In this episode, we interview Frank Cottle, a serial entrepreneur and an expert and veteran of the virtual office and services industry. Frank shares his fascinating life journey, including working as a professional diver and working for the largest luxury yacht broker in the world. He shares valuable advice on how to use virtual or flexible workplaces for your small business. Flexible working is becoming more and more popular in the world of employee benefits, as it can make such a difference to how easily people can fit work around their other responsibilities, and it is fairly easy to establish if your company is digitized. There are even recruitment companies like the ten2two recruitment agency which specialize in finding flexible roles for their clients, so it could also mean that you end up attracting better applicants for jobs.
The How of Business Podcast is focused on helping you start, run and grow your small business. Our free on-demand audio show offers practical advice, tips and techniques for existing business owners and aspiring entrepreneurs.
Weekly episodes include discussions of small business topics with host Henry Lopez, and interviews with other successful entrepreneurs and professionals.
Introduction [00:00:04] This episode of the “How of Business” is sponsored by Lease Smart, most business owners don’t have the skills or knowledge to negotiate the best commercial property lease. Lease Smart offers lease negotiation services at a cost far below the savings they realized for their clients guaranteed. Visit the show notes page for this episode at thehowofbusiness.com for a free download offer or leasesmart.com for more information.
Introduction [00:00:35] welcome to the How of Business with Henry Lopez and David, begin the podcast that helps you start, run and grow your small business. And now here are your hosts.
Henry Lopez [00:00:46] Welcome to this episode of The How a Business, this is Henry Lopez and my guest today is Frank Cottle. Frank, welcome to the show.
Frank Cottle [00:00:53] Thank you very much, Henry. It’s a pleasure to be here.
Henry Lopez [00:00:55] It’s our pleasure to have you, sir. Frank is the CEO of Alliance Virtual Offices and chairman of the Alliance Business Centers Network. He is a recognized expert on flexible working, the virtual office movement and third place working. If you haven’t heard that term before, we’ll get into that a little bit. Prior to creating the Alliance brand, Frank successfully operated his own portfolio of business centers in multiple locations across North America. Frank has spent the past 30 years delivering business services that are finely tuned to the workplace needs of startups, entrepreneurs and growing small and medium businesses. Over the last years, he has worked with tens of thousands of business owners and coupled with the unique global management perspective that he has, has become the go to authority on flexible and remote work. So in this episode, we’re going to chat with Frank about his very interesting journey to where he is. Today is entrepreneurial journey. And we’re going to do a deep dive on the concept of virtual office, the practices, rather, of virtual offices and how we can use that to start and grow our small businesses. Frank lives in Orange County, California. And so, once again, Frank, Cottle, welcome to the show.
Frank Cottle [00:02:17] Thank you, Henry. After that wind up, I’m not sure what more I can do.
Henry Lopez [00:02:22] Well, I appreciate that. But there’s a lot here we’re going to learn from you. There’s no doubt. I’d like to start a journey way back when if I got it right. You got a bachelor’s in English?
Frank Cottle [00:02:34] Yes, English literature, as a matter of fact, and which is absolutely worthless, I might point out. And that immediately, as I worked my way through college and immediately put me in a position where I knew I had no career ahead of me. So I started working my way through college as a commercial diver interested in working on oil rigs and ship maintenance and things of that nature, went through the Navy’s utility Underwater Demolition School and Coronado Island, which is the SEAL training school. Sandoval, the Pacific SEAL fleet, which was some of the U.S. Department of Defense and basically the space ships in Southeast Asia went from that decided that was not a career. It was just an interesting thing to do to yachting. So I did from the frying pan to the fire.
Henry Lopez [00:03:22] And where did you grow up?
Frank Cottle [00:03:24] I grew up in Newport Beach, California, and San Clemente, California, and inland in Covina, California.
Henry Lopez [00:03:31] And so then when you went into the yacht business, did you move to Fort Lauderdale or did you do it from Newport Beach?
Frank Cottle [00:03:38] State in Newport Beach, Newport Beach was the home base of our company. And so from the early 70s through the very early 80s, I basically was a ne’er do well that just raced big yachts around and pretend I knew what I was doing. But what happened then was kind of interesting. In our business, we’re in the very upper end of the business and we’re in the very upper end of the business. And I have the opportunity to meet with an awful lot of very successful people, the leaders and industry, celebrities, politicians. And fortunately, they thought I was a nice young man and wanted to help me out. So they shared a lot of their stories and a lot of their own success stories with me that just as you’re doing today with your audience. Right. And that inspired me. And after a number of years of learning from some of these folks who are very mentoring to me in my career, I had the opportunity to change careers. And it was sort of an epiphany that took me on that change. Actually, I was sitting in the brokerage one day listening to a sales activity going on, and we were the largest yacht brokerage in the world at that time and listening to this activity going on and it hit me like a rock. I’ll never be an owner so long as I’m a broker. Hmm. And that hit me. I was 28, 29 years old, and I thought, I’m out of here. That’s it. Wow. I sold out my interest within about a year and moved on. It started in the commercial real estate industry, land banking. We come from a ranching and farming family here in California. And so the concept of land is very important in our family. And it was very easy for me to see if I could buy a piece of land in the path of progress and could afford to sit on it for a while. Then I would actually make some money. So we started a company to develop buildings on the inside of large commercial planned master planned projects. And from 1980 to 1990, we built 42 buildings across the southwestern United States. So every 110 days, a new project came out of the ground and it was all with the theory of land banking, and they’re these funny little things called executive suites at the time, it was a nascent industry and that was the smallest amount of bricks and mortar that could go on the biggest piece of land to tie it down and pay for the dirt to pay for the land. So we learned during that decade how to run executive suites or later called business centers. And that was what got us launched into the career interests.
Henry Lopez [00:06:19] So originally you saw it as what can we put on this property for the least investment as kind of a holding investment while we carry this property for its ultimate bigger development opportunity?
Frank Cottle [00:06:32] That is absolutely right. Absolutely right. And after that portfolio is sold that myself and a couple other partners got into the business conventionally, business center operating business. And between us, we built 195 centers across North America and we’re the largest privately held business center operating company in the world at that time. And that portfolio was sold and in between April and August of 2000, OK, I bought the other two partners out of the remaining small part of the company. There wasn’t much left to it and started what is today, the Alliance Business Centers Group. Today and from 2001 onward, we’re a peer services company, I decided that I didn’t like the business model of a classic business center ownership where you leased long term and really short term the from a revenue point of view, it can be very good business, but it’s also subject to variations in the marketplace, market timing issues, geographic issues. It’s very capital intensive and because of the lease liabilities, the balance sheet doesn’t always look as good if you want to value the company. And I’d been involved with a couple of software companies during that period and I thought, I really like software and I really like the business models around software as a service. And so we set out to develop what is now alliance virtual offices and a group of companies like that where we own the customer rather than the center. In many respects, it’s a real estate version of Expedia. If you’ve ever bought a plane ticket from Expedia or rented a hotel or anything like that, you recognize that Expedia owns you as a customer, Hilton doesn’t or American Airlines doesn’t. Your Expedia customer and they have a wholesale agreement with various service providers. We do the same thing today in real estate, focused on virtual offices, meeting in conference rooms, business services all around live reception and telephony services, as well as office space. So today in our system, you can open ten offices in ten cities, in ten countries in ten minutes, just like you book hotel rooms.
Henry Lopez [00:08:59] And so you then have arrangements, contracts or partnerships with the physical virtual office locations, if that’s what the customer is part of what they want, because it’s more than just that. But what I as a client, sign up with you to use your services. You that’s transparent to me are not transparent, but that’s that’s not something I have to worry about. You provide me those connections and resources, whether it’s a physical suite or all of the other virtual services. Is that right?.
Frank Cottle [00:09:31] That that is correct. And we’re somewhat of a marketplace in that regard and that’s that’s really why people come to us is for choice. If you go to again, I’ll use Expedia. Good friends over there. If you go there, you can say, hey, I want a three star, a four star. My budget is something, these are the dates I need to be there. I have a brand preference and you can go into the marketplace and find good value for money. We’re exactly the same, except we handle the daytime needs of businesses rather than the nighttime needs like hotels do.
Henry Lopez [00:10:06] And we’re starting a company that and I want to have a presence in Dallas and San Antonio and in Houston instead of individually having to find, let’s say it was again, virtual space or shared suite space. I don’t have to go and do those three separate transactions. I do that through you.
Frank Cottle [00:10:25] That is correct. In fact, we’re specialists in many regards in handling the needs of a growing companies, whether they have one office and need two, or whether they have hundreds of offices and need thousands more specialists in helping to manage a complete real estate portfolio virtually for a company, and helping them to restructure their organizational environment. So many companies today are contracting rather than employing around a world of the gig economy. And in that model, a company says, wait a second, I used to have 100 employees in that market and now I have 10 employees and 90 contractors. But those contractors still need a place to work or a place together or a place to meet people. And we need to not lose our business presence in those markets. So we need addresses and live reception services, etc.. You really helped to restructure the operating format from an H.R. and a management perspective of many companies, not just be a available service provider.
Henry Lopez [00:11:40] Yeah, yeah. That makes perfect sense. All right. Before we continue on here, I want to go back, though, to that epiphany moment that you had when you were with the brokerage and you overheard that meeting so that the key takeaway there was, OK, these wealthy people, one of the common denominators is they have their own business. They don’t work for somebody else. What else do you take away from those years working with those successful wealthy people? And I’m not you know, I want to put the celebrities aside because that’s a whole different thing. But they’re goofy. Let me tell you that, you know, we don’t learn much from that. Right. But we learn from, in my opinion, is the people who built a business or took over a business and developed their wealth that way, I think well, there are other takeaways that you still think about and use and have applied since then.
Frank Cottle [00:12:33] Yes, I really think so. And the first one you were saying about my little epiphany and all of that and the common denominators and the first thing that came to my mind was action, decision making. In business, you can’t, you have to act. You have to make decisions and I think I learned that in sailing, you know, the moment you cut away from the dock, the moment you pull the lines off the dock on the boat, you have to start adjusting. You have to change course. The wind changes to currents, change all sorts of variables, traffic gets in your way. You have to steer your course and adjust constantly. And that requires decision making and action.
Frank Cottle [00:13:19] And what’s a characteristic that I found in the most successful people that I dealt with was they didn’t hem and haw over things. They didn’t worry about the little things. They just got stuff done. Yeah. And I think that as a characteristic, if I were to say that is important, one of the most important things in our own company, we have a unspoken or very well spoken rule. I guess that the only thing you can get fired for is not making a decision. Hmm. We’ll stand behind any wrong decision that someone makes. But if you’re unable to make decisions, you really can’t work in our company. Yeah, that goes right down to the the very beginning in turn that you have to be able to make decisions in life.
Henry Lopez [00:14:09] Great takeaways and great analogy with the sailing. I, I often say that to become an entrepreneur, you have to be confident in your decision making. And it’s not that every decision you make is going to be the right decision. You have to have enough confidence that you’ll make enough right decisions that hopefully outweigh the wrong ones. But exactly to your point, if you are a person that gets paralyzed in decision making, if you and even I think it goes farther of I think you have to enjoy being the decision maker at the highest level.
Frank Cottle [00:14:39] And trust your gut. I had another experience that was somewhat like the yachting career change experience. During that time, I had been investing in residential income properties and I had accumulated a portfolio of apartment buildings in the Inland Empire area, the Riverside San Bernardino area of California. And I remember driving out there to visit with our property management company one day. And on the way out along the freeway, I was listening to a radio program not dissimilar to this, where there was a lot of discussions about the economy. And at that time the economy was pretty good. But people were challenging that we were going to enter a bear market and a number of things, recession oriented issues. And the speaker on one speaker was challenging the other, and the California speaker was talking about California’s economy says, oh, we’re the Golden State. We’ve got such business diversity, we’ve got this. We’ve got that. Just at that moment, I drove past a sign on the freeway that said San Bernardino, the all-American city, and I pulled off the freeway, turned right around, went to my brokers and said, sell everything. And we did. And we survived what turned out to be a massive real estate downturn but we survived and profited. And so trust your gut. Yeah. And in order to trust your gut, you have to become a student of your industry. You’re never going to be a professor. But if you’re always a student, always seeking new knowledge and always seeking to learn from your industry, then you can trust your gut and you’ll be right most of the time.
Henry Lopez [00:16:28] Yeah, because that that gut instinct really. It’s been scientifically evaluated that it comes from all of those experiences that we accumulate and knowledge to your point that we accumulate and then we’re able to make that what seems like a, you know, a snap decision or a gut decision. But it comes it’s influenced by a knowledge and experience, is it not?
Frank Cottle [00:16:53] Absolutely. It is, absolutely.
Intermediate [00:16:58] This episode of the How a Business Is sponsored by Lease Smart, the vast majority of business owners don’t negotiate the best commercial property lease. They simply don’t know what they don’t know. Lease Smart offers lease negotiation services at a cost far below the savings they realize for their clients they can perform a simple review of the business points of your lease before you sign it. Or they can handle everything and negotiate directly with the landlord on your behalf. For more information and to get your free download of the five Vital Lease Clauses document, visit the show notes page for this episode at thehowofbusiness.com.
Henry Lopez [00:17:41] Let’s start to dove into virtual offices and this whole concept of virtual working spaces. From a startup perspective, I’m looking to start a new business. I think some of the obvious benefits everybody’s probably familiar with. And again, not having to spend money on building out a space or leasing a space. But what else are you seeing as to the advantages and benefits that startup businesses are getting from going with virtual office services?
Frank Cottle [00:18:13] I think it’s not just startups, but all businesses, including business, including government, by the way. OK, interesting. Think the key factor that all businesses have in common as well as a need aside from clients and capital, is flexibility. Flexibility is critical if you’re going to grow your business properly and efficiently. And the key constraint to that are long term obligations. The second largest long term obligation that all companies have is their lease. The first is the obligation to their employees. The second largest obligation they have is to their real estate. So if you can take that long term obligation and make it highly flexible geographically in timing, in model and pricing all of those elements, then you can materially help all companies grow their businesses more effectively and contribute quite a bit to their bottom line. So I think flexibility is the key issue there.
Henry Lopez [00:19:19] Yeah, that’s a great point. Now, Frank, it used to be, and I’m sure some to an extent still that having your own place, your own place to put your shingle up, your own building, the the your own campus was a signal that we were a real business, a real company. And I’m not saying that’s gone away completely, but that’s changed a lot, especially for startups and small businesses. Is up in your observation?
Frank Cottle [00:19:43] Well, it is. And again, I won’t limit it to startups and small businesses.
Henry Lopez [00:19:48] You’re seeing beyond that.
Frank Cottle [00:19:50] Oh, goodness, yes, absolutely. And in fact, if I were to vertically align the entire marketplace for our industry vertical and 20 percent market share pieces, who do you think would be at the top of that 20 percent.
Henry Lopez [00:20:11] That is using these types of services?
Frank Cottle [00:20:14] Uh-huh.
Henry Lopez [00:20:15] Well, my first guess would be a very small business. Solo preneurs, startups. I would have been my guess.
Frank Cottle [00:20:22] Well, you can guess that it’s wrong because I asked a question. I sure could go. Government. Government.
Henry Lopez [00:20:30] Yeah. You alluded to that, which I would never get.
Frank Cottle [00:20:32] Government is a massive user of flexible workspace now, they weren’t in the past, but they’re one of the fastest migrating groups to flexible workplace after that, without any challenge. It’s the global fortune 2000, hmm, underneath that, it’s your classic legal accounting and financial services professionals, then you get to regional entrepreneurial, small and medium enterprises and another 20 percent and your startups are the bottom 20 percent.
Henry Lopez [00:21:04] Interesting and so the takeaway from what these larger organizations and government entities are doing this for is the flexibility point.
Frank Cottle [00:21:14] Absolutely. And here’s here’s an interesting thing. If you look at the annual reports of any large public companies, five, seven years ago, you would have seen that they had a number of employees pick a company and it might have said we have 350,000 employees worldwide. Today, when you look at that same report, you would find that they say we have a workforce of 350,000 employees and that workforce, 25, 30 percent of it is now contracted. They’re not employees anymore, they’re contracted. IDC says that by the end of 2017, we’ll have one point six billion mobile workers, one point six billion mobile workers. That’s a massive force, as you can imagine. And the impact of that on the commercial real estate industry and how those people are moving around is staggering. We have a consulting group with three teams, one here in North America, another in the United Kingdom and another in Dubai. And we deal with a lot of financial institutions that are positioned and have large fixed asset funds, some of the largest institutions, private equity groups in the world, and every one of them today in their fixed asset fund is looking to understand that this change is flow in the workplace. They might come to us and say, hey, we have a global account and they’re growing.
Frank Cottle [00:22:52] Their workforce is growing, their numbers are growing, but they’re cutting their space. They take in half what the heck’s happening. And we say, well, that’s because those people are now contracted and they’re ending up. Those contractors are all going into the serviced office industry. The service office industry combines people, place and technology all together into a single bundled product and serves that product or delivers that product with a highly flexible service agreement of one year or less generally, it’s a rolling agreement. So it can be renewed very easily. But it’s one year or less, if you can imagine, take any big public company and look at the real estate portfolio, look at the impact of that portfolio on their balance sheet, and then say, what if we could get rid of a third of our real estate liability by contracting on a one year basis instead of having 10 year and longer leases? What would that do to our stock value? It’s massive, just massive, so companies are looking at contracting not just because it’s more convenient and they can hire all over the world wherever they want and people can can work in place, which is good. Currency issues oftentimes are beneficial, but they can materially impact their balance sheet, which benefits the shareholders of the companies in a quite an astounding way. So the drivers behind the migration to our industry aren’t just flexibility at the user level, but their flexibility. So a lot of financial levels as well.
Henry Lopez [00:24:32] Sure, sure. Yeah. And that’s what drives that decision at the big money level. And also, obviously, what it’s creating then, Frank, is that these remote workers that are working closer to home, if not from home.
Frank Cottle [00:24:48] And that changes the dynamics of commuting, traffic. And it also changes the dynamics of what they call in the U.K. High Street, the main street and the little little town. So there’s a lot of adjustments that go on when people can work remotely or they can work from smaller business, virtual office, coworking centers, centers that have these types of flexibility in their local environment, which is another big shift in our industry. We used to primarily build centers in the central business districts of major metropolitan areas today where ubiquitous across all markets as an industry.
Henry Lopez [00:25:27] Yeah, yeah. It used to be you wanted the executive suite that’s in that same city center.
Frank Cottle [00:25:33] I want to be on the Avenue of the Americas in Manhattan.
Henry Lopez [00:25:35] Exactly. Absolutely. Yeah, but I can’t. I can’t I don’t I don’t have enough demand for an entire space of my own. And I can only start with leasing but with a suite. But now it’s completely different, the dynamics of it. So I mentioned at the outset, third place working. And I’d like you, if you would, to explain what that means to us.
Frank Cottle [00:25:58] Starbucks. That’s a simple, simple structure’s simple explanation.
Henry Lopez [00:26:04] That’s kind of where I could go into the office, I could work from home, but instead, for whatever combination of reasons, I’m working at a third place. Right,.
Frank Cottle [00:26:13] Exactly, And we don’t consider ourselves really third place working as an industry. We are really a new generation of the activity of officing. And we include business centers, coworking centers, incubators, accelerators, all within the bundle of serviced office singer, flexible workspace. Third place working is really alternative working. And here’s a perfect example, there are a number of restaurants today that are high quality restaurants, usually that only serve dinner. Hmm, guess what? They now open and they now open and provide office space during the daytime. Interesting. OK, so there’s a good example of of a totally repurposed space that was previously waisting that is now being put to good use. Now, does that facility have the same caliber of meeting rooms and office services and reception, clerical, administrative staff, photocopying and imaging equipment, bandwidth that that high quality business center or coworking center would have? No, but it might just be around the corner from where you live. Highly convenient. And you like the other people that are there.
Henry Lopez [00:27:33] Plus, so many of those things can be provided virtually as long as you’ve got right now. Right now there is the constraint of connectivity, but that’s going to go the way that is going away.
Frank Cottle [00:27:42] Bandwidth is becoming like air rights. Pretty soon it will be written into an amendment, into the U.S. Constitution that all government must provide bandwidth to all people. Cities are providing bandwidth. Now, you can walk around London now just about everywhere and have Wi-Fi.
Henry Lopez [00:28:02] New York is experimenting with it as well.
Frank Cottle [00:28:04] And Singapore has just completely transitioned that way. So major cities are saying, hey, people are happier downtown here and there. If the city does this, it’s not that expensive on a big scale to do and it creates a big business draw and a tourist draw and it makes things very nice. So I think we’ll we will see much, much more of that. Like I say, bandwidth will be like air pretty soon. It will have a right to it.
Henry Lopez [00:28:34] That’s right. Yeah. So the other thing you touched on and I’d like to get your thoughts on is the coworking space. So so like for myself, I have Home Office for the better part of the last 15 years. And the thing, of course, that someone like myself is challenged with is I don’t get the interaction with other human beings. I don’t my personality I don’t need it as much, but I need it. And so coworking and these other services offer that. How are you seeing that balance from where we’re out of the traditional office and the social benefits that that provided us? And we we seem like we’re switching. We’re coming striking a balance here from becoming completely isolated to working still or having opportunities to gather and work together.
Frank Cottle [00:29:21] Well, what the industry says and is that you can work alone, but not by yourself. And that’s an important distinction. Obviously, people are social by nature. It’s in our DNA. So we do like to be around others. And here’s an interesting phenomena for you, when people set up an office today in our industry, they the old adage used to be location, location, location. Right. Personally, I always thought it was timing, timing, timing. But that’s that’s a different that’s a different topic. But location, location, location. Well, today, when someone searches for a location within our industry, if we look at the map, if we look at the websites in our industry, which we control quite a number of, and we look at the mapping, we see someone goes into the Web site, they look at the homepage, and then they go to the Facebook connection. They don’t they don’t look to see or what plans do they have, what amenities they go they see, who else is there, what are the people there? So the concept of community is elemental in the decision for real estate today, for the entrepreneurial or for the independent officing user, community and community is the bridge that helps define where you want which location you want to select.
Henry Lopez [00:30:59] Right. Which which tells me that while it’s a challenge and as becoming more remote, on the other hand, there’s a lot more options for me to choose which sub community I want to be a of.
Frank Cottle [00:31:11] As a good example, in your chosen field, you might really prefer to be in a media driven community where there are other people that are share interests that you have, where maybe you can share resources or swap ideas back and forth on how to grow your particular type of business. Someone else might want to be an Indian engineering or a computer engineering oriented community because of what they do, or they just want professional image and services because their clients come to them. And that would be more of a classic business center than a coworking center. So really, you define the type of center you want by the type of business you do and basically who you want to hang out with. And it’s kind of kind of fun. It’s not just a beautiful building and a spiffy design and fancy furniture that does it. It’s really the people that live there. And and that that’s very valid and a big component to building your business.
Henry Lopez [00:32:12] Yeah, great insight there, Frank. This has been a great conversation, very enlightening. Thanks for taking the time to be with us today and sharing your knowledge.
Frank Cottle [00:32:20] Thank you very much, Henry.
Henry Lopez [00:32:21] This is Henry Lopez and you’ve been listening to another episode of the How of Business. If you’re listening to us on iTunes or Stitcher, we would welcome and thank you for subscribing to our show. And we look forward to having you join us on the next episode of the business.[00:32:37] Thanks for joining us on this episode of The How a Business. And thanks to our show sponsor Lease Smart, please visit us at thehowofbusiness.com for the show notes to this episode and to download valuable free content from Lease Smart. [00:32:54] Thank you for listening to the How of Business. For more information, links and other resources, please visit thehowofbusiness.com.