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Does a Coworking Space Have a Variable Cost?

Yes, co-working spaces have variable operating costs that tend to affect the financial bottom line of the space. Variable costs are business expenses that are subject to change when sales volumes change. This simply entails that variable costs either increase or decrease depending on a business’s current output.

As a co-working space provider, managing variable costs remains one of the most critical priorities to ensure the success of your space.

In this line of business, even if your co-working space is currently generating substantial revenue, if you cannot manage cost, you can end up in an even worse shape than when you started. Have it in mind that having a thorough understanding of the fixed and variable costs of your co-working space will help you to identify the profitable price level of your business.

Also, have it in mind that you can leverage this knowledge to find your co-working space break-even point. You can also leverage this information to identify economies of scale, which tend to depend on the fact that as output increases, fixed costs will be spread over a vast range of output items (products or services).

Understanding and managing variable costs are necessary as you respond to changes in the marketplace. Also, understanding the difference between variable costs and other costs, such as fixed costs, will help you to better classify costs correctly.

Basic Co-working Space Variable Operating Cost

Ideally, the ongoing expenses for a co-working space will amount to several thousand dollars a month. This can include lease payments, employee salaries, high-speed internet costs, utility costs, and equipment maintenance fees. Here are the basic variable operating costs you will find at a co-working space;

  1. Marketing & Paid Advertising

The money spent on marketing and advertising a co-working space can be considered a variable cost. Co-working spaces are usually advised to focus on organic marketing and promotion, but some of them also choose to enlist the expertise of an experienced marketing professional to boost their marketing and advertising efforts.

Regardless of who takes care of executing an advertising strategy, whether you opt to do it yourself and not pay a freelancer, always remember that you still need some budget for online advertising.

  1. Management & Business Software

As the popularity of co-working spaces explodes, technology and software companies are also working to create technologies that will automate a good part of their day-to-day work, and help these businesses succeed and expand.

For instance, a good number of SaaS (software as a service) companies help businesses and entrepreneurs with everything from client management, billing, conference room booking, accounting, lead tracking, KPI tracking, etc. Co-working space software like Archie offers co-working space providers solutions to operational hurdles like automated billing, membership tracking, and inventory management.

  1. Coffee & Supplies

A cup of coffee is a quintessential symbol of the office. For decades, it has been a standard practice to offer employees free coffee and tea throughout their workday. Subscription services have now become the norm for the delivery of frequently used products such as coffee.

For co-working spaces, signing up for this type of service would be the easiest and most cost-effective way of receiving coffee supply without much stress

According to industry reports, offering your members daily coffee will cost you around 50$ and 125$ per employee per year. The yearly cost will vary depending on the quality of coffee you select. You also need to budget other kitchen and office supplies such as milk, sugar, tea, fruits, paper plates, etc.

  1. Cleaning Services

Have it in mind that a workspace with a steady inflow of people will surely get dirty quickly. Cleaning services are usually overlooked, yet they represent a good percentage of the monthly operating cost of any co-working space. No one enjoys working in a dirty office, but getting an estimate for this monthly cost can be tricky.

Note that professional cleaning service fees tend to vary based on factors such as location, office size, and type of cleaning required. Commercial janitorial services can charge by the square foot, by the hour, and a flat monthly fee.