This is the sixth 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!
Before taking the plunge and opening a coworking business, make sure to also evaluate the threats and challenges associated with entering the industry. You will want to explore factors that might deter the growth of the industry or even begin to shrink it. At the same time, research what challenges you will have to overcome to make it in the industry.
Begin by exploring what threats could undermine the growth in the industry. Your first step in this respect should involve going back to your previous research on growth predictions. Confirm that they are from reliable sources and read more detail about the estimates. What factors did they account for in their calculations? Hopefully, the growth trends you found earlier were compiled by experts who factored in threats, such as changing lifestyles and government regulations. See if any of the statistics you previously found include sources to specific regulations that are of concern.
Additionally, do your own research. Use the internet as a tool to explore any planned changes to government regulations regarding coworking spaces and what they can and cannot offer. Explore whether your area is undergoing lifestyle changes that might affect people’s willingness to use coworking spaces or even if better alternatives have arrived. Do not forget to consider market saturation as a threat, as well, although this will require specifically searching for the demand for coworking spaces in your area and the number of companies offering this service.
Some of the challenges to entering the coworking industry are the same as in any other industry. Anyone starting a new business, for example, will need to create brand recognition and deal with high upfront costs. In this case, do your research and calculate exactly how much you will need to spend initially to open your coworking business. Account for rent, furniture, utilities, employees to oversee day-to-day functionality and take care of cleaning, and extras, such as coffee machines, pens and paper, decorations, a water cooler, and anything else you plan to include.
If the statistics you found above related to market saturation show that the supply and demand for coworking is about equal, this could pose a significant challenge for you. When combined with customer loyalty to the existing spaces and the potential high cost for customers who switch, you will need to find a way to overcome these challenges. In the case of a market that is highly saturated or approaching this mark, it becomes even more important to offer an excellent value for potential clients.
No matter the challenges for newcomers, there are ways to get around it. To mitigate the high switching costs for customers, consider offering a limited-time deal for new clients. Or to overcome the customer loyalty to incumbents in the market, be sure to offer amenities that the others do not, whether that is faster internet, more types of workspaces, or extra complimentary snacks. You might also want to search online for general advice regarding opening a business in an existing market.