We’re excited to collaborate with Abigail Schilling from Space Savvy Studio for this insightful piece on making coworking spaces profitable. Abigail is a renowned expert in the coworking space industry, bringing over two decades of leadership experience in business and marketing. As the owner and operator of three successful coworking spaces in Oregon, she’s faced firsthand the challenges and intricacies of managing such ventures. Through her agency, Space Savvy Studio, Abigail offers a range of services aimed at enhancing coworking operations and member experiences, from administrative support to marketing and custom tech solutions.
Her strategic vision and leadership have made her a crucial figure in empowering others within the coworking community. Connect with Abigail on LinkedIn and learn more about her work at Space Savvy Studio’s website.
In today’s changing work environment, coworking spaces are leading professionals to a more flexible and community-oriented work environment.
This raises a critical question: Just how profitable are coworking spaces?
With recent forecasts by Statista predicting the global number of coworking spaces to exceed 40,000 by 2024, the importance of understanding their profitability has never been more preeminent. This guide aims to unravel the economic fabric of coworking, weaving together data-driven research, industry insights, and pragmatic strategies to shed light on the profitability of these dynamic spaces.
A recent survey by Deskmag provides a compelling insight: 72% of coworking spaces turn profitable after two years in operation.
But what drives this profitability? And how do coworking spaces navigate the challenges of their initial non-profitable years? Let’s explore.
On the path to profitability for coworking spaces, different factors have unique impacts. This breakdown shows how each element contributes to overall profitability, with percentages reflecting their relative significance.
The structure of membership fees is pivotal to the financial health of coworking spaces, contributing to half of their profitability. By providing a varied assortment of membership options, such as day passes, hot desks, dedicated desks, and private offices, coworking spaces can cater to a wide range of needs and preferences. This flexibility not only broadens the appeal to various demographics but also maximizes the potential for revenue.
KEY INSIGHT: Research shows that coworking spaces with up to 60 members often just manage to break even or may even face losses. Profitability tends to kick in once the membership count reaches approximately 100, with profit margins generally improving as the number of members increases.
The choice of location is pivotal for coworking spaces, influencing their success in two major ways: member attraction and operational costs.
Member Attraction: A prime location in the city center can significantly boost the appeal of a coworking space, making it more desirable to potential members who value convenience, accessibility, and the prestige associated with such addresses. Being situated in a bustling area can also provide networking opportunities, access to nearby amenities like cafes, restaurants, and public transportation.
Operational Costs: While a metro location offers numerous benefits, it also comes with higher rental costs. These expenses form a substantial part of the overhead costs for a coworking space. In addition to rent, other expenses such as staffing, utilities, maintenance, and insurance also vary by location.
To optimize profitability, coworking spaces can make strategic decisions when it comes to lease negotiation, space utilization and coming up with inventive new revenue streams.
Beyond memberships, successful coworking spaces tap into additional revenue. Hosting events, offering consultancy services, or providing amenities like cafes can increase profitability.
When I first opened my own coworking space, I was focused on long-term members and office sales. After a few months I realized that this traditional focus was limiting the number of people I could convert, and I was missing out on a large market segment that was active in my region.
Not wanting to miss out on potential revenue, I decided to diversify my service offerings and target a broader audience. I saw the untapped potential of non-members and the rising demand for flexible options for room bookings and day pass users.
I developed a public online signup and booking page, making it effortless for anyone to discover and access the coworking space. I also integrated self-serve automations for both bookings and day passes to cut down on the work that would be required to onboard and serve these bookings.
The ease of online bookings attracted new users, significantly driving up utilization rates and diversifying revenue streams. But, let’s take a look at another owner/operator that I’ve worked with through my agency, Space Savvy Studio.
Joanna, another coworking space owner, was grappling with financial strain. Her space suffered from high operational expenses, compounded by a high staff turnover and excessive payroll costs. Despite her best efforts, the space’s financial health was deteriorating, and things were just getting worse as she struggled to look at the right data and relied on ineffective marketing strategies.
Joanna realized her approach needed a complete overhaul if her space was going to survive! Together, we undertook a thorough review of her business operations.
We identified key areas where expenses could be cut without compromising service quality. We recognized the need for “the right person in the right seat” and agreed that there was no “unicorn” – no one single person could handle all the tasks. This led to outsourcing certain operations, such as marketing and financial management.
This strategic realignment and outsourcing led to a strong turnaround – operational costs were reduced, and the effectiveness of marketing efforts improved, attracting more members, room bookings and boosting revenue.
Joanna’s space now operates more efficiently, with a leaner, more focused team and external partners, like Space Savvy Studio, that drive success.
