How to grow revenue and build a profitable business
Competitor analysis is part of the daily struggle to stay one key step ahead of the competitors breathing down your neck. No matter how original your business idea might seem, chances are that you’ll have to look over the competitor’s fence sooner or later. Gaining market share is a complex process, in which you build the unique character of your business by acquiring intelligence about those who, essentially, want to out-compete you in the process! Thankfully, this can be broken down into several stages which we’ll explain in more detail here.
Market share is pretty self-explanatory and identifying what goes on with it starts from determining the number of competing coworking spaces in the area you want to provide your services in. In essence, you want to look at the level of success your competitors have achieved, as reflected by what they take in form of their market share. You can compare the figures from their business records (such as those on Crunchbase) with those relating to the industry average at the local or national level. Remember that having the largest market share does not mean that they offer what’s best for the customers – they may be, in fact, just a better established company and your opportunity lies in identifying their strengths for the purpose of turning the tables on them.
First of all, you’ll need to establish if your competitors are really profitable. This portion of competitor analysis entails determining their cost structure, main sources of profit, liquidity and methods of growth as well as resources in form of human capital and available facilities. Bear in mind that determining profitability also means establishing the degree to which your competitors rely on their competences and market positioning to achieve a financial edge.
Doing your homework on competitor profiling will help you identify not just what makes your competitors tick, but develop your own Unique Selling Point (USP) with which you can attempt to take over their market share. In essence, this is the measure of what makes your product or service special and standing tall among what is offered by your competitors. Leaving them in the dust means being well informed about what they consider their USP and building upon this type of business intelligence for your own needs. Make sure you check any resources your competitors use in attracting audiences to their USP, in form of their website, blog, promotional material, newsletter and publications.
Examining your competitor’s customers goes hand in hand with all of the above efforts, since neither their market share not the USP could exist in the first place without access to the customer base they serve. Some profiling is in order here, too, and, in our day and age, this job is made easier by access to social media. Make sure you check your competitor’s social media pages, as the places in which their interaction with customers is most prominent. Check their list of followers on Facebook, Instagram or Twitter to get some idea about the demographic profile of their audiences. Do not forget to go through visitor posts, as well as any reviews you can find. All of these will help you identify any potential gaps in what is demanded by the customers and supplied by your competitors, and use it to create an offer that surpasses whatever your competitors may put on table.
Utilization rate of space is a specific measure used to assess the quality of your competitors’ offer in the field of coworking. If, for example, the national growth rate of coworking spaces is X%, you can easily apply that to your city as an approximation and understand how many new spaces may open for business. This is helped by checking several parameters, which include looking at the highest number of people using said space during a day (daily peak utilization), rate of usage which changes throughout the course of a day (average peak utilization) or checking which businesses are proved to be the most active customers during observed periods.
The Guide to Make Your Space More Profitable
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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:
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.
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.
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.
Coworking Space Management Guide
A comprehensive guide to help you manage your coworking space.
The coworking industry is gaining in popularity, with more businesses arriving and more people taking advantage of coworking memberships. While the popularity of coworking is good for coworking spaces, it also means that there is more competition. To improve your revenue, you need to take steps to differentiate your company from the others.
One of the first things you should do to increase your sales revenue is to make sure you know where most of your leads come from. This will let you focus your energy on that marketing strategy, whether it is emailing forms, making cold phone calls, or social media advertising.
The revenue from coworking comes from membership sales, so you need to make sure that memberships are appealing to potential members. The best way to do this is to bundle your services, such as wireless internet, access to the conference room, notary services, coffee, and more. Instead of offering most services separately, bundle them all into the membership price to provide clarity for members.
Since every person is different, you also want to offer a range of membership tiers for your coworking space. This way, you can offer bundles for people depending on the amount of time they need access to the space or the amenities they need to use. To help with sales revenue, allow for certain amenities to be bought a la carte so members do not have to feel pressured to upgrade plans just for a single feature.
While many people look for coworking spaces as a place to work, others just want to take advantage of virtual services. You can offer these virtual services and amenities with no space requirements on your end as another revenue stream to supplement membership sales.
As with any other business, you should use analytics to make sure that you know how your space uses various resources and technology. This way, you can make sure that everything is being used to its full potential and see if you are offering any amenities that are not necessary. In that case, you can cut costs by eliminating those underutilized amenities. Alternatively, you could change their pricing method from bundling them into membership packages to making them a la carte.
One of the many methods of improving revenue for your coworking space is to promote a feeling of community. Most people join coworking spaces for their community feel as well as the amenities offered, so do what you can to promote this feeling. One of the best ways to do that is to offer a range of events, both social and business-related or educational. You can also work to design the space in a collaborative space.
Another option is to create a credit system that lets members buy credits ahead of time. They can then redeem these credits for access to the conference room, a guest pass, extra time in the space, or something else. Make the credits transferable and easy to use to maximize their value and boost sales.
Are coworking spaces profitable?
If you design an appropriate strategy to build your coworking business, it will bring you good revenue. We have previously discussed about how profitable coworking spaces can be. and business models that may not be viable. Today, we'll be focus on coworking profits and losses so that you can understand if the game is worth the candle.
In this article, you will find an overview of the profits and losses of running a coworking space and the factors that can help you decide if you should go ahead. Did you know that 40% of the coworking spaces around the world are profitable according to the statistic? What’s even more exciting, the percentage has increased for 4 years running (it was 32% back in 2013.)
On the contrary, there are fewer coworking businesses that are losing money now. In 2013, there used to be 36% unprofitable coworking spaces while now there are only 26%. It is true that this business is comparatively new to the market. Apparently, coworking space owners are quickly learning how to get revenue from their business. Why would you want to go through trial and error if you can learn from their mistakes and build a profitable business right from the start?
The owners of coworking make money selling a number of services. These are some of the main few.
1. Renting out desks to various creative entrepreneurs and freelancers - this makes approximately 36% of revenue
2. Selling coworking membership (about 18%.) We recommend you to design combined membership plans for different kinds of your target clients.
3. Rent out meeting spaces - this service brings a 10% of revenue
4. In-house classes and workshops make around 8%
5. Offering virtual office services (approximately 2% of income).
Other revenue streams include selling tickets to the internal events as well as providing public support, and other services.
There are certain expenses which are inevitable if you are building a coworking business.
1. 40% percent of all losses are associated with renting the space from the property owner.
2. Owners of the coworking spaces spend money on marketing and experience huge expenses as a result.
3. 15% of total losses are typically operating costs.
4. Another inevitable loss is employee salaries and benefits.
5. Lastly, coworking space maintenance will cost about 6% of your expenses and another 6% will be spent on the equipment for your space to make all the necessary appliances available for your visitors. This also includes installing efficient software in your coworking space such as keyless access control and so on.
Please take into account that these are average numbers, and your coworking profits and losses may be different. You should also calculate when your working space is going to break even. For instance, WeWork company was operating at a loss for a year. It gained £13.6 million in revenue and experienced a net loss of £14.4 million. This happened because WeWork was renting out desks for the lower price than it paid to the landlords.
Nevertheless, today WeWork is a profitable business bringing enormous revenue. What is more, 35% of coworking spaces start bringing income in half a year. Therefore, it is essential to act strategically and realize that your coworking company has to go through the period of losses which is going to last from 6 months to 1 year. But make sure that your coworking business plan includes a clear step-by-step strategy on how to make your space profitable as soon as possible.
What are other essential factors apart from the coworking profits and losses you should consider before you open a new space?
The owners of coworking make money not only to achieve their ambitious goals but also to make a positive change in the world. These people are often empowered by a particular community. Why not make use of it when you start your own business? The more members you get, the more profitable your business will become. So tailor your future space to the needs of your community. For instance, it can be a women-only coworking space to avoid sexual harassment at work.
If you build a niche-specific business relying on the community you want to contribute to, you skyrocket your chances to get the ROI. It will be easier for you to establish long-term relationships with your members, especially given that you already have the necessary connections in that niche.
Building a network of the like-minded people will also help you to scale your business quickly. You'll be able to provide not only the desks and office amenities, but hold exciting events and invite famous speakers to empower your community and help it grow.
Moreover, you might consider a big city as the location for your future coworking space. Location matters, so it's better to increase your chances and get as many members as you can. There are obviously more people in a big city than in a small town.
Do profound research based on the factors mentioned above and shape your future business success today!
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.
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.
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.
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.
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.
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.