As an ambitious entrepreneur, you probably have this one very thing on your mind: your bottom line.
However, for many people getting into coworking, launching a space is about helping people and being part of an innovative movement just as much as it is about turning a profit.
New space owners will naturally be curious about the timeline for profitability before they deep dive into their entrepreneurial venture.
So - are coworking spaces profitable?
To give a very short answer to the question - yes, coworking spaces can be profitable!
Coworking has been around for almost twenty years now. As a result, we now have a wealth of information regarding the cost of running a coworking space and the expected time frame for turning profit.
DeskMag the holy grail of coworking resources, is a great place to find insights about this question.
According to one of their recent reports titled How Profitable Are Coworking Spaces Today? we learn that 40% of all coworking spaces are profitable, and the percentage has only risen over time.
I bet you're asking yourself: How I be in part of that 40%?
There are a few key factors to consider when focusing on achieving your bottom line.
Age of coworking space
Even though coworking has been around for almost 20 years it’s still - relatively speaking, a new market. Nearly one-third of coworking spaces are less than a year old.
That said, age plays a huge role in the profitability of a space, on average coworking spaces break even at the 13-month mark, and 50% of coworking spaces will become profitable by year 3-4.
One of the most influential factors is membership figures. In other words, the more desks you're renting out, the more your profits will go up.
This is not a huge surprise; membership fees and packages are the largest revenue stream for coworking spaces.
If you are using a coworking space management software like Spacial you can track the profitability of each membership plan.
That said, a lesser but still important revenue stream is amenities fees. In other words, you can earn extra revenue by renting out conference rooms, audio recording rooms, video call cabins, individual lockers, equipment rentals, etc.
Location is an important factor when considering profitability, because the easier your space is to access, the easier it will be to get members to join. As a result, picking a rural or suburban location may negatively impact the speed at which your business becomes profitable.
The recent success of coworking spaces has shed light on how to optimize a coworking floor plan for maximum profitability.
Coworking businesses that offer a well-rounded space are the most successful.
In short, their space offering is diversified. Part of their floor plan is devoted to private and team offices, but they also have space for only dedicated desks. These are the coworking space that performs best overall.
Moreover, offering meeting room rentals for extra revenue seems to also work, however, there is such a thing as too much.
It’s been found that unprofitable workspaces have too many meeting spaces. A coworking business rule of thumb: meeting rooms shouldn’t occupy more than one-fourth of the floor space.
Another unwritten rule is to simply diversify your offerings. Coworking spaces that offer space, services, and membership options for all types of people and workers are more likely to become profitable.
Interestingly, there’s been studies on how gender distribution in a coworking space impacts profitability.
It’s been found that an imbalance towards either female or male-centered coworking negatively impacts profitability. Simply put, coworking spaces that are gender balanced in terms of its members are most likely to become profitable.