Advancements in technology have made it easier for companies to conduct business without the overhead of a physical office. Yet many small business owners are reluctant to go virtual, fearing it will result in less control and lost productivity.

“Business people assume an office will amplify resources,” says Todd Miller, author of the book Going Virtual. “But the office traditionally isn’t a great place to get work done.” 

According to Miller, one study found that three hours of work per day is lost due to office related interruptions and distractions, costing U.S. businesses $750 billion a year. Just because the workers are in an office setting doesn’t mean they aren’t spending time on Facebook, surfing the Web or shopping, outside of their lunch hour.

“Business people like to have numbers at their back, when making expensive decisions expect for the office,” says Miller. “It’s one of the most expensive expenditures, but business people give the office a pass. They never question whether or not they should have an office.”

Miller recalls a senior officer at a company that actually makes virtual-office products telling him the ‘CEO doesn’t want to go virtual because it doesn’t feel right.’ The irony: that CEO spends about half the year on the road and not in the office.

While many small business owners push back from setting up a virtual office, in essence they may already have one -- plus the cost of a half-empty office. That’s because mobile devices like smartphones and tablet computers are making it easier for people to conduct business anywhere and anytime. “The vast majority of small businesses don’t know great solutions exist,” says Mike Pugh, j2 Global’s small business expert. “Most everyone has a smartphone. E-mail is no longer going back to your desk.”

A virtual office doesn’t make sense for every small business, especially those in manufacturing, but for a large swath of them it might. Not only can it save the company money on the costs associated with a physical office, but it can give it a recruiting edge when trying to attract younger talent. It’s also easier for small businesses to go virtual, because they have less people to organize and manage.

So how should a small business go about setting up a virtual office?

Miller says, first make sure the business plan has clear goals and incentives for employees to work off of. You don’t want to send your employees off to work at home or the local coffee shop without setting goals and deadlines they are required to meet. Having a crisply defined plan will ensure employees know what they are supposed to be doing, even if there isn’t a manager sitting in the office next door.

Technology plays a pivotal role in a virtual office, so it’s important that the business has a good infrastructure in place in terms of e-mail, software and a telephone system. Many small businesses utilize cloud-based applications to manage their customers, invoices and for collaborating with other employees. If this is already in place, going virtual can be headache free. Even if they have to go out and get all the needed technology, the lower costs associated with using cloud-based applications will offset any lost time spent training employees on the software.

According to Miller, another essential component of a virtual office is the telephone system.  

“You want your customers to be able to call into a central number the same way a bricks-and-mortar office has automated greeting,” says Miller.