The Co-Working Space of the Future
Co-working spaces are at the backbone of the remote working world. Some people swear by them, some people find them a waste of time. But it’s clear that this business model is gaining popularity around the world, and it’s likely to continue as more people start working from “home”.
Right now, a co-working space is basically just a big room with a bunch of desks, some offices, and a high-speed internet connection. Certain places have unique touches such as pool tables, community events, and even dorms for people to sleep. Ultimately though, co-working spaces do not vary greatly from place to place. The business model is very simple, charge a membership fee and perhaps sell some beverages and food.
The reality is nobody is getting very rich from this business model. Popular spaces can earn very modest income from selling a lot of subscriptions, but when you look at their revenue per square foot it’s nothing spectacular. The reason for this is that the average member at a co-working space will spend a long time using the facilities. In the restaurant world, businesses target a statistic called “table turnover”. This refers to how many different customers sit in a an available seat over a specified time period. In the case of a co-working space, the table turnover is low.
When compared to a gym, where even the most active customers will only visit for 5–6 hours per week, a co-working space customer spends a lot more time using the facilities. It is common for someone to work basically 8 hours per day, 5 days per week at a co-working space. That adds up to 40 hours per week. There aren’t many other subscription brick and mortar businesses where a customer spends so many hours using the facilities.
This means that co-working spaces need to find new sources of revenue from their customers. Pieter Levels suggested in an article that they can do this by providing other complementary services. Some examples are massages, food, living spaces, and tourism services. However, there’s also another way for these spaces to increase their revenue: by leveraging the output of their customers.
People who work from co-working spaces fit into two basic categories: freelancers and remote employees. Remote employees may occasionally work on side projects, but generally have enough work to fill their day. Freelancers, on the other hand, face a common challenge: they must balance their time between finding new clients and completing work for new clients. The work that a freelancer delivers requires a unique skill set and varies widely between freelancers. Some are graphic designers, some are web developers, some do voice overs. This aspect is best left to the freelancer. However, looking for clients is simply sales. A good salesperson, or sales team, can sell many different types of freelancing work. They can package it up and brand it under their name which adds value through perceived consistency and trustworthiness.
Therein lies the opportunity. Big co-working spaces should start compiling the output of their regular and skilled freelancers into a pretty package to be sold to other businesses. The co-working space could find contracts to be filled by their own participants, and take a very generous cut from the top. Obviously this would require more work for the co-working space; they would need to oversee the deliverables and ensure they meet the appropriate quality, as well as seeking out the sales. But it instantly transforms a co-working space into a de-facto freelancing agency.
Of course there are some legal hurdles to this business model. In many countries you would need to provide work permits if you are hiring tourists (even for contract work). There may be ways to skirt these issues by paying people in membership credit and/or credit towards accommodation. Regardless, in most co-working spaces there are a good number of local people working as well.
I believe we will see some unique innovation from these spaces in the future. The startup costs for this business are very low, which will attract many competitors. You only need to purchase desks, internet, and a good space. Barely any equipment is required. With high competition should come new ideas on how co-working spaces can generate more revenue from highly active customers. When executed properly, this should create a more symbiotic relationship between co-working spaces and their customers.