Before we answer this question, let’s first discuss how coworking spaces typically make money.
Coworking space revenues can come in many forms. The largest revenue contributor to coworking spaces franchises and businesses are the membership fees. There are various levels of membership fees that cater to working professionals and SMEs to larger Fortune 500 companies that need to house senior management in prestigious locations. It can also range from private offices, from large to small, to open space memberships. According to DeskMag, “Coworking spaces earn the majority of their revenue, unsurprisingly, by renting out desks (61%).”
Some clients may prefer a pay-as-you-go fee structure, and offering on-demand use is an effective way for coworking spaces to cater to a different market segment that would normally not be interested in the usual membership structure.
While membership fees account for a majority of the shared workspace revenue, there are plenty of opportunities to upsell additional services and products to members. Some examples include:
Of course, there are startup costs associated with opening a coworking space business. The primary costs include:
If done correctly, coworking spaces can be quite profitable and the industry profit before taxes and depreciation can average anywhere from 10 percent to 50 percent. The payback period may be as short as 2 – 3 years. The driver of profitability depends on the brand’s value, its location, products and services that have competitive pricing, office design and features that are relevant to the target market, an effective sales and marketing, extensive staff training to help ensure operational and cost efficiencies, and the support of the parent company.
In many cases, coworking spaces are offered as franchises, and the franchisor’s proven and successful business model is licensed to qualified franchisees. Some of the best coworking spaces franchises include companies like International Work Place (IWG) – Regus, Signature by Regus, SPACES, HQ, No. 18, OpenOffice, BASEPOINT. In fact, IWG and its various brands have over 3,100 locations around the world, and members of each location may freely visit other locations within the network.
Author: Sean T. Ngo is the CEO and Co-Founder of one of Asia’s leading franchise consultancy (franchise broker – brokerage), VF Franchise Consulting. He is Vietnamese American and has been living in Vietnam for over 16 years. You can reach him at [email protected] or [email protected].