Starting a Coworking space

[Seeker]

Hi everyone,

I have been reading the MMM blog for a while now and have decided to dip my toes into the forum in the hopes that this community can be of some assistance.

I am considering starting a coworking space and I am wondering if anyone here has any suggestions for resources that can assist me in doing market research, developing a business plan, etc.

Thanks in advance for your help!

[alcon835]

Welcome to the Forum! No resources yet, but a few questions:

- Are you looking for a smallish thing like MMM does where you buy a building and pay for it all with cash/memberships?
- Are you looking to build a WeWork style business that you start small somewhere and then grow throughout the country?

The former is potentially doable, but keep in mind MMM does a TON of the work himself. Saves a lot of money. He also has a lot of seed money to get something like that going and a very large base to draw membership from.

If you're looking to start a large, multi-city co-working space that's far outside the capabilities of my advice. But good luck either way!

[M0ntana]

I know very little about this, but I generally have the reflex of avoiding me-too business ideas. Crudely speaking, these are ideas that come up once a certain market segment has become "hot" or is seen as a golden ticket for easy money.

I have seen this with drop shipping, coffee shops, funny t-shirts, statement socks... and now coworking seems to be all the rage.

I have issues with these models because they make you jump on a bullet train to commodification city. This forces you to compete with all the other me-toos out there by driving the price down until it no longer is a worthwhile model to pursue anymore.

Despite that, here would be my thought process before I'd even consider something like this:
- Do you own the building? If so, how much would it take the make the necessary renos to make it a decent coworking space? If not, how much would be the lease? What about utilities, coffee, cleaning, admin, reception, accounting, etc.? How much members would you need to make these numbers work? How long can you afford to bleed until you've hit your numbers? Real Estate is tough, so don't come into it ill-prepared.
- Is your area really undeserved for coworking or do you have competition on every corner? is there really a creative/freelancer pool to draw from?
- Is there any way you could niche down by differenciating your product from the weworks of the world? For example, as a lawyer, I feel underserved by most coworking spaces as I cannot work in open spaces for confidentiality reasons. I have seen a few legal coworking spaces sprout around and do believe these have an edge most do not have.

Just some thoughts. Please note I have no experience (nor desire) to get into the coworking biz, but this is just like any other business once you think of it... Just with considerably higher risk than most of those discussed here (as most do not require expensive RE investments).

[SwordGuy]

As far as resources go, I would recommend this one:

https://www.popupbusinessschool.co.uk/

They are masters at how to start a business with little to no resources.  I recommend absorbing everything they've got on their website, then search for people who interviewed them.   They'll get you into the right mindspace before you open your business.  Won't cost you a penny, either.

[willieaames]

Check PM.

[Seeker]

Welcome to the Forum! No resources yet, but a few questions:

- Are you looking for a smallish thing like MMM does where you buy a building and pay for it all with cash/memberships?
- Are you looking to build a WeWork style business that you start small somewhere and then grow throughout the country?

The former is potentially doable, but keep in mind MMM does a TON of the work himself. Saves a lot of money. He also has a lot of seed money to get something like that going and a very large base to draw membership from.

If you're looking to start a large, multi-city co-working space that's far outside the capabilities of my advice. But good luck either way!

Thanks!

I'm currently thinking of a larger space in the 10-12 k sqft range to eventually grow into multiple locations throughout my city. I'm prepared to get my hands dirty and do as much as possible myself along with good strategic partners that have the same mindset. I want my initial space to be outside of my cities' downtown core which is already saturated with coworking spaces and has extremely expensive real estate - I am struggling to find a way to research the market demand for such a space in other parts of my city.

[Seeker]

I know very little about this, but I generally have the reflex of avoiding me-too business ideas. Crudely speaking, these are ideas that come up once a certain market segment has become "hot" or is seen as a golden ticket for easy money.

I have seen this with drop shipping, coffee shops, funny t-shirts, statement socks... and now coworking seems to be all the rage.

I have issues with these models because they make you jump on a bullet train to commodification city. This forces you to compete with all the other me-toos out there by driving the price down until it no longer is a worthwhile model to pursue anymore.

Despite that, here would be my thought process before I'd even consider something like this:
- Do you own the building? If so, how much would it take the make the necessary renos to make it a decent coworking space? If not, how much would be the lease? What about utilities, coffee, cleaning, admin, reception, accounting, etc.? How much members would you need to make these numbers work? How long can you afford to bleed until you've hit your numbers? Real Estate is tough, so don't come into it ill-prepared.
- Is your area really undeserved for coworking or do you have competition on every corner? is there really a creative/freelancer pool to draw from?
- Is there any way you could niche down by differenciating your product from the weworks of the world? For example, as a lawyer, I feel underserved by most coworking spaces as I cannot work in open spaces for confidentiality reasons. I have seen a few legal coworking spaces sprout around and do believe these have an edge most do not have.

Just some thoughts. Please note I have no experience (nor desire) to get into the coworking biz, but this is just like any other business once you think of it... Just with considerably higher risk than most of those discussed here (as most do not require expensive RE investments).

Thank you for these sobering considerations. It just so happens that I am also a lawyer and I'm looking at this business as a potential side-business to supplement my practice. I have thought through many of these same issues but have struggled to find any reliable literature online as to how to do market research in a particular geographic area, develop pricing strategies, etc.. For example, when selling hot desk spaces, presumably you factor in a multiplier of some kind for each seat as no one will be sitting at a hot desk 24x7 - and that multiplier is a critical consideration when determining whether or not this would be a profitable venture.

[Seeker]

As far as resources go, I would recommend this one:

https://www.popupbusinessschool.co.uk/

They are masters at how to start a business with little to no resources.  I recommend absorbing everything they've got on their website, then search for people who interviewed them.   They'll get you into the right mindspace before you open your business.  Won't cost you a penny, either.

Thanks! I'll check this out!

[Papa bear]

I’ve been looking for space to buy that could work closer to a MMM style.  Can’t find anything that makes sense though.

I’ve worked in those spaces and I’ve met a few people who started a high end one in my city. I’ve chatted them up and done some research. 

My issue?  I won’t do improvements on a building I don’t own.  So I need to find something to buy!


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[MaaS]

I know very little about real estate. But, one thought on your customer base:

You will primarily be housing start ups. The successful ones will quickly get their own spaces. That leaves the non rocket ships as longer term customers. Most start ups are burning cash like crazy. A huge number will fold seemingly overnight in the next
recession. And no, a contract won't do much for you when they go bankrupt.

I'm not trying to discourage you - but use conservative occupancy projections and keep a bigger cash reserve for your overhead than you expect to need. This could be profitable, but it's also likely to be volatile.

Source: I work with start ups.

[natashaj]

Agree with @MaaS. 99% startups fail and the 1% who survives chooses own housing after certain period of time.  Also, when the startup get bankrupt, how are you going to bear the cost?.

[Papa bear]

I’ve worked in some of the older, more traditional spaces, and had clients in some as well.  You don’t only get “startups”, you also get a lot of small 1-2 person groups, companies that are expanding to a new area and don’t want to pay for space day 1, etc.  there are a LOT of different clients that end up here.

If you go more the MMM model, you’ll get a lot more gig economy types, hoteling people who don’t need an office everyday, and other “Starbucks” entrepreneurs that don’t want to sit in the coffee shop everyday. 

Plus there are a ton of MLM, financial “planners”, and other “be your own boss” types that need these flexible spaces.


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[jpdx]

How will you differentiate your business from the other established co-working spaces in your city?