My morbid curiosity with Coworking Space Closings

[Alex Hillman]

I'm sure I'm not the only person on this group who has google alerts set up for the words "coworking" and, sigh, "co-working".

Between the number of new space announcements that show up in those alerts, Deskmag's reporting on coworking growth trends, and many amazing success stories that we've all been privy to seeing unfold, there's no doubt in any of our minds that coworking isn't disappearing any time soon.

But speckled in the success stories are sadder ones. Coworking spaces who struggled and failed. 

Another one hit my Google Reader tonight, in St Louis. Hence this email and this project being spurred right now. 

On one hand, the business of coworking is susceptible to all of the rules of starting a new business - there's going to be a failure rate. Not every business is meant to be. The rate at which I hear about closings is increasing, but it's hard to tell if it's growing in or out of proportion of openings.

Between coworking spaces that struggle to keep the lights on and coworking spaces that have closed (for good or bad reasons), there's patterns in closures that I personally find very interesting, far more interesting in "new hotness variations" on the coworking models.

The pattern-watcher that I am, I see some things, but I need more information to start building a hypothesis that can be proven or disproven.

I can't do this alone. If you've started and closed a coworking space, been a member of a coworking space that struggled and failed, or are simply a passionate observer who saw an unfortunate closing, please take a few minutes to help fill out this survey:

https://indyhall.wufoo.com/forms/coworking-space-closings/

This information is personal and potentially sensitive. I don't expect all of the replies to include names or all of the details. Many people on this list have shared their personal stories before, and we should all be thankful for that. 

The best solution I could come up with is to choose how anonymous you would like to be. 

1) The name and email address fields are optional and will ONLY be used to reconnect with the submitter for more information.

2) The final required question asks for your consent to share the data you enter, beside the optional name/email fields which are anonymous by default. In case you have an alternate preference, you can specify it in "other".

There's researchers on the list, so if there's other fields that you think I should include (or better ways to collect the same data), I'm all ears.

Even if you're not aware of closings you can share about, I need help getting the word out about this project. I'm hoping for some assistance from Steve King & Team Deskmag since I know this stuff is already on their radar. If there's anyone else already studying this (all of the quiet grad students on this list, I'm looking at you), I'd love to share work reciprocally. 

My goal is to organize this information and share some hypothesis that we all study together and share back again, overall helping the ecosystem not just learn from successes but also avoid repeating historic failure patterns.

My hope is to be buried under a mountain of responses and have to recruit some of you to help me dig myself out :)

Thanks y'all.

-Alex

-- 

/ah

indyhall.org

coworking in philadelphia

build amazing communities: masterclass.indyhall.org

[Chris DiFonzo]

Alex -

Props for starting this thread. I think the information will be valuable and hopefully help some current owner/operators succeed in spite of adversity.

I think you will get more responses, and perhaps salvage more existing cases, if you include owners/spaces that fear or outright anticipate failure in the next 12 months. 

Btw, If you like we will tweet survey tomorrow.

Best,

Chris

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[Alex Hillman]

Thanks Chris. Great idea on opening up the closure dates to the future. I don't expect to close the form so we can continue to collect data over time.

I've removed the "required" part of the date fields to allow for more flexible entry and updated the intro. 

More suggestions and sharing welcome :)

-Alex

-- 

/ah

indyhall.org

coworking in philadelphia

build amazing communities: masterclass.indyhall.org

[rachel young]

Hi,

Thanks for starting this, Alex. I'm curious about the results too.

I suggest adding mandatory fields for City, Province/State, and Country so that you can easily search and sort by region. The two entries I just sent were from Toronto, ON Canada.

Also you copied the notes ("It doesn't have to be a eulogy...") from the second last question to the last question. Just a formatting thing.

r.

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[Alex Hillman]

Excellent suggestion on location data, and the little formatting fix. On their way. 

I've got a dozen or so submissions overnight. Keep 'em coming people. 

--
/ah
indyhall.org
coworking in philadelphia

[Farhan Abbasi]

Hi Alex,

Glad you did this survey in 2012. Any chance you still have the results?

Farhan

[Zach Wade]

I also would be very interested in the results.  Thank you

[Alex Hillman]

Turns out that surveys are terrible for collecting this kind of information :) I’ve had to do a lot of more hands on work to find real, valuable information. 

I’ve used some of my findings to help fuel other articles, like this one in the Philadelphia Biz Journal (I pubilished the full interview to suppliment the piece): http://dangerouslyawesome.com/2014/07/behind-the-scenes-of-a-front-page-interview-coworking-any-old-space-wont-do/

The issue is that demand for space is a red herring for success in coworking, and worse, it’s a magnet for opportunism. 

Take a look at every corner of the “sharing economy”…and you’ll find the same thing. Utopian sharing quickly devolves into mass exodus. There’s a bigger problem in doing the research, though…and that’s collecting information from founders/leaders. 

Founders and leaders of failed spaces (generally) won’t talk, and when they do, it’s platitudes or outright lies. Because let’s be honest, nobody likes facing their failures. There are, of course, a couple of exceptions and they’ve written about their experiences here on the Google Group.

The best sources of insight have been former members and former staff. The problem is that THEY generally don’t respond well to being approached out of the blue (I’ve learned first hand). 

We see that coworking spaces are opening at accelerating rates, but what’s not as obvious is that the vast majority of them are dealing with high turnover and/or burn rates that make their business model completely unsustainable. Because of the nature of these businesses, it’s very hard to see the effects of these problems until “reality” sets in about 2 years after the start. 

There’s clues before then (a mix of highly visible ones, and others that are much more subtle), but any coworking space younger than 2 years old really should be focusing on getting GREAT at one thing: knowing their members. 

We’re going to see a lot more closings in the near future. I’d say that most coworking spaces open today fall into one of four categories:

1- they’re generally unsustainable, and will die within 2 years.

2 - they’re generally unsustainable, but somebody is pumping cash into them to extend the 2 year life expectancy. Some will right the ship, but many will not before the cash dries up.

3 - they’re growing sustainably

4 - they’re growing unsustainably 

I’d say that 80%+ of coworking spaces I encounter fall into unsustainable categories 1 and 2. ~18% (maybe a bit less)  are safely in category 3, and less than 2% in category 4. 

-Alex

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[Steve King]

We haven't looked at coworking facility failure rates lately.  When we last looked, back in 2010, the failure rate seemed to be around 30%-40% within 2-3 years of opening. This is higher than the average failure rate for small businesses, but not by much.  

I'll hunt around a bit and see if we can easily update these numbers.

 

 

[M.E. Ralph]

I don't know if my information would be of use to you but I do thank you for starting this topic. I opened a "business center"/internet cafe' back in November of 2012. I had previously worked in retail as an operations manager and saw a need for this through many inquiries received at my work. Most of us know that internet cafe's were pretty much antiquity by the year 2000 but in the city I lived in, it was something new even in 2012. In October of 2013, I decided to transition into a coworking space to be part of the times. Here it is a year later and I'm still struggling. Despite my attempts to get people into my space by sponsoring meet up space, host a variety of classes, etc., it seems people here don't get the concept. In the couple of years I've been running this business, I've come across only four people who know what "coworking" is! I've had to "flavor" a lot of my social media posts with educational bits: what is coworking? how coworking works, etc. When I explain the concept,  the light bulb goes off in their heads and they get it. It seems they're just not familiar with the word "coworking". I'm curious to know if anyone else has run into this dilemma.

[Jerome Chang]

I operated for nearly 3-4 years before more than 20% of the people knew the concept, “coworking”.

Go back to your business plan/model, and communicate the essence of that. If it can’t be explained so simply in 1-2 sentences or that others can reiterate for you, then it isn’t simple and compelling enough.

Also, have you tried to introducing member or visitors to others? Have you “brokered” - so to speak - any collaborative opportunities? Pay it forward and others will appreciate your efforts…and your space.

JEROME CHANG

WEST: Santa Monica
1450 2nd Street (@Broadway) | Santa Monica CA 90401 
ph: (310) 526-2255 

CENTRAL: Mid-Wilshire
5405 Wilshire Blvd (2 blocks west of La Brea) | Los Angeles CA 90036 
ph: (323) 330-9505

EAST: Downtown
529 S. Broadway, Suite 4000 (@Pershing Square) | Los Angeles CA 90013 
ph: (213) 550-2235

[Stacy Kessler]

Hey Alex and Others,

Long time lurker, first time poster :) I started Platform 53, a coworking space in Cincinnati, OH/Northern Kentucky this past September, so still really fresh, but have been doing research and pop-up coworking events around the region since 2012, hence the long-time lurking... 

I just ran across this conversation thread and found it fascinating. I know most of the collection was done a few years ago and it didn't sound like it was as helpful as hoped, but sounds like there's still a lot of interest around it. I think understanding this topic is extremely important. I'm a market researcher by trade (both qual and quant), so if there's a passion for picking back up the effort or digging into other coworking questions, let me know--I'd be happy to help and ready to start being more active in the broader coworking community.

Best,

Stacy Kessler

Co-Founder & Chief Visionary Officer

Platform 53

PS. Thanks for all you do for the coworking community, Alex. Love your dedication to having open conversations about coworking through this Google Group and elsewhere. Really refreshing to be a part of a collaborative industry after coming from the cut-throat corporate world.

[Alex Hillman]

Hey Stacey, welcome to the discussion! :)

Hit me up off list, I'll catch you up on what I've found so far and some leads that might be worth following. I agree that there's a ton of value in better understanding the patterns in the mistakes made and problems encountered.

-Alex

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The #1 mistake in community building is doing it by yourself.

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[Shailesh Deshpande]

Hi Alex, Stacy & Others,

Stumbled upon this discussion thread while researching coworking. I recently started a coworking space called 'Indieloft' in Nagpur (India) and looking to promote it locally and build a strong community.

It'd be really interesting to understand why some of the other coworking spaces before us failed while we think we can make a go of it. I can already see how a coworking space might struggle if it doesn't have a core group of startups/entrepreneurs/freelancers who are engaging and collaborating on a regular basis. What were some of the other reasons?

Really appreciate what you guys are doing to make this phenomenon successful globally.

Cheers,

Shailesh

/shail...@gmail.com//@indieloft//www.facebook.com/indieloft//

[Alex Hillman]

Here’s an incomplete and in-no-particular order of things that I’ve seen kill coworking spaces. Many of them aren’t unique to coworking, but often take unique or different “forms” in the context of coworking. 

- Membership turnover 

- Hiring mistakes 

- Leadership burnout 

- Top-heavy membership

- Losing a large ‘anchor’ member company

- Overspending 

- Investor pressure

- Poor partnerships

- Over-reliance on sponsors 

- Identity crisis

- Mismatched audience 

- Landlord disputes

- Rent increases

I know for a fact there are others that I’m not thinking of off the top of my head!

-Alex

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The #1 mistake in community building is doing it by yourself.

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[Tom Brandt]

Hi Alex,

This all makes sense. But I am not quite sure what is meant by "Top-heavy membership". Can you elaborate?

twb
member, Workantile

@twbrandt

[Alex Hillman]

Too many full time members, not enough flex (or some variation on flex).

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[Joel Bennett- Veel Hoeden]

Good list Alex.  I would add poor/non-existent succession plan for leadership as well. Have seen a few spaces in our area that start to falter when the original founder/leader decides to step away without someone of equal passion ready to step in to carry the baton.

Joel Bennett

Veel Hoeden Coworking

[Alex Hillman]

Yeah I agree Joel. I counted that under "leadership burnout", but it definitely should be a separate bullet on the list. 

It's something I see every day in smaller ways too. The only thing worse than failure is being trapped by your own success :)

-Alex

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The #1 mistake in community building is doing it by yourself.

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[Elliott Williams]

Sorry for being late in this conversation. I just wanted to add a few types/subtypes:

2.1 unsustainable but with unlimited funds (usually connected with some sort of govt initiative).

5 - coworking spaces as feeders for real estate. These are spaces that will never be sustainable, but the owner of the building doesn't care because the owner is just trying to get these companies to grow to get an "actual" office.

[Alex Hillman]

Elliot - 

Both of those scenarios – while they sound troubling in lots of ways – don’t strike me as the actual reason for the closure of a space. Symptoms, but not causes, ya know?

-Alex 

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The #1 mistake in community building is doing it by yourself.

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[Caroline McLaren]

Fascinating concept Alex.  I can't wait to see the results.

The Fetch has been keeping track of coworking spaces (alive and passed on) in Australia here: http://blog.thefetch.com/coworking-spaces/coworking-in-australia/

Corner Table will also be closing in March (http://cornertable.com.au/), though more due to founder's personal decision than anything to do with the actual space.

[Anne Kirby]

Thank you for this conversation! I was just wondering about this last night. 

[Elliott Williams]

true. sorry i just meant those were different types of spaces that i've seen that could add to your list, not necessarily reasons for closing

[Marius Amado-Alves]

"Too many full time members, not enough flex (or some variation on flex)."

Er... many fulltimers is a *problem*?!?!?

[jonathan...@gmail.com]

Many full-time members with permanent desks is absolutely a problem.

We limit to a maximum of 40% of desks for full-timers. If you go too far above that there are at least three common problems:

1) Part-time / flexible members don't feel like they have a significant sense of ownership of the space. They are more inclined to feel like second class citizens using spare desks. They then don't participate in the community as much and that magnifies all sorts of other problems.

2) Revenue becomes less predictable. I'd rather have 100 people paying $100 per month than 35 people paying $300. 

3) The space becomes less flexible. It's much more difficult moving a permanent member's desk for a weekend or evening community activity.

Hope that helps,

Jon

—
Jonathan Markwell

Follow my adventures in space, time and code: http://jot.is/sustainablyindy

The Skiff: Brighton Coworking Community http://jot.is/sharing-space
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On Fri, Jan 30, 2015 at 10:05 AM, Marius Amado-Alves <amado...@gmail.com> wrote:

"Too many full time members, not enough flex (or some variation on flex)."

Er... many fulltimers is a *problem*?!?!?

[rachel young]

I'll add another item to Jonathan\s list:

4 - Less diversity. 100 members with a flex or part time membership is 3x as many different occupations, passions, life experiences, and hobbies than 35 members with a full time membership, so the mix of people that members interact with will be much less with full time people packed in, but you can cap the number of full time members and ensure there are more part time or flex to make that diversity even more apparent and effective.

We have three membership levels: lite, part time, and full time. I always aim for a mix of approximately 30%, 50%, 20%, respectively, with no cap on daypass users or non-space usage memberships (virtual/non-space usage network membership only).

r.

____________________
rachel young
rac...@camaraderie.ca

We're located at 2241 Dundas St W, 3rd floor

(between Bloor and Roncesvalles)

Chat with me via 10KCoffees

Find us online:

Website/blog and Newsletter, Twitter, 

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We're a proud member of CoworkingToronto, 

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[Jerome Chang]

I think the below typically applies to smaller coworking spaces.

Well, let me rephrase:

the below is required for smaller spaces

larger spaces does not need to follow the below rule; BUT, should they, yes, I agree that the below would be ideal.

That said, from my experience of being in the trenches for now, 7 years, I can comfortably say that recruiting full-timers is MUCH easier than part-timers.

Part-timers have to me, seem only part-ly motivated to join, whether due to

(1) they don’t want to spend $;

(2) they’re so attached with their status quo of their home office;

(3) their interest is so 50/50 fickle, any little thing can wane their interest.

Also, if you were to spend, say, 1 hour per new part-timer member, between the tour, follow-up(s), onboarding…to yield $100, and your goal is 10 members, then you’ll spend 10 hours for those “sales”.

If you were to spend, say, the same 1 hour per new full-timer to yield $300, then you’d only need to spend a little over 3 hours for those “sales”.

The spread worsens if you seek $10k, or $20k. The very same many DIY/automated billing and other admin procedures you’ve focused to minimize, is being offset by exponentially more labor time to sell, or “cost of sales”.

Is that the reason why exec suites probably only ‘rent’ full-time office spaces? Yes. Same efforts that yield way more $ revenue.

Is there a better mix between the below strategy and exec suites? Yes. And that will depend upon how you operate, your demographics, your size space, etc.

JEROME CHANG

WEST: Santa Monica
1450 2nd Street (@Broadway) | Santa Monica CA 90401 
ph: (310) 526-2255 

CENTRAL: Mid-Wilshire
5405 Wilshire Blvd (2 blocks west of La Brea) | Los Angeles CA 90036 
ph: (323) 330-9505

EAST: Downtown
529 S. Broadway, Suite 4000 (@Pershing Square) | Los Angeles CA 90013 
ph: (213) 550-2235

[Jacob Sayles]

It's all about balance... and that's our role.  The easy part is to make sure the toilets are clean and the credit cards are run.  Keeping things in balance is the tricky (and fun) part.  

[Melissa Mesku]

Alex, 

Is there such a thing as a coworking Pulitzer? 

Let me know if New Worker Magazine -- or lil' ol' me -- can be of help on this particular topic. 

Melissa 

Melissa Mesku

Founding editor, New Worker Magazine

the magazine for and by people who cowork

newworker.co

[Thilo Utke]

Just wanted to share this post here from long time coworking space: http://thinkhousecollective.com/farewell-thinkhouse-collective

Cheers
Thilo

--

more time for your members: http://cobot.me

[Andy Soell]

I think there's a great deal of truth here, and I'm really curious about other space's approaches to different membership levels (we're getting way off topic here, but whatever). I think Jerome is absolutely right that it's much harder to keep a part timer on board, probably due to their lack of commitment and the fact that they just by nature of their membership aren't around very much. At the same time, I also completely believe that a good community is a diverse community, and that includes an even distribution of people across different membership levels.

Looking at our own membership levels (we have full time, 3 days/week, 1 day/week, 1 day/month), far and away the highest churn rates are in that 1 day/week level. 40% of all cancelations we've had are from that level. I'm not sure what—if anything—is to be done about it, but I'm curious what people have found useful in keeping people coming back who aren't coming every day. I like offering once-a-week memberships, because I really think everyone needs to get out of the house at least once a week, but it seems like that's the level at which people eventually forget about the coworking space and just drop off the face of the earth.

[Alex Hillman]

> Looking at our own membership levels (we have full time, 3 days/week, 1 day/week, 1 day/month), far and away the highest churn rates are in that 1 day/week level. 40% of all cancelations we’ve had are from that level. 

1 day a week churns more than 1 day a month. That’s a pretty HUGE clue about what the problem is.

-Alex

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The #1 mistake in community building is doing it by yourself.

Join the list: http://coworkingweekly.com

Listen to the podcast: http://listen.coworkingweekly.com

[Glen Ferguson]

> Looking at our own membership levels (we have full time, 3 days/week, 1 day/week, 1 day/month), far and away the highest churn rates are in that 1 day/week level. 40% of all cancelations we’ve had are from that level. 
1 day a week churns more than 1 day a month. That’s a pretty HUGE clue about what the problem is.

I'm curious what percentage of your membership is on that 1 day/week plan. When we opened, we didn't have that level, but people wanted to join at that level, so we created it. We've consistently had between 40-50% of members on our 5 days/month level (it's easier to bill as days per month, and more flexible for the member). I'd expect the percentage of churn to reflect the percentage of membership, but now you're giving me homework to do this weekend and further break down my churn stats by membership tier to see if that holds true.

---

Glen Ferguson

Cowork Frederick

122 E Patrick St

Frederick, MD 21701-5630

+1 (301) 732-5165

www.coworkfrederick.com

@CoworkFrederick

[Andy Soell]

Our membership breakdown is pretty symmetrical:

Full Time: 30%
3 day/week: 20%
1 day/week: 20%
1 day/month: 30%

The skew comes in when you look at cancellations. Of our history of cancellations, they’ve come from:

Full Time: 15%
3 day/week: 5%
1 day/week: 40%
1 day/month: 40%

It’s worth noting that our overall churn rate is actually decent: 5% month-over-month average last year. But the pattern is still there: Weekly members stop coming around and either a) cancel or b) downgrade to monthly memberships, stick around for a while, then cancel. I’m curious if anybody else has seen this and what they’ve done to curtail it.



-----Original Message-----
From: Glen Ferguson <gl...@coworkfrederick.com>
Reply: cowo...@googlegroups.com <cowo...@googlegroups.com>>
Date: February 6, 2015 at 6:23:09 PM
To: cowo...@googlegroups.com <cowo...@googlegroups.com>>
Subject:  Re: [Coworking] My morbid curiosity with Coworking Space Closings

> >
> > *> Looking at our own membership levels (we have full time, 3 days/week, 1

> > day/week, 1 day/month), far and away the highest churn rates are in that 1

> > day/week level. 40% of all cancelations we’ve had are from that level. *
> > 1 day a week churns *more* than 1 day a month. That’s a pretty HUGE clue

> > about what the problem is.
>
>
> I'm curious what percentage of your membership is on that 1 day/week plan.
> When we opened, we didn't have that level, but people wanted to join at
> that level, so we created it. We've consistently had between 40-50% of
> members on our 5 days/month level (it's easier to bill as days per month,
> and more flexible for the member). I'd expect the percentage of churn to
> reflect the percentage of membership, but now you're giving me homework to
> do this weekend and further break down my churn stats by membership tier to
> see if that holds true.
>
> ---
> Glen Ferguson
> Cowork Frederick
> 122 E Patrick St
> Frederick, MD 21701-5630
> +1 (301) 732-5165
> www.coworkfrederick.com
> @CoworkFrederick
>
> On Fri, Feb 6, 2015 at 4:58 PM, Alex Hillman

> wrote:
>
> > *> Looking at our own membership levels (we have full time, 3 days/week, 1

> > day/week, 1 day/month), far and away the highest churn rates are in that 1

> > day/week level. 40% of all cancelations we’ve had are from that level. *
> >
> > 1 day a week churns *more* than 1 day a month. That’s a pretty HUGE clue

> > about what the problem is.
> >
> > -Alex
> >
> > ------------------

> > *The #1 mistake in community building is doing it by yourself.*

> >>> *JEROME CHANG*
> >>>
> >>> *WEST: Santa Monica*

> >>> 1450 2nd Street (@Broadway) | Santa Monica CA 90401
> >>> ph: (310) 526-2255
> >>>

> >>> *CENTRAL: Mid-Wilshire*

> >>> 5405 Wilshire Blvd (2 blocks west of La Brea) | Los Angeles CA 90036
> >>> ph: (323) 330-9505
> >>>

> >>> *EAST: Downtown*

> >>> 529 S. Broadway, Suite 4000 (@Pershing Square) | Los Angeles CA 90013
> >>> ph: (213) 550-2235
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>> On Jan 30, 2015, at 6:11 AM, rachel young wrote:
> >>>
> >>> I'll add another item to Jonathan\s list:
> >>>
> >>> 4 - Less diversity. 100 members with a flex or part time membership is
> >>> 3x as many different occupations, passions, life experiences, and hobbies
> >>> than 35 members with a full time membership, so the mix of people that
> >>> members interact with will be much less with full time people packed in,
> >>> but you can cap the number of full time members and ensure there are more
> >>> part time or flex to make that diversity even more apparent and effective.
> >>>
> >>> We have three membership levels: lite, part time, and full time. I
> >>> always aim for a mix of approximately 30%, 50%, 20%, respectively, with no
> >>> cap on daypass users or non-space usage memberships (virtual/non-space
> >>> usage network membership only).
> >>> r.
> >>>
> >>>
> >>>
> >>>

> >>> *____________________rachel young*rac...@camaraderie.ca
> >>>
> >>> *We're located at 2241 Dundas St W, 3rd floor*
> >>> *(between Bloor and Roncesvalles)*
> >>>
> >>> *Chat with me *via 10KCoffees
> >>>
> >>>
> >>> *Find us online:*
> >>> Website/blog
> >>>
> >>> and Newsletter
> >>>
> >>> , Twitter
> >>>
> >>> ,
> >>> Facebook
> >>>
> >>> , Google+
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[Alex Hillman]

About 2-3 years ago, we started noticing an entirely new cancellation reason showing up when people left Indy Hall. 

For 5+ years, the majority of the people who left did so because they were moving away, or because they took a job. Of course people left because it wasn’t the right fit for them, too, but the vast majority of the people who found us stayed. 

Then, people started saying something we hadn’t heard before: “I’m not using it enough”.

Which sounds pretty similar to what I’m hearing from you guys. 

So….what changed so suddenly from the first 5 years to the most recent few?

I had to talk to a lot of members, with a lot of focus on relatively new members as well as the folks who joined and left, but two VERY consistent patterns showed up:

1 - Prior to this new cancellation reason showing up, most people who joined found out about Indy Hall first – usually through our existing community members who told them “you’ve gotta join, this has helped me in so many ways..." – and then once they got here they discovered that it was this thing called coworking. 

After the shift, we had more people first seeking this thing called “coworking", then finding us as an option, and choosing us. They’d heard about coworking in the newspapers, etc, and heard it was a cheap and flexible way to rent a desk. 

Those two categories of people had very different expectations of what the value of Indy Hall was.

The problem is that while it might be easier to recruit this kind of person as a full time member:

a) more full time members means that the culture starts to feel a LOT like a regular old office, which people who join are actively avoiding. (see this comment for just one example: http://www.reddit.com/r/CoWorking/comments/2udb90/why_did_you_leave_reasons_you_stopped_going_to_a/co7rv3k)

 

b) from a purely financial perspective, a full time desk can only generate so much membership revenue. On average, a flex desk represents at LEAST 4x the revenue potential as a single full time desk ...in some coworking spaces I’ve worked with, that ratio is even higher.

c) This kind of full time member (the one who comes in specifically to rent their own desk among other desks) tend to be more territorial than flex members. They contribute far less, and are inconvenienced by the smallest things. They’re just generally bad citizens. 

Once I realized that, we were able to tailor our tours and communication to the desk rental folks to help them see that yeah, there’s a place to work but the desk is barely scratching the surface of what they can get from their membership. 

We didn’t “correct” them, so much as showed them how to be better citizens, reminding them that yeah…this place was big but the way it ran most smoothly is when they were an active part of the community. 

Which actually led me to realize something a bit more subtle: 

2 - Indy Hall had gotten BIG. When we were just a couple thousand square feet, it was easy to tell people that our community was the primary “feature”, not the workspace. But 5 years later, with multiple floors and a physically massive presence, I think that people had a harder time believing us when we said the same thing. And I don’t blame them!

So we made some focused changes:

We focused on new member education, especially during our tours and new member onboarding, to really helping people make smarter decisions about choosing a membership with us. (note: we’re still working on this today. we never stop working on this)

We put more effort into developing our Tummling practice. 

We rebalanced our full time membership, which had grown to nearly 40% of our total membership, back to ~20%.

We got even more intentional with our events, making sure that they weren’t simply “activities” but things that helped members build relationships. 

We did a lot of work with our online community, turning it into an equally vibrant gathering place as our workspace so that the members who weren’t physically in the room could still get value. 

Cuz here’s the mistake you make by letting yourself turn into a lazy landlord: you bind your business to your square footage and the number of desks you can fit. The only way to get past that ceiling is to add more space. And worse, you continue to reinforce the idea that the only way for people to get value from their coworking membership is to use a desk. 

If the only time your members derive value is when they park a computer at a desk in your space, I have bad news for you: you’re just renting desks. 

For the results of our work, some cold hard figures:

- Our overall revenue grew in 2014 over 2013 by 49%.

- Over 25% of our revenue comes from our Basic and Community memberships.

- Those memberships are growing the fastest. Community membership, which includes ZERO coworking days, grew by nearly 20% in January alone. 

We’re also putting a lot of work into our more nuanced churn patterns. I finally have the data to back an intuition that people who join in “peak new member” months like January and August tend to churn out 2x faster than people who join in normal months. That’s helped us do some more digging, find out why they leave. 

It’s because those busy months are the hardest to get to know people, because so many new faces are overwhelming. 

We could have been like a gym or a landlord, happily taking their money in January knowing that we wouldn’t see them again by March. ¯\_(ツ)_/¯ 

But instead, we focused on increasing the value of the community to them so it’s not reduced to the value of a desk. And now we’re able to predictably improve our retention for people who join in those seasonal bursts. 

As someone who’s added more square footage to Indy Hall 4x in 8 years to make room for our waiting lists, I’ve paid very close attention to the growth patterns. The biggest one is that when adding more square footage for the sake of adding more people, the returns are diminishing. That’s not how this kind of business scales, or protects itself for the future. 

Adding more square footage to accommodate for more people is MOST valuable when each of those people are contributing to the value that every other member is able to get as a member. Because that’s the biggest value of a coworking membership: the other people in the community, not the desk. 

-Alex

 

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The #1 mistake in community building is doing it by yourself.

Join the list: http://coworkingweekly.com

Listen to the podcast: http://listen.coworkingweekly.com

[Alex Hillman]

Oh, by the way, the next episode of my podcast (http://dangerouslyawesome.com/on/coworking-weekly-podcast/

) is going to have some really awesome SCIENCE to back all of this up. 

I had an amazing talk with the authors of this article: http://time.com/money/3586004/coworking-why-it-works/ 

They’re the first independent academic researchers to do a qualitative study specifically on what goes into the creating a sense of community, and why renting desks is a mirage. 

------------------

The #1 mistake in community building is doing it by yourself.

Join the list: http://coworkingweekly.com

Listen to the podcast: http://listen.coworkingweekly.com

[Marius Amado-Alves]

"We rebalanced our full time membership, which had grown to nearly 40% of our total membership, back to ~20%."

Has this happened naturally, or you imposed some kind of quota?

[OphelieR]

Thanks Andy for sharing these data. In our coworking the trend is a bit different. 

The average churn rate is 5% on all our memberships except the full time coworking (different from resident/dedicated desk) which has a churn rate of 8%. We don't have data around the main reason for living, it's something we're putting in place at the moment but basically if someone cancel from full time coworking it doesn't necessarily mean they will upgrade to resident desk or downgrade to part time.

Moreover, the number of full time coworker is much lower compare to our resident members or part time coworkers. I was discussing this with another coworking space owner at the GCUC in Bali last week and they had a similar issues. 

Is it something other coworking spaces are experiencing with full time coworker ? Does anyone have any explanation for this ?

[Will Bennis, Locus Workspace]

Just adding to this thread to announce another coworking space closing (Locus Workspace's first location in Prague, Czech Republic). We're not out of business, just consolidating from two to one space. And ultimately it was a great thing. But it was our first location and really a difficult choice to make. Anyway, here's a blog post about the sadness that came with closing the space. Running that space was a really important part of my life, and much of it would not have been possible without the inspiration, ideas, and general good will that came from this group.

Best,

Will 

[Alex Hillman]

Thanks for sharing this, Will. Part two, about relief, was especially resonant for me!

Seems bittersweet - excited to read part three about optimism :)

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The #1 mistake in community building is doing it by yourself.

Better Coworkers: http://indyhall.org

Weekly Coworking Tips: http://coworkingweekly.com

My Audiobook: https://theindyhallway.com/ten

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[Will Bennis, Locus Workspace]

Finally finished the final post in a long promised three part series about closing a branch of my coworking space.

It's about the optimism that can come from scaling down, about overcoming the entrepreneur's central challenge of transitioning from "working for your company to working on your company" (from maintaining your business to developing it), about the role of external context in work success, and a tribute to my father (who was a pioneer in leadership studies and who passed away in 2014).

Would love to hear others' thoughts, as I think it has a lot to do with common challenges we all face, and not much to do with my particular coworking space!

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[Steve King]

Will: Excellent essay that I enjoyed on several levels. First, your father's work had a major impact on my career. I was slugging it out climbing the corporate ladder in the late 80's and 90's. On Becoming a Leader and his other work greatly helped me shift from being a front line manager to an exec. In particular, his work made me understands the importance of  developing and communicating what George Bush senior called "the vision thing".  I was also fortunate enough to hear your father speak several times. He was very inspiring. 

Second, in our work advising startups we often find startup CEO's and other execs struggle making the shift from working for the company to on the company. This is a very hard transition - especially for founders - and many fail because of their inability to do so.

And I also agree with your points on the importance of environment and its importance to independent workers. 

Good luck with the new location.

Steve

[Will Bennis, Locus Workspace]

Thank you so much for this feedback, Steve. Really cool to hear about your influences and experiences with my father's writing. He was actually sitting in the back of the room at a long-ago small coworking conference that you were at, I think the only time I met you in person (a meeting at Blankspaces in Santa Monica for coworking space owners who had been in business for a year or more, maybe in 2012 or so). He kind of just wanted to sneak in and see what his son was working on, but was truly inspired by the optimism and willingness to openly collaborate among a roomful of competitors. I know you're in most many ways the same kind of observer, but thought you'd be interested to know.

[Jerome Chang]

Hi all.

I recall that Oct 2011 gathering at my space. It was truly collaborative, and a milestone in my eyes of coworking history. I never thought of the other participants as competitors as no one was even in the same geography, and even if so, the industry was growing so quickly.

Thank you Will for your honest revelation about closing your first location. I did the same last month after 10 years in our original Wilshire location, which I believe was the first in the SoCal/Southwestern US area. I agree that it’s hard to let go of the original, which I consider a prototype. Nonetheless, the memories of how we started, and how the photos were used in a lot of PR/press...are now just photos of memories.

I would say that closing that location didn’t exactly get me to work “on my business,” but I really don’t miss having either that location, or a 4th - not sure yet. That said, I’m a glutton for punishment and plan to open a downtown Long Beach location this Spring. Yikes. :-/

Maybe it’s time for another gathering of folks, not with 1 year experience, but 10+? :-)

Jerome, founder & architect

www.BLANKSPACES.com

[Will Bennis, Locus Workspace]

Thanks for the feedback, Jerome. 

It's nice to hear that felt like a special event from others who have been around for a while. Definitely did for me, but I don't make it to a lot of coworking owner/manager events.

I like the idea of a 10+ year event, but you'll have to give me 2+ years. :)

[Jerome Chang]

Haha. Ok, then a gathering of, say, owners of 6+ year old operations. We can talk about “the good ‘ole days.”

Jerome

www.BLANKSPACES.com

[Jeannine van der Linden]

Ooo, can I come?  Just under the wire, July 2010. :-)