How Much is That Empty Desk Costing Your Coworking Space?
Do you ever wonder what that empty desk is costing you? The calculator below will create a quick estimate using numbers you already know.
But why calculate the cost in the first place? Knowing this number can help you:
- Identify a comfortable maximum occupancy for your space
- Methodically assign a cost per new member acquisition
- Understand your break-even on marketing efforts
- Create a dynamic marketing budget based on occupancy
Calculating the true cost of an empty desk at a coworking space proved much more difficult than we originally anticipated. We wanted to create a quick calculation, without collecting all the nitty gritty financial information including members, membership plans, office sizes, churn, utilization and much much more.
Our calculation requires 6 values. Fill in your values as we walk through an example calculation using the floorplan below.
Monthly Revenue: $40,000 in our example
Your monthly revenue from the previous month.
Monthly Expenses: $30,000 in our example
Your monthly expenses from the previous month.
Total Square Feet: 12,000 in our example
Total square feet of your space.
In our example, the total space is 12,000 square feet.
Total Number of Desks: 140 in our example
Count the total number of desks in your space. Include all types of desks that are workspaces (dedicated desks + hot desks). Leave out common areas, meeting, and event spaces.
In our example above, the Total Number of Desks is 140.
Current Occupied Desks: 70 in our example
Take the time of day in the past week, and simply count the number of desks that are occupied. Include all desks that are workspaces (dedicated desks + hot desks). Leave out common areas, meeting, and event spaces.
In our example above, the total number of occupied desks is 70.
Target Desk Occupancy Percentage: 85% in our example
What percentage of occupied desks would be ideal for your space? If you’re unsure what this should be, try using 85% which allows for your community to grow and fill the space organically and avoid overbooking the space.
Calculate Your Empty Desk Cost
Click here to view our online calculator results, or create a copy which you can modify.
Based on our example, we ended up with two numbers:
Empty Sq/Ft Expense: $15,000
This number is calculated by multiplying the Sq/Ft per Occupied Desk (at maximum occupancy) by Expenses per Sq/Ft by the number of Empty Desks. In our example, 50% Desk Occupancy would mean that the other 50% Desk Occupancy is not supporting the expenses.
Lost Revenue: $40,000
In addition to the expenses associated with having an empty desk, we also look at the lost revenue that would have been generated. This was calculated by taking the average revenue per occupied desk, and multiplying that by the number of empty desks.
Empty Desk Cost: $785.71
The final Empty Desk Cost is the sum of the two numbers above, divided by the number of Empty Desks.
Are you as shocked as we were, when calculating your empty desk cost?
Breaking it down…
Put simply, this formula calculates the overhead per square foot.
($30,000 Monthly Expenses / 12,000 square feet) = $2.50 Expense per Square Foot
At maximum capacity, the square feet per Occupied Desk would be:
12,000 square feet / 70 desks = 85.71 square feet per Occupied Desk.
With 70 desks currently unoccupied, the Empty Square Foot Expense is:
70 Empty Desks * 85.71 square feet per Desk * $2.50 Expense per Square Foot
= $15,000 Empty Square Foot Expense
Considerations & Assumptions
To create a quick calculation, we had to incorporate assumptions.
- Occupied desk growth is consistent in revenue. This assumes the number of occupied desks grow at the same rate as your revenue.
- Expenses are fixed. This assumes that there are no variable expenses incurred as your occupancy grows. As a result of this, the Expense per Square Foot remains constant.
- Frequency is constant. In our example, the Current Occupied Desks count was 70, however this could have originated from 100 members. Our formula assumes that at 200 members you would have 140 Occupied Desks.
- Depending on how you look at your business, the Lost Revenue cost may or may not be a factor.
The Empty Desk Cost may seem high at first, but it’s important to keep in mind that it can include revenue from multiple streams including memberships, space rental, and services. It also covers a proportionate percentage of your expenses relative to the total number of desks.
A few points we found particularly interesting about this:
- Increasing your monthly revenue, actually increases your Empty Desk Cost. After some discussion, we thought this was accurate, as if your space can generate more per desk, the lost revenue of one empty desk, would be greater.
- Adjusting your target occupancy does not impact the Empty Desk Cost. This makes things more predictable, especially when applying this number to your coworking space.
How to Use This Metric
Here’s how our clients use the empty desk cost to:
Identify a comfortable maximum occupancy for your space
Your target occupancy percentage should be an indication of what your maximum occupancy should be. Double check that this number is aligned with your target revenue, utilization, and expenses.
Methodically assign a cost per new member acquisition
Taking the airline industry as an example. If a flight has one empty seat that could sell at $800, what would you spend in marketing to fill that seat?
Understand your break-even on marketing efforts
Taking the same airline example above. If half of the seats were empty, would this change what you would spend in marketing to fill those seats? Keep in mind fixed expenses such as fuel cost, staffing cost, etc...
Create a dynamic marketing budget based on occupancy
Occupancy and utilization fluctuates and so should your marketing budget allocation. It would be wasteful to keep marketing when you’ve hit your target occupancy. Having several marketing systems focused on the various services can give you the finite control to boost business when and where you need it most.
A Metric, Not The Metric
As with most business metrics you choose the ones that help evaluate your success at reaching targets. With this data, you can make more informed decisions to help steer the direction of your business, and to identify a clear path to get there.
Spacefully helps coworking spaces by creating online marketing strategies that attract, engage, and convert members. Discover the exact coworking marketing plan that coworking spaces are using to find more members and long term office tenants.