The big news this week in the flexible workspace industry: WeWork’s S-1 and imminent IPO. If you are an independent coworking space operator, you may be wondering what it means for you.
The distributed workforce is real, and it is gargantuan. While WeWork has 500+ locations worldwide and is growing like crazy, they’re barely scratching the surface of the market. There are 60M remote workers today and that number is growing every day. Many people believe it will grow to 100M in the next 4 years.
You can sleep well at night knowing that you’ve chosen a growth industry and the only thing that stands in your way is your own ability to run your business well.
WeWork does so well because they make decisions based on what their members want, not just what the business needs. They allocate a significant amount of space to private phone rooms because they know how crucial it is that their members always have a place to take a private call. They’re attuned to the local tastes and design their spaces accordingly. They provide high quality desks and chairs because that’s what their members want (and are willing to pay for).
Do you know how satisfied your members are? If they could wave a magic wand and change anything about the space, what would they change? Which improvements should you prioritize?
If you aren’t asking your members for feedback on a regular basis, you should. You might be surprised at what you discover.
WeWork has demonstrated that they’re prepared to weather an economic downturn by increasing the allocation of their memberships that are signed office leases. They’re flexible office leases, to be sure — not 5 or 10 year terms. But their ability to weather any storm is something we should all take a lesson from.
There are other market forces as well. How frequently do you change your pricing structure for flex memberships? When’s the last time you raised your prices? Do you set expectations with your members that such a thing is a possibility?
Another example of adaptability is your responsiveness to your member feedback. If you grow your membership, you’ll need to allocate your space differently. As an example, instead of building concrete walls into their locations, WeWork invests in movable walls. This way they can adjust both the size, price, and capacity of their space in accordance with market demand. Need more private rooms? No need for construction. Simply move the walls.
The WE brand
The We Company has developed a powerhouse of a brand, and has done so very intentionally and strategically. It is globally consistent while remaining locally unique. The company builds each location with a carefully curated aesthetic that incorporates not only the expected premium experience of a WeWork office space, but also including local tastes, culture, and aesthetics.
When a potential member walks into your space for the first time, have you already set expectations for the type of atmosphere they can expect? Are you meeting those expectations?
WeWork also knows how they impact everything else around a location, because they are tracking it. They even call it The WeWork Effect. This includes how a WeWork lease benefits landlords and its building valuation, surrounding communities, the companies their members are employees of, the environment, all of it. And they tell the story, a lot.
Flexibility is quickly becoming a key requirement for the modern workforce (that’s a post in itself). WeWork exudes this. Members don’t have to sign 10-year contracts for office space, they can sign up by the day. Members have flexibility by having locations where they need them, more than 500 globally and growing. Flexibility is in the types of workspaces that are available: desks, couches, private offices, large company suites, meeting rooms, phone booths, cafe style lounges.
Have you asked your members how they like to work? Do they prefer private spaces to focus or like the buzz of a casual cafe space? For your space, what is your most popular membership type and how do you know?
WeWork membership agreements, while focusing on flexibility, are an average of 15 months. That brings a level of financial predictability that has not been standard in the coworking industry.
Day passes and month-to-month plans are part of what makes coworking such a desirable option. However, there can be a balance between providing customers with the ease of flexibility and having the financial security of revenue projections as a business.
WeWork shared that 40% of their memberships are now for enterprise clients, up from 28% just 2 years ago. These are companies with 500 or more employees. This is a quickly growing segment of coworking consumers as corporations move towards a more distributed workforce model.
They focus on the savings that corporations can expect using their locations on a per employee basis compared to a traditional corporate office. This hits right to the core of the 3/30/300 rule for total cost of occupancy.
WeWork’s new locations reach break even in 6 months on average and maturity within 24 months. Only 30% of their current locations have reached maturity and they are still opening more, and quickly.
Have you hit profitability, and on what timeline? If not, what do you need to do to get there?
Data, data, data
The We Company uses data for every decision: which building in which city to open a new location, what the design should be, how the workspace can make people more productive & how to track it.
What metrics are you tracking, or should you be?
What’s your strategy?
Many spaces simply open up shop and pray for business. This works reasonably well an astounding amount of time — but only for awhile. Once a competitor opens up across the street, or there is an economic downturn, many spaces discover just how much the success of their business relied on luck and timing.
Be the business that survives and thrives, despite competition. Know who your customers are, and go find them. Have the most satisfied members in town. Be always on the lookout for ways to capture more demand from that class of customers. Resist the temptation to say “yes” to every request, and instead put together a prioritized roadmap of who you’re going after as a customer, and why. Ask every single new customer how they heard about you, and be ravenous about getting more.
You might be surprised at how successful you can be by focusing on a niche rather than accepting any and all members. Imagine if WeWork moved in across the street; which customers would stay with you, and why? Which customers would jump ship?
Go talk to the customers who would stay and figure out why, and how to get more.