Breaking Down the Coworking Business Model

This article is written by CoworkingResources, a publication dedicated to helping coworking space owners, operators, and professionals navigate the flexible workspace industry.

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The coworking business model has many faces, many potential revenue streams and many potential risks. 

While the industry continues to grow and take shape in the wider real estate market, operators and investors are hard-pressed to keep up with the constantly changing coworking landscape. 

Now, more than ever, it’s important to know the coworking business inside and out, and be well-acquainted with revenue models that are both financially viable and valuable to the community.

As a coworking space grows, your business model has to evolve not only with business and industry trends, but also with the real needs of the community. 

Here are a few tools and resources to help you become even more acquainted with the coworking business model.

How to set coworking revenue KPIs for your space

Every coworking space needs a good business calculator. A business calculator can:

• Help develop growth projections
• Explore various revenue scenarios with changing variables
• Provide support in the absence of a dedicated business analyst or accountant

Most startups are not expected to be profitable right away, or even after a few years. However, the path to profitability needs to be clearly mapped. It must be the bottom line of every business decision that is made. 

This Coworking Growth Calculator can be used to determine important benchmarks your space will need to reach within a 12 month period.

Scenario #1: You’ve just opened a new space and have $15,000 in membership revenue in the first month.

Let’s say you have a goal to grow to at least $100,000 just in member revenue by the end of the year with the same amount of space. You currently have 60/150 seats occupied and a turnover rate of 4 seats per month.

This tool will then calculate:

• How long it will take you to reach capacity
• What turnover rate is needed to reach this goal

You can use these numbers to then set KPIs for your business over the course of the year to keep you on track to succeed. For example:

• You are currently at 60 occupied seats
• You need to be at 400 occupied seats in 12 months
• This means, you need to increase your membership by 28 seats per month

Many coworking softwares have analytics that you can utilize that can help you to better understand key metrics that will support your decision making.

Can you grow your coworking revenue by membership alone?

It’s common for coworking operators to struggle with the temptation to crowd their space with hot desks or small private offices while trying to still maintain a comfortable environment for members. 

Remember that the amount of money you can make per member per square foot is finite if there are no plans to expand the physical space. This is why a business calculator is so important in helping you formulate realistic, achievable goals.

Once you have solidified the potential revenue you can get from memberships, you can begin to focus on any value-added services that contribute to the member experience and community culture.

Growing coworking revenue with value-added services

Memberships tend to make the bulk of revenue for coworking spaces. It is the primary component of the business model. 

However, there are plenty of add-on services that can help the business be both competitive and boost the community culture.

Consider offering additional services or partnering with nearby businesses such as:

• Gym facilities
• Daycare facilities
• Secure lockers/bike rooms
• Wellness programs and workshops (yoga/meditation room)
• Dog-friendly areas for an added fee
• Workshops (i.e. help members offer their services to the community by allowing them to host events or classes for a small fee)

While a small space may not have the room to support some of these services, demand for these add-ons could prompt a mutual partnership with nearby businesses. Building an ecosystem of services that members can enjoy throughout the entire workday is beneficial for everyone on the block.

As an added bonus, these partnerships can also bring you more clients. 

For example, your partners may hire your space to hold events that they don’t have the capacity for or recommend your day pass to new clients.

Best practices for monetizing meeting rooms in your space

The beauty of a coworking space is its versatility and flexibility. 

You can diversify your coworking business model by monetizing meeting rooms outside normal coworking memberships. This could mean: 

• Opening it up for events after work hours or on weekends
• Holding workshops
• Hosting guest speakers

These tactics, if monitored and marketed carefully, can turn into supplemental income over fixed membership charges. 

One thing to keep in mind if you decide to hold a paid workshop or host a guest speaker during work hours – monetizing areas of the space that are normally communal requires strict security enforcement. 

When a conference room is usually unlocked all day long, it can be tedious to explain to members that it is suddenly inaccessible for a private event.

The manager or operator needs complete control over who can enter the space and at what times to be able to track when the space is actually making revenue that is separate from general memberships. 

Implementing access control systems along with coworking software tools that help showcase when a room is available, are good ways to regulate these situations and maintain a clean look and feel for the office.

How to create additional revenue streams for your coworking space

Not all of the partnerships listed above are feasible for all coworking spaces, especially those just starting out. 

However, there are other additional services and discounts that you can negotiate on behalf of your members that could add value to your community and act as additional revenue streams. 

These could include: 

• Special software add-ons to memberships (ex. Adobe for designers)
• Accounting/legal services
• Virtual memberships (mail/package receipt, secretary)
• Internal communications services for businesses (Skype, Zoom, etc.)

The add-ons you may offer should be based on the types of businesses or freelancers who use the space and the specific kind of community you are trying to build. A space that targets graphic designers and tech-focused companies will benefit from design platforms that they would have to pay for no matter what. 

With an add-on service, the coworking space simply takes the hassle of managing these tasks out of the hands of the end-user.

Some services are evergreen and demanded by all kinds of customers, no matter the demographic. These include: 

• Accounting and legal services
• Mail delivery and receipt
• Printing and photocopying services
• Virtual secretaries

Services like these come down to how invested the coworking space is in the development of its individual members. If the space aspires to be a success-enablement platform, as opposed to being strictly a physical place to work, these services should be heavily considered along with the technologies needed to achieve this.

Charging for add-on services in your coworking space

When thinking through how you can charge for these additional services, there are a number of options you could consider, for example:

• Bundle I – $30 per hour including access to the gym
• Bundle II – $50 per hour including tea, access to the gym, and photocopying services
• Bundle III – $200 for 6-hour day pass, including tea/coffee, access to the gym, and photocopying services

Here’s where pricing these services can get tricky. 

A coworking space is meant to be a simple and holistic solution to the complex process of renting a traditional office space. You don’t want to offer so many add-ons that resources are stretched and your members get confused about what the space is really offering. 

Try to strike an attractive balance in your membership tiers as well as offer appealing one-time services to those who are exploring the space for shorter time periods.

The key to maximizing revenue is by providing value-added services that give people reasons to choose your coworking space over other available options.

Define your revenue growth model with specific tools that can help you identify costs that can be cut (or at least streamlined) and pinpoint the technologies and services that are worth investing in for the long run.

Editor’s note: this article was originally published October 29, 2019. It was updated for accuracy and relevancy April 8, 2022.