I’ve had the privilege to help start three coworking spaces in Central Oregon (Bend, Redmond, and Sisters) and it makes sense to reflect on what has worked, in hopes that these lessons learned will help someone else to start a coworking space in their town.
What is coworking?
Individuals and teams rent offices or desks in a shared work area, promoting collaboration and social interaction between employees of different companies, and often different industries. They generally optimize for open space and shared amenities.
So you’re looking to start a coworking space?
Great idea. Here are some guidelines that should help, based on my experience:
1. Find a building with an open-minded owner
- You’ll need to partner with a commercial property owner who is interested in supporting your cause, because this generally is not a typical lease arrangement. They will need to take some financial risk, but the upside is that the space will draw attention to their building and you may be able to fill up their space faster than other comparable commercial office space due to the trend of many professionals preferring a short-term lease in a collaborative workspace vs. a long term commitment.
- If possible, find a space with a bull-pen feeling, with offices surrounding the shared desks. The key is to avoid hallways, as they make it harder for people to interact. The key to a good coworking space is the serendipitous interaction between people, which is significantly greater when everyone is in one ‘space’. Even cube walls create barriers that prevent people from interacting, so we’ve seen far more engagement after taking them down and going with an open desk layout.
- Avoid keys if possible – go with a keyless system of some sort, or electronic keycards if you can. Keys are expensive and a pain in the ass to manage.
- You should try to have phone-rooms (small room that can fit 1 to 3 people), otherwise the conference room gets tied up with one person sitting on a phone call. We see that a lot. Our new space has 5 phone rooms and 4 conference rooms.
2. Negotiate the terms of your occupancy
- There are two approaches to occupancy that we have used: you could lease the property and sub-lease to tenants, thereby taking the financial risk and also benefiting from any upside profit. The other approach is to let the tenants lease directly with the building owner, and you facilitate the management of the space. I recommend the latter approach until you’ve proven that there’s a business model that could sustain a lease arrangement.
- Assuming you’re just managing the space and not subleasing directly to tenants, you should get a 10% kickback as a management fee – the building owner would cut you a check every month for 10% of the income generated. This covers the cost of supplies, such as printer costs, whiteboard markers, water, beer, etc. Note that this assumes you’re managing the space as a volunteer. You might also ask for a free desk or office, or maybe you get a free office and only 5% kickback in cash. That part is up to you, but it’s unlikely that you’ll be able to work out a scenario that allows you to take a ‘real’ management fee ($2k+/mo) unless you take on a formal lease. That’s where you would get the profit margins to afford a management stipend.
- It has been useful to be a non-profit since many government organizations are more reluctant to provide funding and support to for-profit entities. I don’t think that the non-profit status is required for fundraising, however. Most organizations that will contribute to your cause are not doing it for the tax benefits, so don’t bother going through all the extra trouble to establish a (c)3.
- All of our funding has come from private businesses. Our city has been generally unsupportive, which is a bummer.
3. Attract tenants and create culture
- Craigslist is a good way to advertise the space, and we’ve found that the best approach is to focus on a specific group of professionals, such as technology professionals, so that there’s a common thread between the tenants. That helps with creating culture, which is what makes our space better than other coworking spaces in town.
- We try to offer benefits to the tech community, such as free meeting space for any tech-related meetups, free beer, free pizza (paid for with our 5% cut) and we find that a tip jar will put us ahead on most evenings, so it’s not a loss for us. Beer is donated by a sponsor brewery.
- It generally takes a year to fill a space.
4. Have a consistent, reliable manager
- Coworking spaces don’t manage themselves. There are always issues to deal with, such as tenants locked out of offices, empty toner cartridges, empty kegs, dog piss on the floor, fire alarms, loss of network connectivity, bathroom issues, people issues, and other fun time-wasting problems. It’s all part of the deal, and whoever is tasked with dealing with them on a daily basis should get a free desk and a serious pat on the back.
- I’ve recently started using Nexudus to manage our space – it’s extremely helpful because all of the money is handled via credit card and I can have everyone sign leases electronically. Note that this may only be useful if you were to sub-lease, otherwise you probably won’t collect the money. Or maybe you could still set it up using the owner’s bank account and make them pay for the software – it would be well worth it. The software helps you keep tabs on your community and automates all the billing, which saves a lot of time and headache.
- This will take 4-6 hours of your time per week, so be prepared.
If you have questions, feel free to ask them in the comments section and I’ll do my best to help you out!
He loves to write code, is passionate about design, and he's an analytics geek. He's helped organize and pitched at the Bend Venture Conference, he's a mentor and alumni of the FoundersPad business accelerator program, and his last startup (The Social Business) was acquired in 2014 by Innovation Garden in New York.
You can reach James by email at [email protected].
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