Here's How to Nail Down Your Coworking Revenue Streams
This is the third installment of our ‘Can Coworking Spaces Be Profitable?’ blog post series, where we discuss topics like how to find industry statistics, determine cost drivers, conduct competitor analysis and more. Scroll down for past and future installments — we have seven in total!
Knowing The Possible Revenue Streams
Since startups, freelancers, digital nomads, and part-time workers are interested in meeting various needs in a coworking space, there are various revenue streams that you can set up through your services. Since coworking spaces are built for versatility, they can be easily transformed from a business center to a multi-purpose event space.
For example, Impact Hub is not just a coworking space but also an incubator, an innovation center, and an event venue. The shared workspace has a global network and offers its members different packages — from access to a limited number of events and virtual offices, to fixed desks with unlimited access to the venue and plenty of benefits included in the deal.
WeWork also offers various membership plans that start from a pay-as-you-go membership to a custom buildout with unique functionalities for large corporations. The company also rents it spaces across the world for different private events, such as conferences, workshops, and even birthday celebrations.
Creating new sources of revenue and increasing income is the way to go in order to ensure sustainable business growth. A coworking space financial model should include at least five revenue streams that could have a significant impact on the business. Here are a few prime examples:
Obviously, as a coworking space membership fees will be your primary source of income. Most shared work spaces have time-based membership plans that include hourly, daily, monthly and annual rentals to all services provided in the space. You can choose compelling labels for your plans, such as “light”, “flexible” or “premium” members to give a hint of what is covered under a fee. Drop-ins, those that haven’t booked in advance and those that aren’t interested in a longer plan typically don’t get to use the benefits of a loyalty discount.
Don’t forget about group or shared memberships. Group memberships usually include substantial discounts for more users that book together. A shared membership can include a number of services that can be used by more than one user, typically one at a time. A great incentive for bringing more people on board is a credit-based system. Loyal customers can collect credits with each service they use, getting bonuses after they accumulate a certain number of credits. Referrals and invites of new members can also serve a similar purpose.
Daily, weekly, and other time-limited passes don’t need to include all that you offer. For instance, a drop-in would hardly likely need a locker and a pre-payment to your weekly brunch menu. On the other hand, a startup on an annual plan would probably take most of your space and ask for maximum benefits.
If your coworking space is open 24/7, attract customers in downtime periods by offering special discounts — for instance, 25 percent off on night time passes for the period between 8 p.m. and 8 a.m. But keep in mind that working at night may cost more on your side, so always calculate those extras in the discounts.
Another way to classify your membership fees is resource-based. For example, you can offer plans such as:
- Shared-desk plan
- Dedicated desk plan
- Small private office
- Mid-sized private office
- Large private office
In this way, visitors can choose the type of environment that fits best. Some of the above options are more social while others are more secluded. Coworking spaces should cater to both .
If you have a relatively large space and connections to a well-established company, hosting corporate businesses in your space will beef up your profit margin. By catering to corporations and not only individual professionals, you can significantly increase coworking sales revenue. For example, WeWork got $250 million in revenue from corporate clients last year. This accounts for 25 percent of the company’s total annual revenue. This is because corporate enterprises generally have a more established presence wherever they are, and are more likely to rent for longer terms than small businesses and startups. They also attract smaller industry competitors and satellite businesses that may also be open to partnership with a coworking space. In this way, hosting and enterprise corporation could open the door to a more stable ecosystem of businesses that patronize your space.
You can set the social space in a way to generate additional sources of revenue from leased events or leased equipment. Find a local coffee dealer that is looking for passionate coffee consumers and let him provide coffee services for minimal fees. A popcorn or an ice-cream machine is not a huge investment and can do wonders for hunger pangs. You can cover such services with the membership plans for longer periods, charging only to drop-ins, while providing complementary services for the regulars. Connect with local food or beverage companies and let them host promotional events in the social space. Get in touch with the shops in the area and let them provide discounts for your customers. In turn, let them use the space for advertising. The type of the events you can host always depend on the location and the design of the workspace. A large terrace can be great for informal summer events while a nice bar is convenient for afterwork Fridays.
Coworking resources can also include lockers, printers, fax machines and telephone lines, audio and video equipment, call cabins, and anything else you can think of. With so many options, it can be complicated for users to see what is the most affordable alternative. Therefore, include a “check-the-box” online calculator to help them assess the overall costs.
Offering Services to Non-Members
You can rent conference rooms or sell tickets to workshops and training programs to any interested party. Conference equipment, laptops or video projectors can be rented at an additional fee. You can also host events that require catering services and derive profit from referrals.
Conference rooms can be rented not only to the coworkers, but also to the outside members. Pay attention to security, especially if your conference rooms have extra doors for access from the outside. The most lucrative plan for conference rooms is per-hour, but you should also think of daily and weekly passes. Many corporate workshops or training seminars are held over the weekend so it’s good to have weekend options advertised for your space. As a general rule, you need to provide conference equipment to users and charge extra for additional laptops, chairs, and video projectors. Think of including catering services from a local catering company and make money from the referral fees.
In the evenings or in the mornings when the shared workspace is less busy, you can offer available rooms for fitness purposes. Of course, it may not be so simple to set up a full gym, but you can think of adding some mobile equipment, such as the bare necessities for dance, yoga, pilates and similar activities where you don’t need to do too much moving back and forth or where users bring their own equipment.
Determining Revenue Sources
Start thinking of the revenue-generating resources by planning the space availability, layout, and location.
The first thing you need to check is any legal requirements for the sub-services that you provide. Also, check your own lease for additional costs or limitations to what you can do in the rented space. Some businesses need to get special permits, so it’s worth investigating this before everything else. For example hosting events where alcohol is served may require a special license for the business, or fitness classes might need to be covered in your liability insurance.
Second, see how much flexibility you have in terms of redesigning and refurbishing the place. Wide open spaces and different room sizes are more valuable as they can be easily adjusted to varied requirements. The furniture doesn’t need to be too robust or confining. The design process is very important to maximize the space you own. If you have the budget for it, you should really consider hiring a professional designer who knows how to get creative with optimizing the space.
Consider the pros and cons of leased and purchased equipment. If you don’t have the resources to buy everything, go for rentals, which are an affordable short-term investment.
Lastly, conduct a cost-benefit analysis of all potential investment ideas. Include risks and opportunities. Coworking space essentials, such as security, health and safety, desks and chairs, coworking software and staff will need to take priority. Also, think of what ideas from above you can implement for free. Weigh the costs and the benefits and if the latter outweigh the benefits, go for the concrete investment.