You started your small business the same way everyone does: with an idea, know-how, a few bucks, and a dedicated corner somewhere in your home.

Maybe you had a business partner or two or chose to walk this road solo.

It's tough at first.

You had to figure out how to turn your idea into a business model, find the right people to outsource your books, and face every kind of setback.

There were nights when you stared at the ceiling, wondering if you were doing the right thing. You sunk all the time and money into your business that you possibly could, but it never felt like enough.

And then something clicked.

Over time, your business starts making money. And not just "I'm not going to go bankrupt" or "barely breaking even" money.

Real money.

The kind of money that makes you think that it's about time for your small business to level up and relocate. After all, your operation is outgrowing your home office, and renting a physical office is the logical next step.

Right?

Possibly. It may feel like the time to rent an office for your small business, but how do you know when it's the right time? Leasing a real office can benefit a small business, and it may be what you need to take your company to the next level.

However, it is a big step, and there may be better ideas than spending money on office space.

The question is: How do you know it's time to rent an office as a small business owner?

When You Need the Space

You'd need more space than your home office can provide for several reasons.

Maybe your house can't fit any more inventory without bursting at the seams. Maybe your garage is overflowing with equipment, or your work truck is blocking your driveway. Or you can't squeeze any more people into your home office.

Consider renting an office if your company's potential is being held back by a lack of physical space. That may mean renting a warehouse or a garage, or it may mean renting a little space where you and your employees can set up workstations and do their jobs with minimal distractions.

Make sure you've tried every other solution first. Otherwise, you may spend a bunch of money on space you don't need.

When You Need to Hire More People

Let's face it; there aren't that many people willing to cram themselves into a home office and work elbow-to-elbow with you and your employees. And even if you can find talented people willing to work in those conditions, you can only fit a small number of them in your home.

So unless your business will function with all remote workers, you will need to find somewhere for your employees to work.

When You Need the Right Talent

The saying "location, location, location" doesn't just apply to restaurants or retailers.

Talented people aren't going to come to you; you have to go to them!

Your home office may be a great little place to work, but that doesn't matter when it means potential employees would have to drive for over an hour to get there. Renting an office in the right area will dramatically affect the number and quality of applicants you'll get when you start hiring, and the boost to innovation and productivity that the right people will bring could more than pay for the lease.

When You Need to See Customers in Person

Suppose your business relies on walk-ins, face-to-face meetings, negotiations around a conference table, or even convincing potential clients that you're a talented professional running a well-equipped operation. In that case, you may have much to gain from renting an office space.

You don't need a professional office with a receptionist and a conference room if you never meet with your customers in person, but the calculus changes a lot when your reputation and personal charm are major selling points in your business.

If you're a financial advisor, for instance, you aren't going to convince many Baby Boomers to let you manage their money if you're meeting around your kitchen table and you're in your pajamas.

It's also easier to convince people to buy insurance or real estate if you have somewhere to pitch them.

The same rule for potential hires applies here, too: you can't expect clients to randomly stumble on your website and drive for an hour to get to your house, but you can expect people to notice the sign on your office when they're going through town.

When the Numbers Support It

Your finances should be one of the first and the last consideration when you're deciding whether or not to rent an office.

The first thing you should consider is your current budget.

If you find an office that you can afford with your current budget, you can move on to considering other factors.

If your current budget doesn't have the room, well, don't.

You need to be able to support the rental with your current revenue. Otherwise, you'll have to either borrow money or dip into your savings, neither of which are good ideas (unless you like debt or hate savings).

You should also factor in your projections for the next few years, but only if you don't need increased revenue to pay for the space.

Never spend money on the assumption of future revenue growth.

It may pay off, but it also might turn into unforeseen losses that snowball into severe financial headaches.  

It's common for small business owners to want an office.

It makes your business feel more established and can be seen as a physical manifestation of all your hard work.

Renting an office is expensive, though, so you need to make sure you need it before you shell out all that cash. Wait until you're confident; otherwise, you may be stuck with a long-term lease that you don't need and can't pay for.