October 18, 2022
Hybrid work models are leaving offices bare all over the world, and the consequent effect on the prices of corporate real estate is leading savvy entrepreneurs to consider new options. Coworking space business models are emerging with a new range of approaches to providing remote workspaces that combine the comfort of the home with the functionality of the office, in a location that’s convenient for everyone.
Now is a good time to start figuring out how to start such a business, and if you’re serious about it, you’re going to need to do the groundwork. A coworking space business plan is an essential document to start building and will pave the way for you to secure your funding. It’ll also teach you a lot about the industry, the market, and how you’re going to be functioning in relation to both.
We’re going to show you a template for your very own coworking space business plan design in this article, which can serve as a checklist of all the research and documentation you’ll need to gather to get started. Before we go into that though, let’s look at why this kind of business is becoming so popular.
Why and How to Start a Coworking Space
With employers shifting to remote and hybrid models, you might think there’s a sudden increase in half-empty office buildings, and to some extent, you’d be right. Office demand is expected to decline significantly, and the majority next generation of companies to start up will certainly be factoring in a smaller physical workspace to their budgets and forecasts.
However, something still has to be done with all these empty floors, and for some entrepreneurs, this is an appealing prospect. At the worst of times, coworking spaces are less vulnerable to industry shifts, and with office real estate looking like such a good investment right now, this might be the perfect time to jump ahead with learning how to start a coworking space.
While some companies are pushing for a full return to the office, the workforce is resisting, and it looks like those companies that are earliest to embrace hybrid workspaces are the most likely to take advantage of the new normal. Many people prefer the flexibility and comfort that remote work provides, and many find that their role in the company does not require them to be physically present.
It’s also becoming more apparent that workers are even more productive when working from home. The combination of these factors results in a powerful demand for new working setups, and as companies necessarily compete to retain their most valuable talent, new workspaces are emerging.
As hybrid setups look like they will stick around for the long term, entrepreneurs are now making use of coworking spaces to reduce overheads for companies on real estate.
The benefits come from several angles. Combining the facilities of an office with the comfort of working in a casual environment, companies can rent coworking spaces in cities where they have high numbers of hybrid workers, providing them with a more accessible workplace that requires very little in the way of a commute.
This allows workers who may have busy homes to get some conducive space without heading all the way into the office. It also allows companies to bridge the gap between office and fully-remote workforces, saving costs on a more dispersed workforce while maintaining productive, shared facilities.
The applications for share workspaces are numerous, and there are several business models to consider. Before you get onto your business plan, it’s important to figure out which model you’ll be going with, and then how and where you’ll be funding it. Let’s go over that now.
The Coworking Space Business Model
The different types of business models can be broken down by the scale you plan to be working with. For small operations, you’ve got different options than larger ones, and each comes with its benefits and drawbacks. Here are some approaches you might want to take:
- For small-scale - Using repurposed space is one way to make use of some of those newly-empty buildings. They don’t have to be offices; they can be community buildings like churches or town halls. Partnerships are available in these instances, or you can rent or buy a space specifically.
Splitting the cost between you and another company can further reduce your overheads, and if you can find a complementary business to partner with, this can boost the profits for both. Consultancy firms may benefit from a stream of workers from the same industry sharing a space, and members of the space benefit from the ability to network with one another, too.
- For mid-scale - Empty office spaces are already set up for work; with a little renovation, you can make them into a combined office and coworking space, getting the best of both worlds and creating a functional floor that is relaxed and casual at the same time. Alternatively, you can design a venue for educational programs that companies will happily send their staff to take part in, meanwhile members benefit from the free seminars or lectures.
Mid-scale coworking spaces sit in the bracket with the most diverse set of options. You can do a lot of the things in this range that you can’t do with smaller spaces, and you can create a lot of the benefits of a much larger enterprise but at a slightly smaller scale. Further, if you have long-term plans to grow, you’ll be in a position to replicate the successes of this company in other places, which is where large-scale investment will come in.
- Large-scale - Any of the above can be created in number, spread around in different cities, and marketed to companies of all kinds. If you are ambitious and you want to start building a large company (and you can get funding for it), this might be the ultimate goal for your coworking business. Early adopters will benefit from the largest share of the new market.
These are just a handful of directions that you could take for your business, but whichever you choose will need to be attractive enough to funders, which is where your business plan will come in. Before we go over that, let’s recap the standard sources of capital for new ventures.
Source your Funding for your Coworking Space
There are three main sources of funds for new companies, and the source or sources you choose will depend on how much you need, how quickly, and what you’re willing to contribute.
- Bootstrapping – this is money off your own back. Either from your savings, from your main job, or from maxing out your credit cards, this is one way to take on the full financial responsibility yourself. This is generally a slower process, and only provides capital for smaller ventures (unless you’re quite wealthy), but the perks are significant. Bootstrapping your company allows you to maintain full equity, and therefore full control of the direction of your project. You’re not going to be at the mercy of shareholders, and you won’t have lenders on your back to return the money (credit card companies excluded).
- Banks – Banks are often happy to dish out substantial capital to new and attractive businesses, particularly because they will secure the loan to your private assets. This means that if the company fails, they still get their money back, and that’s one of the significant drawbacks of taking this route. Perks include the speed and the sheer amount of capital they can provide, as well as the fact that you’ll keep your equity. Just remember that you’ll be on the hook, regardless of the financial state of the company.
- Investors – There are numerous types of investors, from pre-seed to seed, through Angel, to Venture Capitalists, and everything in-between. The principle is similar for each of them, and the level you choose will depend on the stage of funding you’re looking for. Essentially investors will be likely to take some share of your company in exchange for capital – the more capital, the higher the share – and the financial risk will be on them.
Some investors will have valuable experience in the industry, so you may be able to gain much more from finding the right person, but you will have to appease them as shareholders as the company grows.
While these are the three main types of funding, it’s worth keeping an eye out for grants for new businesses. It’s a good idea to have an understanding of the amount you’ll be looking for before you get started, but if you’re still not sure how much you’re going to benefit from drawing up a coworking space business plan.
A Template for your Coworking Space Business Plan
The business plan for most new ventures follows a standard format that can be used as a template. A business plan is much more than just a record of your company docs and data; it’s a comprehensive study into the health and prognosis of your business.
The pages of a business plan are typically presented in the order described below, however, they don’t need to be completed sequentially, and some may be more supportive to others if researched and completed in a different order. Once it’s done, the document will read as follows:
- Executive Summary – This will be a general overview of the document as it stands. A brief introduction to the company, its mission, and the contents of your coworking space business plan to follow. Obviously, you can’t complete this page until the rest of the document is done, so you’ll likely save this page for last.
- Market analysis – This page is next, and should paint a detailed and accurate picture of where your company belongs in the industry. To complete this section of the document, you’ll need to do your market research thoroughly, and understand who and where your competition is.
This page needs to show investors that you understand the coworking space concept, the industry as it is, and its future. It then needs to explain to the reader exactly how you plan to take your share of the market and hold it.
This is the page where your ideal customer will be described and backed up by the market data you have gathered in your research phase. This page and its data, when complete, will segue neatly into how your company will meet its market in the next section.
- Company description – Here, you’re going to be describing what you’re offering that directly meets the needs of those ideal customers you’ve identified. Explain your plan of action, and how your approach settles into a niche of its own and does the job better than your competition.
The goal of this section is to stand out among the competition, in whichever way you can. Maybe you’ll be cheaper than them, or provide a wider range of services. Whatever it is you do differently needs to be highlighted here and depicted as a selling factor to your customers.
- Organizational structure – This page will introduce the key players in your company and how the hierarchy is laid out. This is a good place to expand upon some of the elements in the company description and point out how your management or administration talent is going to help you take on the industry.
Where possible, include resumes and photos of your most relevant team, and explain how each individual’s contribution will push your company towards its goals. This page is a brief overview of your top talent, but don’t overdo it with the accolades and enthusiasm. As with everything in this document, you need to be accurate – it’s not a sales pitch.
- Products and services – This page is heavily dependent on the business model you’re choosing. A larger coworking space may have talks, training, consultancy services, etc. These will all need to be listed, along with the price and the way they will be arranged.
Membership tiers, discounts, and other key components of the revenue streams you’ll be expecting need to be laid out in detail, and if your space will be selling any products, even )coffee and cookies!) itemize them here with their price.
- Sales and Marketing – Now you’re going to describe the strategies you’ve devised to reach these customers. You’ve laid out your market, and you’ve explained how your company can help them, and now it’s time to describe the bridges you’re going to build to find them and introduce them to your brand.
Identify the media channels you will use, describe your sales funnel as it relates to your demographics, and cover touchpoints in as much detail as possible to show that you understand the market well and how to approach it.
- Financial projections – Now we come to the meat of the document. Many investors will skip to this page early, and for good reason. This page is a testament to how well you know your business. It’s going to act as a litmus test for investors to judge how reliable you are as a partner.
Your projections need to be based on real figures, and they need to be honest. If you’re trying to market your company to investors by exaggerating its prospects in the industry, you’re going to make yourself look dishonest or at best incompetent.
Detailed and realistic projections come from detailed and realistic financial documents, so these need to be well-researched and presentable on both counts.
For help with this, at ProjectionHub we have over 70 different industry-specific projection templates including a property rental projection template that can be used for planning new coworking spaces. Using a professional-grade template can make all the difference to the presentation of your most important data when it comes to appealing to investors or lenders.
Make use of this template as a checklist that can be used to go through your company research and documentation and form a profile of your project that can guide you into the industry. When completed with care and attention, it will make the difference between acceptance and rejection of any sources of funding you may request.
A coworking space provides companies and their workers with a middle-ground that takes the benefits of remote work and combines it with the facilities of the office. The great thing about such a space is that it can house multiple companies’ employees, bringing networking opportunities to members, and creating resilience against industry shifts by providing a diversity of bodies.
Setting up a coworking space business plan should be one of the earliest steps in this venture, as it represents the transitional moment between idea and reality, and solidifies your project with a genuine path to success.
Forming a business plan shows you exactly how to set up a coworking space, as it involves deep market and financial research, and is as much a process of education as it is of documentation. A detailed plan will display your company in a good light and detail exactly how your investors will get their ROI from supporting you, as well as bring you accurate insights into how to get started.