40% of all coworking spaces are profitable.
This statistic is enough to scare anyone who’s looking forward to setting up a coworking space.
However, we need to look at why 40% of coworking spaces are profitable and follow this profitable model in setting up our coworking space.
Coworking spaces are generally not built to create profit but to improve the working lives of its members by forming connections through networking and creating communities. However, this cannot mean that coworking spaces operate at a loss. Every organization needs to earn profits and coworking spaces are not exempted from this law.
The 40% statistic about coworking spaces is also misleading because most coworking spaces break even after thirteen months of operations. By this time, coworking space owners have a fair idea of how to optimally price and manage coworking spaces.
Coworking space owners are always seeking new ways through which they can maximize profits.
There are two sides to maximizing profits. One is by maximizing revenue through well-made membership plans and the other is minimizing costs.
First, we shall dive into strategies that will help you price your coworking space optimally in 2020:
- Price your membership plans properly
- Include a psychological factor in your pricing plans
- Free services and promotional offers
- Keeping the optimal number of membership plans
- Minimizing employee turnover
Price your membership plans properly
Clearly defining your membership plans is probably the most important factor that determines if your coworking space will be profitable or not. Some common membership options are flexible desks, dedicated desks, work pods, and private cabin.
Understanding the profitability of different membership plans is a necessity. The disadvantage of having mostly fixed members is that it won’t help you to increase your coworking space turnover.
On the other hand, having mostly flexible members in your coworking space means that you lose out on revenue-earning during vacations.
After a year, it will be clear to you which membership plans and what pricing are good for your coworking space.
Include a psychological factor in your pricing plans
The human psychology is a funny thing.
When you price two similar products at INR 4,000 and INR 3,999 separately, people will always go for the first option as they’ll think they are successfully paying less than 4,000 for a product.
The same logic applies to coworking space members.
Including the Taxes in the final price of the coworking space rent is better than adding it separately. This makes it easier for members to know the final price and also simplifies their decision as to which membership to opt for.
Free services and promotional offers
Offering free services might look like a sure shot of attracting and retaining members but it is seldom so.
This is because free services are not valued by people. Free services should be offered on a limited basis, such as a free month on advance payment of five months’ rent.
Promotional offers are a great way to attract members into your coworking space once it has recently opened.
Promotional offers such as giving 40% discount to the first 30 members attract the first members to your coworking space and these are the members who will bring in further members to your coworking space.
Keeping the optimal number of membership plans
How many memberships plans your coworking space offers to potential members also goes a long way in deciding how many members do or do not opt for your coworking space.
Keeping the number of membership plans fixed to two or three simplified the sales process. There doesn’t arise a need to explain different membership options and the administrative process is much simpler too.
The only disadvantage of keeping a low number of membership plans is that it limits the target market.
On the other hand, a large number of membership plans will help your coworking space to compete more broadly in the coworking industry. A large number of membership plans will also help your coworking space to reach different kinds of members with different preferences and needs.
The disadvantages of this strategy are that a large number of membership plans can be overwhelming for potential members, just the decision for members whether to join the coworking space or not will be difficult. In addition, the operational selling process also gets more complex to manage.
Minimizing employee turnover
Building an efficient team that manages your coworking space is a very important step in creating a coworking space.
What’s even more important is maintaining that efficient team.
Employee turnover is a problem that most organizations face and coworking spaces are no different. A coworking space management team consists of the community manager, the janitorial staff, the IT team and any other person who is present in the coworking space on a day to day basis. These people are trained, which requires resources such as time and money. It is also required that they are provided with positive work experience, making sure that they motivated enough to continue working at your coworking space. This helps in keeping the employee turnover low.
Employee turnover costs the coworking space a huge amount of amount as it means that you have to reinvest the time and money in finding a new person and training them.
Employee turnover can damage the coworking space community, which can, in turn, damage your financial standing.
What creates a community is having known people around each other who understand and bond with each other really well. This is one of the most important attributes of coworking spaces.
If your coworking space members have to continually adapt and adjust to new coworking employees, then the essence that coworking spaces are supposed to provide is lost.
Coworking spaces aspire to provide a personalized experience. If members are being robbed of the essence of coworking communities, then you do not only lose employees due to employee turnover, you also lose members.
To conclude this point, here are some tips to minimize employee turnover:
- Coworking spaces need to provide a fair and positive work environment.
- Ensure that your employees take the necessary breaks to relax.
- Provide adequate remuneration.
- Give constant feedback on their performance.
- Include employees in the coworking space decision-making process.
- Revamp your coworking space management system with the latest technology.
- Celebrate their achievements.
- Offer learning opportunities.
The prime objective of creating coworking spaces is to form a community where freelancers and employees from different organizations can come together and work together. Maximizing profits was never the main goal of coworking spaces.
However, it is not fair to expect coworking spaces to operate at losses.
A coworking space can only be profitable when everyone is happy: Your members, your employees and of course you. So, in other words, a profitable coworking space can also mean that you’re successful in your endeavor to create a community that coworking spaces strive towards.