: freelancers / solopreneurs, services teams, and product teams. Each category is cumulative, meaning a services team will also have the expenses that a freelancer or solopreneur has. Further, a product team will likely have the expenses of a services team and a freelancer, since a lot of product companies offer services, whether as a revenue line or under the banner of customer success. 

So shall we talk about money? 

Image via Burst

Remote expenses: Solopreneur and freelancer

All businesses have some fundamental things they need to pay for. In the freelancer and solopreneur world, thankfully those expenses can be relatively low. However, they can still amount to thousands of dollars per year for: 

  • Payment processing for digital payments

  • Web hosting for personal sites and ecommerce platforms

  • Custom email and digital asset managers

  • Social media management tools

  • Contract management and e-signature tools

  • Any custom technology necessary to do their job (design platforms, etc.)

These infrastructural costs hurt freelancers and solopreneurs the most, in my opinion, because they are not built for the freelance world. Big tech platforms like Zoom didn’t build for freelancers when they launched a ‘freelancer’ level. Instead, the company simply took enterprise value triggers and offered fewer of them for a lower price. While this covers some needs, it does not reach all - leading to platform creep for freelancers. 

Services companies

Services companies will have the same infrastructural costs of a freelancer, scaled up by the size of their team. However, they will also have: 

  • Virtual office tools like Workplace by FB or Memberstack / Memberspace / etc. 

  • Project management tools like Asana, Trello, or Airtable 

  • Travel and retreat expenses (don’t assume remote teams shouldn’t spend time together)

  • Home office stipends or coworking memberships for employees

  • Virtual events

  • Gift cards and other goodies in lieu of office perks like snacks and coffee

  • Payroll and team admin software that manages the complexity of having employees in different countries

These kinds of expenses are often higher for remote service companies than they would be for an office-centric company. Take retreats, for example. You can’t hire a coach bus to drive outside the city with the team - everyone has to fly in, some folks from very far away. It creates opportunity for fun exotic locales, but also adds to the cost base. 

Product companies

Selling a product is the most scalable type of company, but it also carries with it a higher fixed cost base. Not only will product companies have all the costs associated with human capital, they will also have: 

  • Ticket management and support hub software

  • Fulfillment and shipping costs

  • Returns and inventory management costs

  • Cyber security costs associated with remote product development

  • And more based on what kind of product they are selling

Many of these costs can be outsourced or handled as a percentage of revenues, but that leaves a smaller pot to pay employees and hold profit for investment later. When these companies are remote, there is some efficiency to be gained - an ecomm brand can have centralized inventory instead of distributing it to storefronts first - but that doesn’t mean it’s all easy from there. 

There are of course other costs associated with running a business, but I tried to highlight the ones that remote companies have (or have more of) compared to office-centric companies. And if you’re noticing some overlap, that’s a good thing - it means that many office-centric companies are more set up to work remotely than they may have thought. 

One more thing… 

I started Remotely Inclined to investigate running a business remotely, and now invest multiple hours per week researching different topics, interviewing experts, and putting together this content.

If you’d like to support that work, consider becoming a paid subscriber. You get access to everything I produce and you can have me solve your remote work problems for you - just send me a question. I’ll do the research and publish the answer.