- What Is a Satellite Office?
- Why Are Satellite Offices So Popular?
- How Have Satellite Offices Changed Over the Years?
Q: What Is the Purpose of a Satellite Office?
A: The phrase “satellite office” simply refers to a branch of a company that is separate from an organization’s main office or “headquarters.” Generally speaking, satellite offices are established when companies want to expand into new geographical areas and take advantage of untapped markets. Satellite offices are also sometimes referred to as “branch offices,” and they may offer different lifestyle options for employees who want to travel and live somewhere else.
In 2022, the demand for physical office space returned with a vengeance.
CNBC reported in May that office demand had jumped by 20% while the office vacancy rate was falling. This trend has continued into late 2022, with major cities like Boston, Los Angeles, and New York City seeing a major increase in office rentals.
Many of these new rentals are associated with satellite offices.
But wait a second… just what is a satellite office, anyway?
And perhaps more importantly, why would your business need a satellite office?
As companies rush back to the physical world after spending so much time under digital quarantine, it’s important to understand the available options when it comes to offices.
Setting up a satellite office may be beneficial for a number of reasons, and you can use this strategy to expand across a wide geographical area to take advantage of new opportunities, untapped markets, and plenty of new talent.
So what is a satellite office?
Let’s find out.
- What Is a Satellite Office?
- Why Are Satellite Offices So Popular?
- How Have Satellite Offices Changed Over the Years?
What Is a Satellite Office?
Satellite offices are established in new geographical locations by companies that want to expand out of their home cities.
Satellite offices are usually quite small compared to the “main office” or headquarters of the company. Virtually any business imaginable can create a satellite office, and there are many advantages.
Generally speaking, satellite offices are established in new areas to take advantage of opportunities not seen in a company’s home city. One of the most common reasons for establishing a satellite office is to bring products and services to a new, untapped, and profitable audience.
While establishing a satellite office can be expensive, the advantages often make this endeavor well worth the investment.
One of the defining characteristics of a satellite office is that they operate in a highly independent manner. Even though the main office or “headquarters” will continue to provide direction, the satellite office is responsible for independently overseeing many important tasks.
The main office usually selects one individual to move from the headquarters to the new location in order to oversee the creation of the satellite office and lead its operations. This individual is often known as a branch manager.
And just a heads up:
Branch offices and satellite offices are exactly the same, and the two terms are used interchangeably.
The branch manager may be tasked with relocating, or they may request this new position. If you’re wondering: “What is a branch office administrator?,” this is simply another term for branch manager.
Many employees appreciate having the opportunity to move to a new location and experience a change of scenery.
That being said, a handful of workers from the main office may not be enough to run an entirely separate operation in a new area. This is why satellite offices often hire local individuals who live in the new geographical area.
Before we get too far, it’s important to note that while a satellite office operates with a degree of autonomy, it is not a separate legal entity. This is the main difference between a subsidiary and a satellite office:
- Satellite Office: As previously mentioned, a satellite office is simply another location under the “umbrella” of the parent company. It is not a separate legal entity, and it does not file its own taxes – despite operating in a somewhat independent manner.
- Subsidiary: A subsidiary is a separate legal entity, and it files its own taxes. A parent company must own at least 50% of a company’s voting stock for it to be classified as a subsidiary. However, the parent company can own up to 100% of the voting stock.
In most cases, subsidiaries provide different products or services compared to the parent company. Most parent companies decide that if they’re going to branch out into an entirely different niche, it makes more sense to create a subsidiary rather than a satellite office.
This is because it is easier to maintain consistent branding when you separate a parent company from a subsidiary that is performing a completely different role in the business world.
Organizing accounting for a satellite office is time-consuming, but it is much simpler compared to a subsidiary. This is because a satellite office maintains joint accounts with the parent company, while a subsidiary maintains their own accounts.
This is an important point to consider, as creating a separate legal entity may help you minimize risk and liability. Since a subsidiary is a separate legal entity, its bankruptcy will not really affect the parent company in the same way as a failing satellite office.
Make no mistake – both types of failures will result in losses. But when a subsidiary goes bankrupt, it can be sold to another company with absolutely no liability suffered by the parent company.
In contrast, a satellite office that loses money directly drains the resources of a parent company, as the two companies maintain joint accounts with the parent company having 100% liability.
Ultimately, the decision of whether to establish a satellite office or a subsidiary rests with your unique priorities and business goals. The best choice depends entirely on what you’re hoping to achieve.
A subsidiary might cost more to establish, but it provides greater flexibility and does not affect the reputation of the parent company if it fails. There is also greater liability protection, but a subsidiary may also encounter unique regulatory issues in foreign nations.
While it’s easy to get caught up with international trade laws and corporate shenanigans, you should know that a satellite office can also be extremely small in scale.
What is a satellite office?
Well, it could be as simple as a single employee working from home in a different city. A company might not even advertise the fact that it’s operating within a new location, and this single employee might be operating “under the radar,” so to speak.
In fact, a company could technically establish a satellite office simply by allowing employees to work remotely and then taking advantage of wherever their employees choose to settle.
For example, an employee might choose to start working remotely from Southern Spain to take advantage of the hot weather and mild winters.
If the company specializes in selling sunscreen, they might task the remote employee with making connections with local businesses to see if there’s a demand for the product.
On the other hand, satellite offices can be much greater in scale, employing hundreds or even thousands of workers in a new location.
These individuals might be tasked with establishing local manufacturing centers, creating new marketing campaigns in new languages, hiring local employees, renting local warehouse space, and so on.
The point is that satellite offices vary greatly in scale, and they are flexible enough to meet any business’ needs.
In fact, some of the best examples of satellite offices are franchises. Even though Starbucks is headquartered in Seattle, the company operates satellite operations across the entire world. Each of these locations enjoys a degree of autonomy and independence despite being overseen by the head office.
That being said, there is a difference between “satellite offices” and satellite operations, with the former being more associated with office buildings and office workers rather than franchises and baristas.
How Should I Go About Establishing a Satellite Office?
If you’ve been asking yourself: “What is a satellite office?,” Perhaps you should be asking how to establish a satellite office instead.
Location is everything when establishing a satellite office. Ideally, you should spend months planning out the ideal location for your new satellite office.
The best location for a new satellite office is one that holds very real opportunities for growth. This location should have an untapped market of consumers that are ready to buy your product or service.
In an ideal world, this location will have no other viable competitors, allowing you to move in and immediately establish an undisputed presence as the only reputable source of whatever you’re offering.
However, there should always be a viable reason for physically establishing a physical presence in this location.
Before you move your employees to this new location and begin creating a satellite office, ask yourself if this is really necessary. Is it possible to run the operation from your head office instead while still taking advantage of the opportunities offered by another location?
Keep in mind that there are many technological innovations that can allow you to run a successful business in another state – or even another country – without ever leaving your home city.
The only reason you should put boots on the ground and establish a base in another area is if you have very specific goals that cannot be achieved in any other manner.
For example, you might need to meet face-to-face with foreign or out-of-state individuals in order to make deals and establish working relationships. Some cultures place an enormous emphasis on these face-to-face, personal relationships.
For example, China is known for “Guanxi,” a cultural concept that represents personal trust and a strong relationship between business partners.
Often, business partnerships between Western and Chinese entities can only be established after many years of building up this trust and establishing Guanxi.
In this situation, it might make sense to establish a satellite office to facilitate these face-to-face meetings and invest in the time-consuming process of establishing trust and understanding with influential foreign partners.
It’s important to keep these long-term goals and benefits in mind when establishing a satellite office. Even though the costs associated with travel and establishing physical offices can be daunting, the long-term benefits can make these investments well worth it.
That being said, you should always ask yourself whether your goals can be accomplished with other, less costly strategies that keep operations centralized in the head office.
Why Are Satellite Offices So Popular?
Now that we’ve answered the question: “What is a satellite office?,” it’s time to determine whether you actually need one.
So why are satellite offices so popular? Well, there are a number of advantages to consider:
Advantages of a Satellite Office
- Access to local talent: One of the key benefits associated with a satellite office is access to new, local talent. In fact, some companies establish satellite offices specifically to target talent pools in other geographical areas. This might be an effective strategy if your company is currently headquartered in a rural area and you’re having trouble finding talent locally.
- Gives employees an opportunity to relocate: On the flipside, a satellite office also gives your best talent the opportunity to relocate to a different location. Some might jump at the opportunity to go on an adventure to a new country or a different state. Some might be attracted by big cities, or perhaps they want to experience a lower cost of living in a more rural area.
- More direct interactions with customers/clients: One of the most common reasons to establish a satellite office is to create more direct interactions with customers. This might mean taking advantage of new, untapped markets – or it might simply allow better customer service for clients who live in other locations. Either way, having boots on the ground allows you to create a more personal customer service experience.
- Serves remote workers who may have already relocated: If many of your employees have already relocated to a different location thanks to the advent of remote work, a satellite office can serve their needs effectively. This office space might give them a chance to connect with others if the loneliness and isolation of remote work is becoming an issue. It can also reduce commuting time for employees who are working under a hybrid remote system.
- Allows for a smoother transition when relocating the entire company: Sometimes, companies establish satellite offices as the first step when relocating the entire operation. This allows for a more gradual shift towards the new location instead of simply packing up everything and moving all at once.
- Allows for cross-pollination: A satellite office also helps companies cross-pollinate more effectively. Cross-pollination involves individuals from different departments and even different companies working together and collaborating towards a single goal. For example, your company might want to embark on a joint project with another company located in a different state or nation.
- Boosts reputation: A satellite office in a big city can boost your company’s reputation. This is especially true if you’re currently operating in a rural area.
- The potential for lower costs: A satellite office may help you take advantage of lower operating costs in different areas. For example, moving to a location with cheaper office rent allows you to expand your business and hire new employees while minimizing costs.
- Maintains connection with the parent company: With a satellite office, there is always a strong connection with the parent company. This is not the case with a subsidiary, and it allows for considerable oversight and guidance.
- Quick decision-making: Reacting quickly to changes in foreign markets can be challenging, and a satellite office helps in this regard. When you have boots on the ground and workers who are monitoring the situation constantly, you can react faster than competitors who are located halfway across the nation or globe.
- New networking opportunities: When you move your employees to a new location, you will inevitably experience greater networking opportunities as these individuals interact with other professionals in the area. This type of networking simply isn’t possible if you’re running your operation remotely with no physical presence.
Downsides of a Satellite Office
With all that said, satellite offices also have a number of disadvantages you might want to consider, including:
- Lack of oversight: Even though a satellite office offers more oversight compared to a subsidiary, your employees are still expected to operate with a degree of autonomy and independence. With no executive supervision, this can potentially lead to issues with branding, work culture, and overall work quality.
- Liability: While a subsidiary is a separate legal entity, a satellite office is connected with the parent company. This means that the parent company is 100% liable for any issues that the satellite office encounters – including bankruptcy and lawsuits.
- Hiring: If you need to hire additional, local employees to get your satellite operation off the ground, you may need to spend months searching for talent. This can be both expensive and time-consuming.
How Have Satellite Offices Changed Over the Years?
So what is a satellite office in the modern era? What do these operations actually look like with new technological innovations?
A solid example is a Virtual Office set up through Alliance Virtual Offices.
With this approach, a company can register their business in a wide range of different major cities – including New York, San Francisco, Chicago, Los Angeles, and so on.
These offices are virtual because no physical presence is required. However, Alliance Virtual Offices also provides physical, flexible office space that can be booked on-demand.
If you’re wondering: “What is a remote office?,” it’s important to understand that this is not exactly the same as a satellite office. However, they can serve essentially the same role.
This means that you can send workers into a new location without actually renting an expensive office space. Instead, you can choose a Virtual Office that provides your employees with physical space for meetings, interviews, and anything else that requires face-to-face interactions.
The end result is a cost-effective solution that allows you to take advantage of a satellite operation’s benefits without any of the costly negatives.
What Is a Satellite Office? The Solution Your Company Needs
So what is a branch office?
Well, it might be exactly what your company needs.
Check out Alliance Virtual Offices today to discover the possibilities offered by modern technological innovations.
Alliance Virtual Offices can help you establish a cost-effective satellite office. Get in touch today.