Freelancers, contract workers, or hybrid workers without a private space at home need a place to work. Co-working spaces saw this gap and started showing up everywhere. After the ease of lockdown restrictions in late 2020, the need for a space that isn’t home, but not your employer’s office enhanced the success of these facilities. So, how can you capitalise on this opportunity? Here’s how to open a co-working space.
Africa holds 10,1% of the world’s freelancers. Most operate in industries such as economics (think accountants), graphic design, translation, writing, photography, and web development. Renting office space or hotdesking serves as a much cheaper alternative for freelancers than leasing an entire office. What’s more, it is also a great way for start-up founders to network and create strategic partnerships.
How Does a Co-working Space Work?
A co-working space operates by leasing office space in a business park or shopping centre, taking up the responsibility of utilising the space in a way that covers the costs of the lease. The office space is essentially sub-leased to individuals looking for a space to work.
Your co-working space can offer clients the following solutions:
- Dedicated desk
- Private offices
- Full floor office
- Board room/meeting room
- Event space
- Dedicated work address
The downside to co-working spaces, however, is that you need to ensure you have enough clients to cover your monthly expenses. What’s more, only half of these businesses turn a profit. It’s estimated that it will take you approximately two years before you see your business generating a profit.
The expenses you need to consider are:
- Office space,
- Boardroom
- Desks
- Insurance
- Fibre/WiFI
- Kitchen wares such as crockery, appliances and cutlery (You can include bespoke coffee blends as a value add in your price.)
- Salary for a manager or receptionist if you are not directly involved, as well as a cleaner.
- Groceries (Tea, sugar, milk, toilet paper if not supplied by the building.)
- Desks
- Chairs (Office chairs as well as boardroom and meeting space chairs.)
- Tables for meeting rooms
- Special add-ons to consider such as printers, water coolers, and TV screens for audio-visual presentations.
Creating Revenue from a Co-working Space
There are multiple ways that co-working spaces can generate revenue. Firstly, the most obvious is renting desks. But for the many solutions a business like this offers, there can be different pricing structures. Additionally, customers can be asked to purchase a membership that ensures there is always a space open for them. Memberships can be weekly, monthly, quarterly or yearly. You can also offer day passes.
Denswap recommends that pricing structures be calculated at R 262,40 per square meter, depending on the cost of the rent agreement with the property manager. Offices should bring in enough income to cover expenses, and other facilities such as desks, boardrooms or meeting spaces should be the division that makes a profit.
Beyond office space, co-working facilities can also be marketed as a place to record videos or present virtual classes.
However you choose to approach your co-working space, it’s vital that you start advertising your facility appropriately five months before it opens.
Build to Scale
When you are focused on starting your business, chances are that scaling your enterprise is the last thing on your mind. However, South Africa sees many struggling small businesses that fail to scale their business effectively and timeously. It is a good idea to keep in mind how to grow your business in your start-up phase, beyond just opening a bigger space or second branch of course.
To create a unique space that attracts more clients, you can offer special amenities such as audio booths, a gym where you can practice yoga or access special equipment, childcare facilities, or even a personal assistant service.
As a part of your growth strategy, consider hosting braai nights where customers can network in a relaxed environment, quiz nights, or special growth accelerator presentations.
Remember, you are ready to scale when the margin between expenses and income is more than sufficient to cover monthly expenses for a few months.
Now that you have all the information about how to start a co-working space, dive into our articles about how to register your business and compare the best business banking accounts for you.
