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 a plenty of diverse ways from which you can make money. Don’t limit your customers to the primary customer groups: you can design your coworking monetization plan to include local service providers, event planners, schools and marketing agencies, fitness trainers, basically any company or individual that needs a place to host an event or find a spot to meet with customers. Depending on the location and the space layout, you can turn it into a business center, a place for sponsored events, and even let food providers from your area use the space for promotional purposes.
Membership fees will be your basic source of income. Taking in mind what co-workers would need to get from a coworking space, you can offer a variety of membership or subscription plans to meet their needs. The majority shared spaces have time-based membership plans that include hourly, daily, monthly and annual rentals to all services provided in the space. The longer the user stays, the lower the fee gets. 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 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 8pm and 8am. 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 space type that fits best. Some of the above options are more social while others are more work-focused and relevant for individuals. It’s worth keeping in mind both sides of the story because coworking spaces usually aim for both.
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.
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 plans. 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.
Too much desk-seating is not very spine-friendly. 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 spin, 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.
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 space-confining. The design process is very important to maximize the space you own. Hence, unless a professional designers help is too expensive, you should really consider hiring a pro.
Consider the pros and the 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 in the costs and the benefits and if the latter outweigh the benefits, go for the concrete investment.