Being an entrepreneur and building a successful business is a very complicated job. Setting up a coworking space and making it successful is not an exception. There are too many unknowns, roadblocks, and issues along the way. After working with hundreds of spaces worldwide we’ve gathered a list of patterns that successful coworking spaces exhibit.
Before we get into the details, let’s examine what a coworking space actually is:
- It’s a Community of like-minded professionals;
- It’s a shared, public environment where the Hospitality matters;
- It’s also an office Facility;
- And last, but not least, it’s a Business.
This will be our first post as part of a 4 post series that will focus on the intricacies of building a successful coworking space.
We all know that the most important element of every successful coworking space is the Community. Collaboration between like-minded professionals is the foundation of every coworking space. Sometimes, the community exists even before the physical space.
Building a vibrant community is probably the hardest part of making a great Coworking space. It’s a long path from zero to good to a great community but you have to take it. Building it requires a lot of effort, great team, and energy. You need to build, curate, stimulate and grow it. You have to be likable so that people want to work with you in your space. You also need evangelists. Your first members need to be pitching the space all around the town and selling it for you.
One of the key elements of creating a community is to establish a safe environment where people feel that they belong to something.
When you walk in the space and you can feel a positive vibe, that’s the community.
Coworking spaces are also in the hospitality business. The successful spaces understand it, accept it and capitalize on it.
Hospitality is the friendly and generous reception and entertainment of guests, visitors, or strangers.
The key element of providing good hospitality is your team. Hospitality is people’s business and the people are in the center of providing good service to others. The successful spaces (and any business) are great at hiring members of staff and keeping their company culture awesome.
Focus on hiring nice, friendly, and smart people with a sense of empathy. They will be the face of your coworking in front of members.
When you walk into a coworking space you should see and feel the smile and the warmth of genuinely nice people that work in the space. A smile can open many doors and this is absolutely valid for the coworking business.
Successful spaces understand that they are in the Real estate business too. The quality of the space matters, as much as the other key elements.
- Location – How will members commute to the workspace? Does it have public transport nearby? Does it have parking spots? Are there any nice cafes and restaurants nearby?
- Layout – What’s the layout of your workspace? How much is your ‘net lettable area’? Is there any unused space left?
- Fit-out & Design – Does the space convey your brand? Is it nice and cozy? Does it have enough light? Does it fit the needs of your community?
- Maintainability – Have you chosen materials and furniture that are durable and easy to maintain?
Successful spaces are very good at making the best out of their available real estate. Some of the biggest coworking providers invest a lot in the planning phase to ensure the business and financial viability of the location. One of the biggest mistakes you can do is to construct many large common areas instead of reserving a bit more space for the desks and private offices.
When you evaluate the design put yourself in the shoes of your prospective members and just ask yourself one simple question – ‘Am I going to feel comfortable working on a desk in this place for the next 3 years?‘.
Successful coworking spaces understand that at the end of the day they run a business. And if you want a healthy, sustainable business, you need to make it profitable and generate enough revenue to grow.
4.1 Revenue Channels
Successful spaces leverage different revenue streams and balance between risk and growth potential.
- Private Space – usually the most reliable source of income. You should consider longer terms, instead of month-to-month so you can have more security.
- Desk Memberships – the typical coworking memberships are a great revenue stream.
- Services and Ancillary items – lockers, parking space and dedicated internet, for example, can bring more revenue.
- Meeting and Event space – short-term hires can also bring good revenue in some areas.
- Virtual Memberships – one of the best options to increase your revenue – allwork.space has a great article on the topic.
Tip: To reduce the risk, you may consider longer terms (1-year contracts) with 3 months notice periods for your private offices.
Data: The big coworking spaces have about 60-70% of their revenue from Private Offices, 20-30% from Desk Memberships, and about 10% from other services, such as meeting rooms, events, virtual memberships, etc.
The successful flexible workspaces are also good at keeping their expenses low.
- Rent – start by negotiating better terms with your landlord.
- Staff – having just enough employees is important to keep your spending in balance.
- Software & Services – paying too much for software and services can have a negative impact on your bottom line too.
- Processing Fees – payment processing fees can have a significant impact on your expenses. You can consider using cheaper options, use direct debit (or ACH) or pass the fees to the members via payment providers such as PlacePay.
Running your business smoothly with minimum involvement by your staff is key.
- Automation – you should try to automate as many processes as possible. A good software solution can certainly help here.
- Payments & Security – you may consider charging 2 months in advance for private offices in order to reduce your risk.
- Maintenance – you should consider the maintenance when you’re building, renovating or improving your space – build it in a way that will be durable and will reduce the support costs.
Successful spaces are also good at raising funds and promoting the Coworking idea to investors. Having venture capital is beneficial for your business as it reduces the risk on the entrepreneur side and allows you to be more aggressive with your growth plans.
Always take advantage of the software that you use. It can help you to provide meaningful data when you present to your investors. The software is a key element of any business. You can’t raise capital if you run your business on spreadsheets and Zapier only. It is not scalable for a number of reasons.
Building a great business is complicated and hard, but beautiful and rewarding, especially if you are smart about it. Consider all the different aspects of how to nurture an awesome community, provide great service and high-class facility and you will improve your chances of building a successful coworking space business.