Coworking spaces have been rapidly gaining in popularity over the past few years.
Experts predict that the number of coworking spaces worldwide will reach 42,000 by the end of this year. Moreover, currently, a typical space has almost 190 members on average. If you also consider that 98% of employees would love to continue working remotely, at least some of the time, for the rest of their careers, it’s easy to conclude that running this type of establishment offers a host of potential.
But the fact is, like any other business endeavor, managing a coworking space necessitates a strategic approach — especially if you’re aiming for long-term success.
So, if you’re looking for sustainable finance and investment strategies for the long-term success of your coworking space, here’s everything you need to keep in mind to reach your goals.
Understand the Cost of Getting Started
One of the most significant financial mistakes entrepreneurs make when starting a coworking space is failing to understand that starting and running this type of business involves costs beyond rent.
Yes, paying for the space will make up approximately 50% of your total monthly costs. But if you want to build a space with sustainable, long-term potential, you’ll probably have to make additional investments before opening your doors. That includes structural renovations, design, furniture, technology, legal, and administrative fees.
Furthermore, once you’ve launched, there will be a variety of operational expenses like utilities, payroll, amenities, and marketing expenses. Don’t forget about repairs and maintenance, too. Any coworking space that attracts a large number of people will need regular touch-ups to keep things running smoothly.
Generally, the agreed-upon starting capital for this type of business venture tends to be around $100,000 (naturally, this will vary based on your location and whether you own the space).
So, if you don’t have this kind of budget, then your first step will be to raise capital, either by creating effective income streams, investing personal savings, or doing some fundraising.
Don’t Expect to Make a Profit Right Away
New businesses rarely make a profit right away. In fact, it may take two to three years before you start being in the black. So, if you’re considering starting a coworking space, you’ll need sufficient padding to ensure smooth operations for the foreseeable future.
There are a lot of things you can do to maximize your chances of achieving healthy profit margins. This includes utilizing your space smartly, offering high-quality amenities, or investing in the right marketing tactics to attract your target audience.
For starters, robust SEO, content, and social marketing strategies can do wonders for reaching potential customers. If you’re trying to attract a specific type of customer, you might also benefit from influencer marketing or referral programs; events and workshops; or strategic collaborations with local businesses and startups.
Build Diverse Income Streams
Right now, coworking spaces offer amazing opportunities for success. However, to ensure that your investment pays off in the long run (and doesn’t die out at the first sign of change in consumer sentiment), you must do your best to develop an agile business plan with a solid risk management strategy.
One of the best ways to do this is to diversify your income as much as possible.
In addition to selling memberships, explore ways to expand your offer. For example, you can offer printing services for members and non-clients. You can use your team’s expertise to provide fellow entrepreneurs with consulting, mentorship, or even niche-specific workshops. You might even use some of your space’s amenities — like the gym or bar — to attract visitors who may not need a desk/office but might be glad of a good networking opportunity.
The great thing is that you can easily identify profitable opportunities by observing industry trends and keeping tabs on what people want from their workspaces. In addition to following successful investors on social media to stay up to date, it’s also a good idea to keep an eye out for new articles here on the Coworker Mag.
Make Smart Investments Outside of the Coworking Industry
Another smart thing to do when building a financial plan for your coworking space is to protect and bolster your personal finances. That way, you will ensure that your wealth isn’t affected by the profitability of your business venture. More importantly, you’ll create an opportunity to generate even more capital you can use to upgrade and market your space.
If you’re OK with tying your savings up for a longer period, the stock market definitely could be one of the ways to generate a passive income. However, if you need faster results, you might want to explore a more hands-on approach to investing and entrepreneurship. The great news is that there are plenty of high-quality resources you can follow to get ideas, insights, and advice. This can be super valuable if you don’t know how to start diversifying your income.
Focus Heavily on Branding
How do people choose a coworking space?
Many will evaluate locations, services, and amenities before deciding what option to choose. However, consumer behavior research shows that there are other, non-logical factors people weigh when deciding on their investments.
For instance, brand reputation and familiarity are hugely impactful in helping businesses attract new customers. According to research data, people actively choose to interact with brands they’re familiar with. Plus, earning your target audience’s trust could help you charge more for your services, maximize customer lifetime value, and ensure the profitability of your business during global economic downturns.
Furthermore, positioning your business as a customer-first organization could be an exceptionally effective method of attracting new clients. In addition to designing a beautiful and informative website and maintaining a strong social media presence, do your best to create effective acquisition and onboarding systems for new leads.
Something as simple as using an AI answering service can help your business remain available at all times. That’s particularly important if you’re advertising to prospects who seek flexibility.
Or, if you offer unique services and options none of your competitors do, try your best to market and describe these in easy-to-understand terms that will come off as relevant to your target audience. Ultimately, people may know what a concierge service entails. But if they’re not aware of the benefits it could offer to them, they’re not very likely to pay a premium for it.
Prioritize Customer Retention to Maximize ROI
As you explore sustainable financial strategies for your coworking space, remember that customer acquisition can cost up to five times more than retention.
So, instead of spending the majority of your marketing budget on attracting new leads who may or may not turn out to be loyal clients, try to develop a robust loyalty-building tactic that will help you maximize your ROI.
For starters, offer discounts for annual memberships and give customers the flexibility options they seek. Then explore additional ways to get people to continue returning to your space.
Developing a loyalty program with free perks and additional services is an excellent start. So is celebrating your long-term members’ milestones (like their birthday or business achievements).
However, you can also get exceptional results by focusing your attention on customer-experience-boosting strategies.
Along with prioritizing a supportive environment for your users, explore additional ways you can assist customers when they need it:
– Develop self-service resources.
– Make sure your clients know how to ask for assistance.
– Don’t underestimate the power of communication. Even something as elementary as a mass texting app could help keep customers in the loop regarding current events, workshops, or networking opportunities.
– To maintain high engagement rates among members (or re-engage past customers), invest in an email marketing As a low-cost, high-ROI marketing tactic, this can be an easy way to maximize retention without significantly affecting your budget.
Continually Analyze Financial Performance
Lastly, to build a healthy financial strategy for your coworking business, familiarize yourself with your organization’s economic performance.
Instead of just checking to see if you’re in the black every month, do your best to really study your expenses and revenue. Identify your main losses. And keep an eye out for unexpected sources of income.
That way, you’ll have a solid idea of your organization’s most pressing financial risks. You’ll also have the opportunity to recognize profitable opportunities for growing your business in a way that’s sustainable and future-proof.
Final Thoughts
Which of these finance and investment tactics will you implement in your brand’s growth strategy? Are you already relying on some of them for the long-term success of your business? Or are you still in the planning phase, trying to do your due diligence?
Either way, you can rest assured that these tips work. So, try to incorporate them into your business plan, adjust as needed to meet your brand’s specific objectives, and continue tracking results to ensure you can make agile decisions based on your business goals and current industry trends.
