The times are unprecedented. Almost, none of the financial plans has accommodated for such a rapid change. With the ongoing lockdown, the office sector has been hit hardest, with people asked to work remotely.
TCS has recently announced their target of making 75% WFH (Work from Home) by 2025. In Hyderabad & a few other cities, IT companies are being allowed to operate at 30% capacity. With lockdown rules changing every week, how can co-working spaces accommodate to these changes?
At Zodhya, we have evaluated a few strategies that can put your business in a better position.
As you know, there are two ways to look at money in business:
One is Cash Outflows: Which majorly includes rent, energy bills, salaries & maintenance.
The other is Cash Inflows: Revenues & Investments.
Let’s discuss on Cash Outflows first:
How do you measure Cash Outflow of your space? Are there any metrics you follow?
Some of the renowned companies have started using a metric called OCPS (Operating costs per seat). It is the total operating costs you spend per month on rent, energy bills & maintenance divided by the total number of seats occupied.
Let’s say you have a capacity of 200 seats(In general, such spaces charge between INR 8k -15k per seat per month). Also, you incur INR 4.5 lacs p.m. on rent, INR 2.5 lacs p.m. on energy bills and INR 1 lac p.m. for maintenance & miscellaneous. So, the OCPS = INR 8lacs/ 200 seats = INR4000 per seat.
Now post the pandemic, your existing occupancy has been down by say 90 seats. So, now the OCPS = INR 8lacs/ 90 seats = INR8900 (approx.)
The OCPS increased by 122.5%. So, what can we do?
Rent: Renegotiate with the landlord for a decrease in rent by 20%, at least for the next 6 months. The other way method could be paying a certain % based on the seat occupancy
Energy bills: With the spaces non-operating for the past 2 months, the bills will be lower. But it won’t remain the same if at least 30% of your seats start working. In such a scenario, you can implement software which can monitor/ track your usage. Also, you can put a step further to reduce your bills by 30% by using products like Zodhya which don’t even require an upfront investment.
With these steps implemented, let us recalculate the OCPS again.
Rent decreased by 20% = INR3.6 lacs
Energy bill decreased by 30% = INR1.75 lacs
Maintenance costs more or less remain the same = INR1 lac
Total Operating costs= INR6.35 lacs
OCPS = INR6.35 lacs/ 90 seats = INR7050 (approx.)
Have we addressed the problem completely? Not yet. Can we bring OCPS down further to INR5000, by improving seats to 125?
There is a common notion being voiced by industry experts that co-working spaces will be on-demand post lockdown. Most of the traditional spaces are tightly spaced with not more than 4–5 ft separation between 2 seats. This is where co-working spaces can benefit from, as they usually spaced above 6 ft.
Can you onboard some large enterprises as your clientele? If yes, the payment will be consistent & in bulk.
But here’s is the catch. You cannot ignore startups & freelancers. With pandemic bringing drastic changes, many people who lost their jobs have started foraying into new ventures.
These may not be your immediate clientele. But you can stay relevant to them so that in the next 6 months, they might occupy a few seats at your space.
One way to stay relevant is by sponsoring and holding webinars. This comes cheap with a good exposure if you can bring in the right guests.
The second way would be integrating a third-party software through which you can record attendance, guests entering & leaving the space and even communicate with your clients working from home.
The third way is partnering with MNCs: Scout start-ups relevant to their industries and which are bringing the disruption to their sectors. A few incubators/ accelerators have started exploiting this advantage, but there is still a lot to tap.
In the end, we would suggest you be optimistic. Try out different strategies which you feel might work, on a pilot basis. If it comes out good, you can go big on that. Stay lean on costs but that doesn’t mean inaction.
We always take pride in putting out the knowledge we have to you. There might be some important considerations which we missed out on but we expect a proper knowledge is gained through discussions. Please let us know your thoughts in the comments below.