WeWork’s bubble has finally burst. The almighty leader who re-energised the once boring concept of shared offices has fallen – and the property industry is rattled. So, if the king of co-working can be dethroned, how can your co-working space make you money?
We need to look at the good, bad and downright ugly parts of WeWork’s story to unlock the key to co-working success. WeWork does a lot of stuff right. They carved the way for more than 2,800 companies across the UK to open their own flexible offices. But with the growth of the flex market and vague goals such as “building ecosystems”, there has been little focus on making money.
With a strategy known as ‘Blitzscaling’, WeWork’s business model focused on market domination with speed of growth, without worrying about profit. With huge losses and long-term financial commitments, WeWork has yet to offer any indication that its business model can be profitable.
Now call us old fashioned, but we still believe generating profit should play a key role in any business. We know investors are chasing those ‘cool’ money losing start-ups, but let’s go against the grain and actually make some money. The lesson on how to do so is simple: focus on market opportunity as well as profitability.
According to 2019 research from Deskmag (the holy grail of co-working statistics), 57% of coworking providers are NOT making profit.
That is not to say that flexible offices are not profitable. Age plays a huge role in the profitability of coworking spaces and nearly one third are less than one year old. But it does mean that you face various challenges in your quest to launch a coworking space that is economically viable.
So, I hear you ask: how can I be a part of the profitable 43%?
The answer is relatively straightforward. Let’s take a step back from flexible office giant’s high-risk business model and focus on smaller operations. You need to stop reducing your margins with beer taps, turning your lobby into a greenhouse and building a mini golf course on your roof. Sure, perks like these may attract good PR, but your business strategy needs to focus on what impacts your bottom line: retention.
The stats show us that “the majority of coworking spaces operate at a profit when the monthly churn rate is around 5%. The more they deviate from this value, the more precarious their financial situation becomes.”
And if you are wondering how many customers you should be retaining, a trend amongst 90% of profitable coworking spaces is that they have more than 200 members. So, there is your starting point:
- Attain 200 members
- Retain them at a 5% churn rate
Reaching retention nirvana is no easy task. But for financial success in a highly competitive market with low barriers to entry, losing customers is simply too expensive.
So, whilst the world’s gone crazy for money-losing endeavours, subscribe to our blog and we’ll take you back to the old school way of thinking: managing risk and creating a business model that will make your co-working space profitable.