Think Outside the Box: Increase Your Coworking Space Profits
Many people feel that their coworking spaces don't have to be profitable to be successful. In many scenarios, this is certainly the case. But coworking spaces can be valuable revenue streams of their own. By making savings on key overheads, nurturing community and investing in technology, your coworking space will be more productive and more profitable.
Be smart with your lease agreements
Operators know, and studies support the fact, that rent is the biggest outgoing when it comes to coworking space costs. As such, one of the most effective ways to boost profits is to find ways to reduce losing what profits you make to your upkeep costs.
Coworking operators that lease their properties run the risk of rent spikes when the lease comes to an end, particularly in cities where commercial property prices are spiraling higher and higher. To best position your operation for success with a new landlord or developer, you need to demonstrate your operational efficiency and profitability.
This can be achieved by getting your house in order. Make sure you have internal processes and reporting that effectively demonstrates your profitability across your existing ventures to present to prospective investors, landlords and developers.
Another option is to go for an extended lease. Your standard commercial lease is 3 years, but at the end of that time, a spike in rent could put you out of business entirely. A 5 or even 15-year lease might seem daring for a new operator but could secure more favorable renewal terms down the line and give you more time to generate profit.
Joint ventures are another option that's becoming more and more common in the coworking industry. These include some combination of profit-sharing and/or management fees between the landlord of a building and a coworking space operator.
The benefit of this model is that, generally, the landlord will cover most capital costs, allowing you to invest your capital into other areas to increase the space's appeal and profitability.
Focus on lead generation
Word of mouth is great and generally inexpensive, but if you want to be profitable in 2019, you need to do more to attract potential members in your operation.
When generating leads you should focus on the tactics that you know will deliver. Attending marketing events, investing in paid social advertising, PPC, SEO or email marketing all have costs associated with them. In order to manage your costs, you need to understand which lead generation tools work best for your business and focus your energy in that direction.
Establishing which channel is most effective requires time, tracking and reporting. The sooner you can start tracking your conversions, the sooner you'll be able to identify which marketing channels are working for you.
As you gather this data, make sure you vet the quality of your leads. This will help you further refine your marketing strategies, which in turn translates directly into profit.
Once you've snagged a lead, make sure you meet all their needs and expectations. Get to know your leads personally, make time to have coffee or lunch with them. Invite them in and introduce them to other members within your space to make them feel at home. Lead generation, like coworking, is a people business.
Once you've made the first contact, make sure you have a process in place to manage the relationship and have regular follow-ups. Email marketing is particularly useful in this respect.
Promote your space and always overbook
Most operators find that word of mouth is one of the most effective ways of promoting their coworking spaces. This makes sense because the current state of the market is focused on having a local community feel, supported in part by the members themselves.
Events are extremely effective for engaging potential members and building a pipeline of leads. If you're marketing your coworking space towards a specific industry, this also helps lend your operation a sense of authority within that industry. Just like any new venture, trust and authenticity are essential to securing business.
Another consideration is partnering with local businesses. This can be achieved no matter the size of your space and is one way for you to spread the word about any discounted opening rates.
Coworking spaces operate in a very similar way to gyms. The way gyms make money is to give out more memberships than they have the capacity for on the assumption that everyone won't turn up at the same time. Coworking spaces can operate in the same way. Offer a rank of hot desks and go to town on your membership subscriptions.
Cultivate your community
Coworking spaces are most effective when they become strong communities of their own. The entire spirit of a coworking enterprise is to bring people together and encourage collaboration.
This sense of community is one of the biggest value assets you can create and is what helps establish your operation above the others.
Creating a community might involve an events programme including social events specifically for members, professional events to attract non-members and events which are solely hosted by members themselves.
Events aside, as much as you want to focus on attracting new members, it's important to prune your member list from time to time. There’s no shame in removing members who break the rules and don't share the same ethos as other members.
Having a strong community isn't just a powerful benefit to attract new members. Members that are invested will act as a lead generation tool themselves, inviting their friends and peers to the space you share.
Take advantage of automation
Automating key business processes and implementing online self-service tools will have a significant impact on your profitability. From standard small business automation of payroll software, ordering systems and CMSs, to coworking-specific innovations, automating your processes will reduce costs and boost productivity.
Harnessing technology also gives your members a better service. The ability to check availability and book meeting rooms online gives your members the convenience they expect from a modern flexible working space.
The development of contactless payment options has also opened the door for more secure and cost-effective concessions. Refreshment points and other chargeable supplementary services can also act as valuable revenue streams for coworking spaces.
Andy Margison is the founder and director of ZZap Ltd., a leading supplier of the latest cash handling technology for small businesses. Andrew holds a 1st Class Honours Degree in Business Studies and regularly contributes to various business publications.