Coworking has changed dramatically over the last 7 years. When we opened Think Big Coworking back in 2010, we still had to educate our Midwest market on the basics: What is coworking? What is a shared office? What do you mean you can work in a place paying by the day or by the month, not having to enter a five-year contract?
Today, it’s a different story. Coworking is considered the future of work, and according to DeskMag, 73% of the US workforce will be mobile by 2020. The benefits are clear: Work remotely but not alone, define your own work culture, and surround yourself with like-minded peers that can help your business grow.
Starting a Coworking Space Today
With their popularity skyrocketing, starting a successful coworking space is now more challenging than ever. Investors are scrambling to get into the coworking world. They see the profitability, they see the demand, and now it’s a rat race, a coworking gold rush.
With a great plan and a little guidance, however, you can launch a successful coworking space that makes a real impact on your community.
After seven years of running Think Big and providing workspace advisory services for clients around the world, we have a lot ideas to help you avoid those first-time coworking mistakes.
Specifically, I want to dispel 4 myths about starting a successful coworking space that I hear often.
Myth 1: If you Build it, they will come
You think your coworking space is really hip. You think that if you have the most beautiful interior design that people are going to show up. If you build it, they will arrive at your door. But it’s not that easy.
There’s a lot more that goes into a successful coworking space than meets the eye. It can’t just be a pretty space with a Wi-Fi connection and a cup of coffee (although coffee bars are important too).
The entire business model needs to be designed in a way that supports curation of a community: memberships, floor layout, programming, events, and staffing structure all need to work together to create a collaborative space.
The first step is knowing who your members are. What type of community will be populating the space? What industries are natural fit for the area? What is your niche?
Before building a new coworking space, we highly recommend completing a feasibility assessment to answer these questions.
Myth 2: Coworking is a Real Estate Business
In the Spring of 2015, big money arrived in the coworking world, and commercial developers started exploring how can they could get into the business.
The problem is that most developers see coworking as a real estate business. In reality, coworking is a hospitality business, and not recognizing that can cause serious trouble for a new space.
The difference between commercial real estate and coworking is subtle but important: A coworking space leads with member connections, while real estate focuses on the property.
This shift in focus affects the entire business model, all the way down to your staff. You can’t just have a real estate agent sitting at the reception desk and pretending to be the “community manager”. You need someone who is trained to manage the community, which includes getting to know the members and building connections between them. That’s not the same as selling offices.
Without connections, a coworking space is just a giant, open office. Lead with hospitality and the success will follow.
Myth 3: Designing a Coworking Space is Just Like Designing an Office
Architects are used to designing office spaces and commercial property, but there’s a different set of rules when starting a coworking space. You need a deep understanding of shared workspace operations to create a successful design.
The biggest difference between designing office space and coworking space is the amount of common area. Common areas are the spaces in a commercial or residential building that are open to anyone, including lobbies, hallways, and open work areas. The amount of common area is exorbitant in coworking spaces, so it’s critical to minimize it where you can.
When we first built Think Big, we realized our hallways were bigger than they needed to be. We could have added more square footage to our offices by turning double offices into triples, triples into quads, and so on.
Small changes like this can have a huge impact on revenue, and they are unique quirks of coworking. Be sure you have an experienced eye assisting with your design to catch revenue-increasing opportunities.
Myth 4: Design Comes Before Finances
The design of your coworking space and its profitability are deeply linked. We see a lot of developers designing first and doing financial modeling afterwards, and this can hurt the success of the space.
Profitability of a coworking space is based on the number of spaces you can fit and the revenue they will pull in. To maximize your rentable square footage, you should do financial modeling at the same time as the architecture design.
We once worked with a client who was 50% through their design process, and in six hours we added $40,000 to their bottom line. They were halfway to bankrupt because they didn’t consider the revenue consequences of their design.
One way to maximize your rentable square footage is to design flexible spaces. Take a 25-person board room and partition it off with overhead doors. You can get more revenue per hour splitting up the rooms, and then open up the doors when you do have those big meetings come in.
Another example is renting out open coworking space for events and large meetings. There is a lot of hidden revenue in hosting events. You can get an entire month’s worth of rent from an office space with just one event. That’s why we almost always create an area you can call an “event space” for at least 40 people.
We’re all human and design mistakes are inevitable. If you guess wrong on the use of a space, you want to be able to change it easily. Flexibility and adaptability are key elements of good coworking design.
What is Your Competitive Advantage?
It goes without saying that in order to be financially successful, you need to attract members. To attract members, you need to identify your competitive advantage. What makes you different from the other workspace options around town?
Whenever we meet with a new client for our workspace advisory services, we first try to identify their competitive advantage:
Where is the space? Who is your target market? Who are your competitors?
Then we try determine the space’s financially feasibility: What does the property look like? What does the market look like? With everything considered, can we make this space successful?
Building a successful coworking space always starts with answering these questions. While you won’t avoid all the pitfalls and mistakes while building your space, keep in mind these four myths and you will have a huge head start on the competition.
For more insights on coworking and shared workspaces follow Sarah on Twitter, @SarahThinkBig.