A coworking space business rents or leases fully furnished office spaces on a part-time or as-needed basis to a myriad of businesses.
Coworking space companies also provide virtual office and conference room leasing options. It will amaze you to note that for as little as $49.99 a month, anyone can work on Wall Street, many thanks to the coworking space concept. The rising trend of the virtual office, which effectively functions as a high-cost PO box, is one of the services offered by the $2.4-billion Serviced Office Leasing (SOL) industry.
The global coworking space market size is expected to grow from $7.97 billion in 2020 to $8.14 billion in 2023 at a compound annual growth rate (CAGR) of 2.1 percent. By 2030, it is predicted that 30 percent of all commercial real estate will be a flexible workspace, while flexible working will be worth USD 10 trillion+ to the economies of 16 leading countries alone.
Steps on How to Start a Coworking Space Business
Table of Content
1. Conduct Market Research
If you are considering starting a coworking business, you would need reliable market research to be able to maximize profits from the business. The first step in the market research process is to develop market-based research questions in line with your overall business goal and objective.
In this regard, you should source information that will help you maximize your business, show you what your potential market will be looking for from a coworking space, and also help you operate your coworking space business with less stress.
a. Who is the Target Market for Coworking Space Business?
- Startups and budding entrepreneurs
- Established entrepreneurs
b. Is Coworking Space a Profitable Business?
Yes, coworking space is a profitable business, but according to AndCards, only 43 percent of coworking spaces are currently profitable. With new coworking spaces opening up nearly every day, it might take them a few months to start making profit.
Although, the report further stated that after two years in operation, more than 70 percent of all coworking spaces become profitable.
c. Are There Existing Niches in the Industry?
Yes, there are existing niche ideas when it comes to coworking businesses because a coworking space is at liberty to define the type of people they want to accommodate in their facility. Here are some of the niche ideas;
- Private Workspaces
- Minimal/Bare Bones
- Shared Space/Subleased
- Meeting Space
- Virtual Offices
d. Who are the Major Competitors?
- Impact Hub
- Your Alley
- Knotel (Newmark Group)
- District Cowork
- Make Office
- Industrious Office
- Venture X
- Serendipity Labs
- Green Desk
- Talent Garden
- Novel Coworking
e. Are There County or State Regulations or Zoning Laws for Coworking Space Business?
No, there are no county or state regulations or zoning laws for coworking space business for now, but players in this industry are expected to work with the existing regulations or zoning laws governing similar businesses in the county where their business is domiciled.
f. Is There a Franchise for Coworking Space Business?
Yes, there are franchise opportunities for the coworking space business. They include;
- Office Evolution
- Venture X
- International Workplace Group
g. What Do You Need to Start a Coworking Space Business?
- A Feasibility Report
- Business and Marketing Plans
- Business Licenses and Permits
- Furnished and Equipped Coworking Space (Office Facility)
- EIN (Employer Identification Number)/Federal Tax ID Number.
- A Corporate Bank Account
Choose a Memorable Business Name
When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.
Some of the catchy business name ideas suitable for a coworking space business are;
Creative Coworking Space Business Name ideas
- Corporate Network© Coworking Space, Inc.
- Generation Next® Coworking Space, LLC
- Startup Solutions® Coworking Space, Inc.
- Future Solutions® Shared Office Space, Inc.
- Smart Office™ Coworking Space, Inc.
- Business Base™ Coworking Space, LLC.
- Jenny Blank© Shared Office Space, LLC
- The Arena® Coworking Space, Inc.
- Ocean View© Coworking Space, Inc.
- Central Park© Coworking Space, Inc.
- Fussion® Coworking Space, LLC
- Profitable Venture® Coworking Space, LLC
- ED Mark and Co™ Coworking Space, LLC
- Work Plug© Coworking Space, Inc.
- Pentagon Group® Coworking Space, Inc.
- Your World™ Coworking Space, Inc.
- Vision Board™ Coworking Space, Inc.
- Newton Joe and Co© Coworking Space, Inc.
- Future Hub® Coworking Space, LLC
- Blue Sky™ Coworking Space, Inc.
Register Your Business
a. What Type of Business Structure is Best for a Coworking Space?
Even though there are several options when it comes to the business structure of a coworking space business, the one that most players in this line of business consider is an LLC. It is common to consider an LLC because providers want to protect themselves from lawsuits.
Please note that an LLC will need an EIN if it has employees or if it will be required to file any of the excise tax forms listed below. Most new single-member LLCs classified as disregarded entities will need to obtain an EIN.
b. Steps to Form an LLC
- Choose a Name for Your LLC.
- File Articles of Organization.
- Choose a registered agent.
- Decide on member vs. manager management.
- Create an LLC operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
c. What Type of License is Needed to Open a Coworking Space Business?
- General Business License
- Zonal Permits
- Signage Permit
- Operational State Facility Inspections for your facility
d. What Type of Certification is Needed to Start a Coworking Space Business?
You don’t need any certification to start a coworking space business.
e. What Documents are Needed to Open a Coworking Space Business?
These are some of the basic legal documents you need to legally run a coworking space in the United States of America;
- Business and liability insurance
- Federal Tax Payer’s ID
- State Permit and Building Approval
- Certificate of Incorporation
- Business License
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Contract Document
- Company Bylaws
- Memorandum of Understanding (MoU)
f. Do You Need a Trademark, Copyright, or Patent?
If you are considering starting a coworking space business, usually you may not have any need to file for intellectual property protection or even trademark. This is because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Coworking Space Business?
The startup cost for a coworking space business is not uniform. But basically, it can range from as low as $10,000 to lease and furnish an office space to one million USD and more.
b. What are the Costs Involved in Starting a Coworking space business
- The total fee for registering the business in the United States of America – $750.
- Legal expenses for obtaining licenses and permits as well as the accounting services – $1,200.
- Marketing promotion expenses – $1,500
- The cost for hiring a business consultant (writing of business plans inclusive) – $4,500.
- Insurance coverage at a total premium – $2,400.
- The cost of accounting software, CRM software, and Payroll Software – $1,500
- The cost for leasing a facility (long-term lease agreement) – $75,600.
- The cost for facility remodeling and installations – $10,000.
- Other start-up expenses including stationery – $500
- Phone and utility deposits will cost – ($3,500)
- Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $20,000
- The cost for the purchase of office furniture and gadgets (Computers, Printers, Telephone, TVs, tables and chairs et al) – $10,000.
- The cost of launching an official website – $600
- Miscellaneous – $2,500
c. What Factors Determine the Cost of Opening a Coworking Space Business?
- The size of coworking space
- The choice of the office location
- The required licenses and permits
- The cost of hiring and paying a business consultant and attorney
- The cost for branding, promotion, and marketing of the business
- The cost for furnishing and equipping the coworking facility
- The cost for insurance policy covers
- The cost for registering the business
- Cost of recruiting and training your staff
- The cost of opening the business (Party)
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?
It is not compulsory to build a new facility for your coworking space business, but if you have the required finance, you may go ahead. The truth is that building or reconstructing a facility will help you come up with a facility that will perfectly fit into your overall business goals and vision.
e. What are the Ongoing Expenses of a Coworking space business?
- Electric bills
- Utility bills (phone bills, signage, and software renewal fees et al)
- Salaries of employees
- Marketing costs
f. What is the Average Salary of your Staff?
- Chief Operating Officer (Owner) – $60,000 Per Year
- Facility Manager – $45,000 Per Year
- Admin and HR Manager – $40,800 Per Year
- Marketing and Sales Executive – $35,000 Per Year
- Customer Care Executive/Front Desk Officer -$30,000 Per Year
- Cleaners – $26,000 Per Year
- Security Guards – $24,500 Per Year
g. How Do You Get Funding to Start a Coworking space business
- Raise money from personal savings and sale of personal stocks and properties
- Raise money from investors and business partners
- Sell shares to interested investors
- Applying for a loan from your bank/banks
- Applying for business grants and seed funding from donor organizations, and angel investors
- Source for soft loans from your family members and your friends.
Write a Business Plan
a. Executive Summary
Blue Sky™ Coworking Space, Inc. is a fully registered and licensed coworking business that will be located in Midtown Manhattan, New York City U.S. and with offices in Los Angeles, California, Houston, Texas, Boston Massachusetts, and Orlando, Florida. We will provide well-equipped and secured coworking facilities where entrepreneurs, startups, freelancers, developers, businesses, and teams can meet to work independently, as well as socialize and collaborate on projects.
b. Products and Service
- Lease or rent fully furnished workspaces
- Lease or rent virtual offices
- Lease or rent conference and meeting rooms
- Provide telecommunication services to leases
- Provide other business services to leases
c. Mission Statement
Our mission is to develop a highly successful and profitable coworking space business that is not only a work office; but a space where people can meet to work independently, as well as socialize and collaborate on projects.
Our vision is to become the number one coworking space provider in the whole of New York and to have coworking office spaces in key cities all across the world.
d. Goals and Objectives
The goals and objectives of our coworking space business are to help startups, entrepreneurs, freelancers and contractors et al who can’t or don’t want to commit to a long term lease have a space to work from and yet enjoy all the benefits of a standard office facility in a highbrow business district.
e. Organizational Structure
- Chief Operating Officer (Owner)
- Facility Manager
- Marketing and Sales Executive
- Customer Care Executive/Front Desk Officer
- Security Guards
a. SWOT Analysis
- Centrally located coworking space facility
- A well-equipped and furnished coworking facility
- Experience, trained, and certified professionals
- Excellent customer testimonials
- Not enough finance to build our facility
- We may initially struggle to gain revenue
- Inability to attract high-paying clients
- A growing number of startups in the United States that don’t want to lease their own office space
- Online market, new services, new technology, and of course the opening of new markets.
- Favorable government policies and trends (work virtually or from home).
- Loans diminish profitability until they are paid off
- The first year will be financially tight while we gain customers and pay off loans
- Competition in the area could increase
- Management of employees requires time, money, and efforts
- Lack of capital to keep going if the business model doesn’t work
- Economic downturn
b. How Do Coworking Space Business Make Money?
- Leasing or renting fully furnished workspaces
- Leasing or renting virtual offices
- Leasing or renting conference and meeting rooms
- Providing telecommunication services to leases
- Providing other business services to leases
c. Payment Options
- Payment via bank transfer
- Payment via credit cards
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
- Payment via bank draft
d. Sales & Advertising Strategies
- Introduce your coworking space business by sending introductory letters to startups, entrepreneurs, freelancers, developers, researchers, and contractors in and around your city
- Advertise your coworking space business on national dailies, local TV, and radio stations
- Promote your coworking space business online via your official website and all available social media platforms
- Adopt direct mailing coupon marketing approach to attract investors
- Position your signage/Flexi banners at strategic places
a. How Much Should You Charge for your Service?
Coworking services Price
Day pass $45-$55 per day
Part-time desk – per day $35-$45 per day
Part-time desk – monthly membership $350-$400 per month
Permanent desk $650-$750 per month
Private office: up to 20 staff $160-$210 per square meter per month
Private office: 20-50 staff $150-$200 per square meter per month.
b. How Much Profit Do Coworking Space Business Owners Make a Year?
It depends, but the available report shows that on average, a successful coworking space can earn somewhere from $500,000 a year to over a million USD a year. Some of the leading coworking space businesses make far more than $5 million in profits in a given fiscal financial year.
c. What Factors Determine the Amount of Profit to Be Made?
- The size, type, and location of the coworking facility
- The facilities and extra services offered by the coworking space company
- The management style of the coworking business
- The business approach of the coworking business
- The advertising and marketing strategies adopted by the coworking business.
d. What is the Profit Margin of a Coworking Space Business?
A small-scale co-working space will typically make around 10 percent a month as profit. But a coworking company with spaces able to accommodate between 10 and 50 people or more per time will have a profitability rate of about 40 percent. The bottom line is that the more people the coworking space can accommodate, the more profitable they become.
e. What is the Sales Forecast?
Below is the sales forecast for a coworking space business it is based on the location of the business and other factors as it relates to such startups in the United States;
First Fiscal Year: $750,000
Second Fiscal Year: $1.2 million
Third Fiscal Year: $1.8 million
Set Up your Office
a. How Do You Choose a Perfect Location for Coworking business?
- The demography of the location especially as it relates to startups and small businesses
- The purchasing power of businesses and the residents of the location
- Accessibility of the location
- The number of coworking businesses in the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
b. What State and City are Best to Open a Coworking Space Business?
- New York City, New York
- Los Angeles, California
- San Francisco, California
- Washington DC
- Chicago, Illinois
- Dallas-Fort Worth, Texas
- Atlanta, Georgia
- Boston, Massachusetts
c. What Equipment is Needed to Operate a Coworking Space Business?
You should be prepared to purchase relevant software apps. You will need laptops, internet, and Wi-Fi facility, telephone, printers, and office furniture (chairs, tables, and shelves) and kitchen utensils (tea kettle, toaster, microwave oven, and fridge et al) among others and all these can be gotten as fairly used.
When it comes to hiring employees for a standard coworking space business, you should make plans to hire a competent chief executive officer (you can occupy this position), facility manager, marketing and sales executive, customer service executives, and security guards.
Launch the Business Proper
Most coworking businesses prefer to organize an opening party to officially launch the business. You can choose to do a soft opening if you are operating on a low budget or you can go for a grand opening party.
With a proper launching of the coworking space business, you will be able to officially inform people in your city that your coworking space is open for business.
a. What Makes a Coworking Space Business Successful?
- Choose a good location and facility to launch the business
- Hire only competent, hardworking, and trustworthy staff
- Be deliberate with equipping and furnishing the coworking facility
- Encourage the use of word of mouth to promote your coworking space business
- Leverage on all available online and offline platforms to promote your coworking space business
b. What Happens During a Typical Day at a Coworking space business?
- The business is open for the day’s work
- The office is cleaned and ready for clients.
- Clients come to work
- Marketing/website upkeep is carried out
- Other administrative duties are carried out
- The business is closed for the day.
b. What Skills and Experience Do You Need to Build a Coworking space business?
- Excellent facility management skills
- Excellent interpersonal skills
- Excellent customer services skills
- Business management skills
- Bargaining skill
- Work experience in the facility management industry
- Work experience in a coworking space business
- Experience in managing people
- Experience in business administration