270. 5 Truths About the Size of Your Coworking Space
The coworking business model is seeing more variations than ever before.
The industry had its roots in executive suites that were originally created to serve independent lawyers that needed access to expensive law libraries (back in the 70s before the Internets!).
Then the term "coworking" showed up in about 2006 and was primarily open-plan seating which worked for computer programmers and graphic designers but definitely not lawyers.
Then we fell into a hybrid model with offices + open plan seating...maybe 60%/40%....70%/30%...or 50%/50%. Pre-COVID, this approach was profitable because it aligned fairly well with the demand profile of most markets. And it was more aesthetically attractive than mazes of hallways.
An office-heavy model in 10,000+ feet generally yields a nicely profitable pro forma over 7-10 years.
That said….
The office-heavy model is more expensive to build.
The start-up costs are intimidating depending on your access to capital.
10,000 square feet might be too much supply for a small market.
You might think the office model is not relevant to the target member that you're serving.
You might want to create a space that has strongly diversified revenue, not relying on office revenue to make the model work.
Tempted to start with a smaller space?
Make sure you have carefully and realistically assessed the risk/reward equation and that it aligns with your goals.
Usually, smaller spaces (less than 5,000 sq feet) with a traditional office model are less profitable.
They don't work for management agreements because there's not enough revenue to pay a management fee and a profit share and get the LL a higher return than market rent.
BUT...if you're not passionate about the traditional office model, there are other approaches.
A space that really works for events. With a manager that really loves events :)
A space that drives a very high volume of light memberships (The Wing could have been wildly profitable at 2,000 square feet. More on that next week).
A hybrid space like the SUCCESS Space model we talked about last week - cafe, workspace, business coaching.
A space that has a globally in-demand address (Michigan Avenue in Chicago, Palo Alto in Silicon Valley, Wilshire Boulevard in LA).
On this week's podcast, we dive into 5 Truths about Small Coworking Spaces.
Everything Coworking Featured Resources:
Masterclass: 3 Behind-the-Scenes Secrets to Opening a Coworking Space
Creative Coworking Partnerships: How to negotiate and structure management agreements from the landlord and operator perspective
Resources Mentioned in this Podcast:
To be featured in the Noumena community and give your members access to a whole library of entrepreneurial resources and financial education programming, all at no cost to you by the way, visit noumena.pro/coworking to fill out an interest form.
Learn more about SUCCESS Space, a coworking franchise model with three revenue streams; recurring and on-demand revenue from coworking memberships, a full-service cafe, and Success Certified business coaching.
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