Bigger is not always Better. Organize an 11X12 foot room into an office/guest room. The room is attractive and efficient. Try it and see!!

[edit] Steps

Measure from floor to ceiling and back again! Don't buy a desk, file cabinet, bookcase or bed without comparing sizes. A big mistake many folks make is buying something they like, bringing it home, and then finding out the object is taking up too much of the room.
Go up, not out. This is critical to utilizing your space. A desk just deep enough for the computer with lots of shelves going up towards the ceiling to hold Cd's, books, etc. is key to successfully furnishing this small office. Try to allocate a desk with cabinets to hide tower and monitor from view when not in use. Also, keep the desk clean and clear when it is not being used. This makes for a more relaxing environment for guests.
Buy a Trundle Bed. Avoid dark colors on furniture and walls. Light colors give the illusion of space.
Remove the doors of the closet, and fill the closet with floor to ceiling bookcases. This adds floor space and storage to your room.
Buy only vertical file cabinets. Avoid using any horizontal files which take up more space.
Locate all furniture items on a wall and keep the center of the room clear. Your overnight guest will feel more comfortable if they don't have to walk around your files.

[edit] Tips

The guest's night stand should have a functional lamp on it, and there should be a clock visible from the bed, so your guest can tell if it's time to get up. The night stand itself can be a file cabinet forsome of your office paperwork. It can be made to look more like a night stand by using decorative hardware.
Put some sort of hooks on the back of the door for your guest to hand their clothes, robe, and/or towel on, as well as at least a small mirror for them to get presentable before emerging from their room.
Make use of the wall space close to the ceiling for a wall-to-wall shelf that nice looking baskets can hold seldom used objects, like holiday storage.