In my day one recap of GCUC Canada 2017, I share the main takeaways from a panel discussion on cultivating diversity within a coworking...
Starting up a coworking space is hard work. Most coworking spaces actually take a while to become profitable businesses, if at all. In fact, according to the 2017 Global Coworking Survey, only 40% of coworking space operators consider their businesses to be profitable.
Knowing these challenges, you may be wondering why I decided to jump into the coworking craze. While there are plenty of articles which highlight the explosion of interest in coworking, I was well aware of the challenge. I proceeded building my coworking vision the right way (or what I thought was the right way) and we opened our doors in September of 2016. As of today, I’m happy to share less than six months later, we stand at 90% capacity and are already turning a profit. In this article, I will share my insights and what I believe are the most important things to consider to hit the ground running when you open your coworking space.
Coworking spaces today have a low barrier to entry. It is relatively easy to rent a venue, add furniture, slap on a logo, and call it a coworking space. This also means it is difficult to really make your space stand out. Furthermore, with the help of venture capitalists, competition is quickly growing. The biggest players in the business are raising millions of dollars to build out incredible spaces and are putting little guys like us out of business.
With the influx of big money pouring in to build these coworking spaces, defining a brand that stands out is one of the biggest challenges for a new coworking operator.
So how does one define their brand? First, ask yourself why you want to start up a coworking space. Usually when I talk to people about why they want to startup a coworking space, I receive one of the following responses:
I will tell you right now that reasons one and two are among the worst reasons to start a coworking space. If your drive is purely financial, you will most-likely fail. Running a coworking space requires passion. Another common misconception is that every coworking space is financially viable. This is simply not true. The second reason is also a terrible reason to go into coworking, as you should be glued to the space your first year. In fact, you will need to dedicate a lot of effort and time to ensure your brand aligns with your passion and vision. Coworking simply is not overnight success like many envision.
I founded Journey Coworking with a defined vision and brand. I knew I did not want to be a business incubator, which seems to be the aim for a number of coworking spaces. I wanted to build incredible spaces, but I wanted to have a membership levels which a small business could join and have the amenities that would rival some of the top companies in the world. I wanted to focus on building communities with individuals obsessed with disrupting their industries but also wanted to collaborate together.
In my mind, a brand is a passion. Your passion comes from the heart. Find your passion and spell it out loud in your space and mission. Sell your vision and passion to your members. Without a vision and passion, you fail to stand out from your competition.
You cannot just define your brand and build a great space without first knowing your target audience. I highly recommend that every potential space owner go through this defining your avatar exercise before starting up a space. What’s a business avatar? They are the ideal customer you want your business to attract. Defining your avatar requires you to dive deep in your demographics and really understand your target audience.
For me it was much easier because I already owned a company that had most of the characteristics of the avatar I defined. For my business, the type of prospective clients I realized I wanted to attract were business owners who are successful and want a flexible and fashionable workspace and a community they can call home. They may not necessarily be the next Fortune 500, but they want a great workplace culture and community.
As big money is funneled into coworking spaces, their design details are getting more unique and higher end. You can no longer just place furniture in a space, call it a workplace, and expect members to come flowing in. If you are offering a cheap membership rate to match cheap furniture, you are operating a high volume, low margin business. You are going to need a large quantity of members to generate a profit. And with a ton of members, it becomes increasingly difficult to curate a culture. That’s not the type of business I wanted to create. If you feel similarly, ensure you create a higher-end brand and vibe to increase your margins and attract higher paying members who believe in your vision.
When we built Journey Coworking, we decided to pull out all the stops in building a space members would love. I built a large bar area, nap pods, showers, and a community area with massage chairs. Our desks were custom made by a local fabricator, we purchased high end ergonomic chairs, and we provided both standing and sitting desks. I built out enough conference rooms so we would have a bigger member-to-conference ratio than our competition. My aim was not just to be any coworking space, I wanted to be the best coworking space in Austin. And I wanted to make sure we were sending that message the minute you stepped through our doors.
As a business owner you also really need to promote yourself. If you are too afraid to put your face on your website, about us page, or get on camera then you are already well behind the curve. Get yourself involved in the community. Network around and really start engaging with business leaders. If you aren’t doing this as a space owner, then you aren’t offering much to your members. Your members can find their own connections, but more times than not, members join a community expecting that the space can open some doors to them. Be that door opener.
The coworking space owner is the center of the community. Think to yourself: “What do I offer to a potential member who is an entrepreneur?” Using myself as an example, I bootstrapped my first company, REthink, with $2,000 in savings and turned it into a major player in its industry. Since many of my members are bootstrappers, I share a lot of common ground with them. They feel like I am someone they can talk to about the issues they run into with their own businesses. My experience differentiates me in comparison to the community managers that you will often find at a large coworking space. Many these spaces are run by employees, not other entrepreneurs. I am a peer to my members, not just a landlord, company representative, or business entity. Define what sets you apart, and then work to leverage it.
Real marketing involves real outreach. It’s not just getting on Google and hoping for the best. If you aren’t savvy in marketing, find the best person for the job. My early marketing efforts are hugely responsible for my early success. Clearly define your brand and build a great space, and you are halfway there with your marketing efforts. The brand and space will provide the base for your marketing efforts.
Now you need to reach out to the right people. Guest post like crazy, get on those top ten lists, contact local press, get on review sites and manage those reviews. Outreach is a lot of work and you will get rejected a lot of times, but this is where passion comes in. Your passion will fuel your efforts and it will come out when you pitch to these movers and shakers in your area. It’s important that you work to build the trust of your community, as that is what will ultimately lead to new membership conversions.
If you need to hire someone to help you with marketing, hire the right person. I cannot tell you the amount of money and time I wasted on brand specialists, designers, and marketers who didn’t know what they were doing, or didn’t understand my brand vision. There are many out there. If you want to do more research on local marketing outreach, I would suggest reading this post about local marketing.
The local community around your space must be involved for long-term success. Start hosting events at your coworking space. Since my space opened in late September 2016, Journey Coworking has been involved in Startup Grind, South By Southwest, Movember, and Venture Crush. Not only are these events great for brand building, but they open up a lot of networking opportunities for you and your members. Additional sales doesn’t hurt as well :). Sometimes, I even manage to sell memberships after events when members from another place have stopped by the event and fallen in love with our venue. Others are just great for social interaction like the MoYoga event we hosted with November (see photo above).
Coming from the software industry, I know all about churn. The coworking industry operates very similarly, as the main measurements of success are your recurring revenues (aka MRR) and membership retention rates (aka churn). There is no question you are going to lose members regardless of what you do. There are a number of factors outside of your control: members move, they sell their business, or the company they are working with no longer sponsors their coworking membership.
But the other factor, member satisfaction, is the responsibility of you as the space operator. You must understand what your members’ pain points are. Do they want fun extracurricular activities to unwind from a hectic workday? Is one of your members particularly disruptive? Are your members complaining about an issue with your space? Address your problems early and listen to your members. Get their feedback about what their issues are and resolve the problem before it becomes a negative review.
Happy members bring you referrals. On a number of occasions, I’ve received referrals from events, or prospects from existing members. Sometimes, my existing members even wine and dine prospects who visit the space because my existing members feel so invested in the community we’ve built together. Happy members are incredible assets to your business and they can really close a deal when they are engaged in growing your community.
I understand what I have outlined is based on my own experience and is therefore not a guaranteed way to repeat the success I have had. In an industry like coworking which is so focused on people, every business is different and we all must find what works for us. So in closing, I’d love to hear what other operators have to say about what worked for them for achieving early success. Leave a comment below and let me know what worked for you.
All photos of Journey Coworking provided by the author.
About the author
Vijay Mehra is the founder of Journey Coworking, a 12,000 square feet Austin coworking space located in East Austin. Vijay purchased an old warehouse, gutted the entire building and renovated it into a state of the art coworking featuring high end amenities. Prior to starting Journey Coworking, Vijay was the founder of REThink, a cloud based software company that specializes in streamlining processes for Residential and Commercial Real Estate Brokerages