Starting a Coworking Space Isn’t Always About Profit
One in every four coworking space businesses fails, and yet those who are in it are reluctant to get out. There may be a good reason why.
Last year, I joined a coworking space called Shift, which has been operating since February of 2016. It was initially only to operate as a “pop-up” to test the market for a coworking space. The Shift Collaborative is now seeking funding for more permanent changes to the space.
Are you thinking of starting a coworking space of your own? Here’s how you can do it:
1. Have a Plan
First things first, you need a plan. We used the plan of Ryan Sprowl, an Oberlin College alumnus who submitted a proposal to Oberlin College’s LaunchU entrepreneur competition. Our coworking space is nontraditional and has more of an open layout, with funky, retro decor.
We were offered a pop-up space in downtown Oberlin to test the market, so when Sprowl accepted our proposal to use his plan, we put it into action.
2. Find Your Place
Step two: find a good space that is centrally located and has heavy foot traffic. Shift is tucked nicely in the center of downtown Oberlin. We’re across from a popular restaurant and next to the local coffee shop. You have to walk past our space to get to the library, two banks, and the city manager’s office. We’re hard to miss.
3. Find Your Audience
So we’ve caught your eye. What’s next? We will let you sign a month-to-month lease so that you can test the space and concept. A typical coworking space has cubicles and a conference room, as well as printing, copying, and fax access. Clients can pay per day, per week, or per month.
Oberlin is a small college town with a lot of activity, so it’s no surprise that Shift is used consistently by a few spouses of Oberlin college professors who work from home. These folks make up the Shift collaborative.
Shift also serves college alumni who come into town from time to time and need a space to work with high-speed internet. As a collaborative, we market to Oberlin College and the city itself in hopes of attracting alumni and entrepreneurs living in Oberlin — as well as visitors — to use the space.
4. Managing Revenue and Costs
Shift offers weekly, daily, and half-day rates. A consumer can pay $40 for the entire week, $10 for one day, or $5 for half a day.
Ideally, the venture would pay for itself with the money made from those using the space. Unfortunately, this isn’t always the case.
Some coworking spaces have a coffee shop at its storefront to help offset the operational costs. What the collaborative has found is that we need an investor to continue operating the space due to lack of activity.
The Challenges of Funding a Coworking Space
Inactivity is the biggest challenge to operating a coworking space. There’s overhead because you’re renting the space. So if, as the owner, you aren’t generating enough usage, it may not sustain itself.
As such, you may want to secure funding or a partnership that will allow you to sell goods to cover the operating cost and possibly even turn a profit. Sprowl’s vision was for Shift to develop as a multipurpose, collaborative space with coworking and studio spaces and a full-service coffee shop.
Different times of year can bring different patrons, so you want to be around for at least the first year to see how well you do during each season. In 2016, Deskmag conducted a Global Coworking Survey and found that the average gestation period for a coworking space in the U.S. lasts 8.5 months. So anyone looking to start one needs to be patient. It should also be noted that two out of three coworking spaces start to promote themselves at least a few months before they open.
Based on the same survey, one out of four coworking spaces doesn’t turn a profit.
Is Starting a Coworking Space Worth It?
For us, Shift is a place for learning, collaboration, networking, and finding new passions. Although the coffee shop isn’t the partnership that the current Shift collaborative has chosen, the business model that Sprowl created has worked. Still, building the business has been a labor of love. As one collaborative member stated, “We don’t plan to make any money off of this. We just want to keep it open for our own personal use.”
That may not appeal to a thorough businessman, but sometimes business is not entirely about making money — it’s also about creating something new and enjoying ourselves while doing it.