Free Calculator Tool Predicts The Profitability Of New Coworking Spaces

Published on May 29, 2018 - By Jo Meunier (née Disney)

• Deskmag’s 2017 survey found that only 40% of coworking spaces are profitable
• Fixed entry costs associated with coworking are high (leases, fitout, design), while return is low for the first year
• Craig Baute developed an online coworking calculator that can help new and established operators project estimated costs and revenue

Despite the multi-billion-dollar valuations of workspace brands like WeWork and Ucommune, coworking isn’t big money business. In fact in many cases, it’s quite the opposite.

Deskmag’s 2017 report found that only 40% of coworking spaces are profitable, while Cushman & Wakefield’s Coworking 2018 report warned that “scale is the only way to improve volumes and to improve margins”, due to exorbitant real estate leases and fixed operational costs.

Even so, coworking continues to grow at an impressing rate with new spaces mushrooming all over the world.

In December 2017, Emergent Research and GCUC released their coworking forecast for the next five years, citing expectations for continued rapid growth between 2018 – 2022. Their research suggests that the number of global coworking spaces is set to grow on average 16% each year, up from 14,411 in 2017 to just over 30,000 in 2022.

There is still plenty of room for growth, but the ultimate challenge for new spaces remains: fixed entry costs are high, and return is low for the first year.

Calculating for Success

Is this true for all spaces? Or can new coworking spaces break even inside of 12 months? Some of these answers are found not in feasibility reports costing thousands of dollars, but instead, in a free self-generated online calculator tool.

Craig Baute is a coworking consultant and the founder of Denver coworking space Creative Density, which he opened in 2011. Over the past year, he has developed an online calculator tool designed to give new operators projected costs and revenue during the first 12 months of opening a space.

Launched in March this year, the calculator produces a report giving a snapshot of key costs like rent, utilities, furniture and staff, and according to Craig, it can be presented to third parties as part of an application for loans or investment. The calculator provides a guideline on estimated potential revenue by the 13th month, after the space has been open for one year.

It’s an excellent opportunity for new operators and already, more than 150 people have used it. But it begs the question: why provide a free tool to help others that could ultimately generate more competition for your own space?

“I love the independent coworker ethos and I want these spaces to succeed, so that local people can find the right community,” says Craig. “Coworking helps create micro communities, empowering people to work where they want to live.”

His idea for the calculator came from first-hand experience of the difficulties associated with starting a space, combined with the knowledge that independent spaces, whether in Denver or any other town or city across the world, can enrich local communities and boost regional economies.

“Small operators are flying blind”

It’s not easy starting a space, and many are forced to close within the first year.

“Feasibility studies start at around $3,000 and go up to $10,000. New operators can’t afford it so they don’t do it, which means they’re flying blind,” said Craig.

“Then you’ve got the real estate, furniture, build-out, connectivity, kitchens – all this stuff costs thousands of dollars. Add to that, small spaces don’t have the reserves to put money towards marketing, they don’t expect chairs to cost thousands of dollars, and it all adds up. They end up under-capitalising, which means the business can’t grow.

“I wanted to create a free tool based on realistic data and my own experiences over the past 9 years, to help them understand the resources and loans they might need to get started.”

Denver Coworking Alliance

In addition to running Creative Density and consulting, Craig also started Denver Coworks – a coworking alliance and passport that covers the city’s 15 (and counting) coworking spaces.

His thinking, like so many other regional workspace alliances, is that a rising tide lifts all boats and workspace operators that collaborate and share knowledge are more likely to succeed. As such, since 2012, Craig has been involved with the launch of every new coworking space in Denver.

As for Craig, his own coworking journey started in 2009 when he graduated in Michigan, and found himself looking for work during what was considered the worst financial crisis since the 1930s.

“I was a desperate guy in a recession!” he said. “I was looking for work and I came across coworking in 2009, just as it was getting started, which was really at the right moment.”

Craig had the idea to start a coworking space and took the time to research demographics of cities across the U.S. and scope out potential coworking sites.

“I didn’t want to be the first coworking space in a city, so I targeted medium-sized cities where I’d be the second or third space. I set up a lead gen website and decided that whichever city had the biggest uptick, I would move to.

“Denver was it!”

Since then, Creative Density has expanded twice and Craig is now looking at innovative ways to take the brand further through franchising, with a number of deals currently “in the works”.

“It’s an exciting experience!” he said. “It enables us to diversity and do something neat for local communities, while making a good return. It falls into this beautiful place. It’s about creating a business that pays the bills and that franchisees and members can be proud of.”

As for the calculator, Craig is currently marketing it organically through coworking groups, and word is spreading fast.

“Around 85% of people using it are in the U.S., but we’ve had people using the calculator all over the world – Columbia, Kenya, China, Mexico, the Middle East – everywhere.

“It’s really exciting that we’re reaching all these locations and helping people get started on new coworking ventures.”

www.creativedensity.com/coworkingcalculator