138. Jamie Russo shares the Danger of 5 Day and 10 Day Coworking Membership Passes

Resources Mentioned in this Podcast:

Everything Coworking Featured Resources:

Transcription

138. Jamie Russo shares the Danger of 5 Day and 10 Day Coworking Passes

00:00:01 Welcome to the everything Coworking podcast, where you learn what you need to know about how the world wants to work. And now, your host, co working space owner and trend expert Jamie Russo way. Welcome to everything. Coworking Podcast, This is Jamie Russo. Today we are going to talk about the dangers of the five and 10 day pass. I know a little controversial before we dive in. If you are launching a space in 2020 we're opening the Coworking Startup school for enrollment the first week in March.

00:00:42 This program is for you. If you are investing in your co working space and want to avoid costly mistakes and stress by getting expert and peer support in a highly facilitated environment, we want to make sure that you create the right space for you and your target market right from the beginning. And we want to make sure you get the business model, right? So the you're set up for financial sustainability that matches your goals. So we'll help you with your performer, your product mix design, sourcing furniture, working with vendors,

00:01:10 getting your marketing systems down, hiring the right team or learning how to run the space yourself and getting you set up with their right tech, so you could absolutely piece some of the support together from the podcast and the Facebook group. But this program is for people that want to invest in access to a package that provides the information resource is and support you need when you need it, and in the order that you need it and accompanied by access to me and other industry experts and a curated peer group. If this sounds like a fit for you,

00:01:41 then learn more at www dot co working start up school dot com. Okay, let's talk about the five day and 10 day Coworking membership pass. Is there some tension here? Tell me if you can relate. This may be in your recent past or near long past, but you probably remember the feeling you open your co working space. You want to sell memberships? Know what doesn't quite describe the feeling you are desperate to sell memberships. You've put a lot of money into your space, a lot of time,

00:02:15 a lot of sweat, a lot of sleepless nights. Your dreams are wrapped up into making this base successful, and you open with expenses, and you quickly need to build revenue to cover them. And you have this pro forma that's staring at you on your computer with your optimistic hope for what the first year will look like. So you are ready to roll. So you two are folks that are candidates for a co working membership. But wait, they don't want to commit to full time. This is not what you expected,

00:02:48 and you are carrying the anxiety of living through an uncertain ramp up period. And frankly, you're just not prepared to stand your ground. You really want to sell memberships? These people are saying they want to join, but not full time. And you think about how helpful it would be to have these people using the space, touring potential members around an empty space as we know not super compelling selling Coworking space. The open space at the beginning is like a restaurant. You know how restaurant will put all the people like in the windows so that it looks full,

00:03:23 and it makes people want to go in or that favorite breakfast place that you have to wait an hour to get into. But you wait because obviously it's good because everybody's hair. We used to do that all the time in Chicago, my husband was always like, Why are we waiting an hour for breakfast? It's just how it waas. So when places air crowded, people want in right? Not crowded. People are suspect, so you cave and you sell a bunch of five and 10 day passes. Here's what I think you just sold.

00:03:52 You sold flexibility that not even your local gym will offer. You have members that will likely not show up very much and not actually help you look full Orphee. Feel full or build your community. You have also sold very little revenue, not very helpful. Let's look at the math and there's a block post associated with this podcast episodes. If you wantto actually look at the path, you can go to the blogger at everything coworking dot com and look through the post. So let's say you're pricing. Look something like this.

00:04:23 Probably not exact, but industry averages ish. Two person office, $1000 dedicated desk for 75 full time Coworking membership. 310 day pass, 1 55 day pass 75. How many five day passes. Do you have to sell to equal 12 person office? 13. Your sales funnel had better be on fire, so let's see what your head sales funnel would have to be producing for you. If you have 10 tours a week and you convert 25% of them and you might convert more,

00:04:56 maybe you're really good at converting to worse. If you're in a busy market, it's probably not a lot more than that.

00:05:01 If all of them wanted five day passes, it would take you 5.2 weeks to sell 13 of them,

00:05:07 and you will have recurring monthly revenue from that of $975. I want you to think about what kind of dent that's making in your rent.

00:05:14 If you have 10 tours a week and you convert 25% of them and you sell dedicated desks, it would take you one week to sell 975 in recurring revenue.

00:05:25 One week versus 5.2 weeks. If you have 10 tours a week and you convert 25% of them and you're selling Coworking seats,

00:05:32 it would take you a little over a week to sell $975 in recurring revenue. If you have those 10 tours and you convert at the same rate and you sell a two person office,

00:05:40 it would take you half a week to make $1000 in recurring revenue. So in a four week month,

00:05:47 there are roughly 20 working days, right? So four weeks, five days a week times for 20 working days were not counting the weekends because most people don't work on the weekends.

00:05:59 People that buy offices and dedicated deaths are likely looking for a space where they can work most of those 20 days.

00:06:07 They need the routine or they have a team that they work with at the space, and they're paying a premium to not be at home or at Starbucks.

00:06:13 They're gonna be in your space. People with Coworking memberships typically have more fluid schedules. Not always, but many.

00:06:21 They're in your space, like 30 to 50% of those 20 days, which is 6 to 10 days a month.

00:06:27 What does that mean? It means that if you offer a part time membership, almost all Coworking members will want it pay less and use only the time that I really need.

00:06:38 Heck, yah signed me up for that any day. What does that mean For your business model on your open coworking portion of your space?

00:06:46 You will be constantly trying to sell low dollar memberships to people that are not in the space very often and don't really need your membership.

00:06:54 If you only need a place 6 to 10 days a month, that's not a need. That's a one.

00:06:57 So these five and 10 day passes they don't sell. And really, we're talking about the 10. I don't not even talking about five.

00:07:04 They don't sell the revenue goals they don't help. Much was making this base look full, and they likely won't spend enough time in the space to develop sticky relationships.

00:07:14 And they will also likely be more focused on tracking their days and tracking the R A. Y of this low level membership that you've sold them.

00:07:22 It's a want, and so they're thinking about that expenditure a lot more than if it's a need. You've also given them a number to keep track of,

00:07:30 and so if they use less, then they think it's not worth it because you've not told them that it's all you can eat.

00:07:36 And if they use more than they have to buy day passes, presumably back to the gym membership model,

00:07:42 wouldn't it be amazing for most people to pay Ala cart to use the gym? Do you think that many gyms would stay in business on this model?

00:07:53 So I googled to see and well, here's what I found. If all the people who purchase gym memberships were truly dedicated to exercising regularly,

00:08:02 the clubs would have a real problem trying to squeeze everyone in. That's actually fine with gym owners who expect on Lee about 18% of people who buy memberships to use them consistently.

00:08:13 In fact, to be profitable, these gyms need about 10 times as many members as they can actually fit through their doors.

00:08:21 That is not how co working spaces work right so we could work that way if we could sell that many memberships.

00:08:28 But you need to know your sales funnel before you can be sure that you can do that. So you need to test your sales funnel and see if you can get the volume in that will convert enough people to make this work.

00:08:41 That's what gyms are working on. Volume, volume, volume. What do people do that want to work out?

00:08:47 They buy a full membership because it's the only option if you are visiting from out of town, so I do.

00:08:54 CrossFit. You know this. If you listen to the podcast, I often drop into gyms When I'm out of town.

00:09:00 It will cost me 20 to $25 a day, which is a big premium to having a membership. You know,

00:09:05 if you have a co working space and you have a day pass, it's 20 to $25 right. It's a premium to having a monthly membership and what the day rate is on a monthly membership.

00:09:16 So speaking of options, the next challenge we run into when we're selling all these different options for co working space is that you might put potential members into analysis paralysis and I've talked about this study before,

00:09:29 but I love it. There's a Harvard Business Rio Review study, and I'm linking to it in the block post and which will be linked to from the show notes.

00:09:37 If you can't find it but it's on the block. The research shows that when people have too many choices,

00:09:42 they don't buy, and the study uses an example of selling jam like preserves. If you provide a camera or how many choices they offered,

00:09:51 call it like 20 versus I think it was either three or six. Overwhelmingly, people bought more jam with fewer choices.

00:09:59 And so your website picture your pricing table on your Web sites got a lot going on with the five day,

00:10:05 the 10 day, the full time, the dedicated desk, the nights and weekends, the whatever you want to put your all giving them creative names.

00:10:12 Well, the average consumer looks at your price, Ingrid, and it's not that easy for them to figure out what they need.

00:10:18 And what are they gonna default to? I'll just try it. Let's try the 10 day. So then you have to hope that they use the space enough to upgrade.

00:10:26 Will they upgrade? Probably not, because most people only use this base 6 to 10 days a month.

00:10:32 So why do we sell five and 10 day passes? I did when I first started four short sold five and I still whatever anybody wanted to buy.

00:10:41 I'll sell you what you wanna buy, cause I want you in a seat and I want your revenue.

00:10:46 Totally. I have been there. I totally get it. This was on my first base, not on the second space.

00:10:50 Here's why we do it first. We just don't do the math on how many we'd have to sell of something to make meaningful,

00:10:57 recurring revenue. People want it. We'll sell it. We just don't really think about the sales final Implication number two were afraid.

00:11:05 Fear, right? That's partly likely. It has a lot to do with that. You're open. You just want members.

00:11:11 You are afraid that you are not gonna fill that space. So you're afraid that you won't be able to sell full time memberships.

00:11:18 And when people start asking for part time, you're like, Oh, people don't wanna be here full time.

00:11:23 No one wants what we have to offer. I have to sell them. A five or 10 day paths were not prepared for people to ask for off menu options.

00:11:30 So we just say yes under pressure. So, you know, maybe it's not on our website, but we open the space.

00:11:36 People know that they're not gonna use it 20 days a month, and yet so they're gonna ask their lot.

00:11:41 Askar is out there who ask you for all sorts of things, but because it's kind of a new model,

00:11:47 they might ask. They probably are not asking the gym owner if they can do six days a month.

00:11:51 You know, they know how Jim's work. People don't know how co working spaces work so that I ask you a bunch of questions.

00:11:56 You may be unprepared and you might say, All right, I guess we could do that. I think this happens a lot.

00:12:03 And then the fourth reason we sell five and 10 day passes is we just feel like we're really committed to offering the ultimate inflexibility.

00:12:11 And we're not thinking about the sustainability of our business model. We get into this passion around, you know,

00:12:17 the power to the people. They get to choose how often they work here. We're gonna let them.

00:12:22 You can, but it has to be at a premium. Otherwise you're gonna go out of business. And we don't want that.

00:12:28 Members don't want that either. They want the option to be there, and so you have to help them understand how the model works,

00:12:35 and they need to understand that they cannot. On Lee come 10 days, they can't pay for only what they're going to use.

00:12:41 This is not a model that happens in other industries, right? The gym example. I'm gonna keep going back to that because people understand it and use it when people ask you,

00:12:52 Can I get a 10 day pass? No, you can't. You know, I tell people we would go out of business if we did that.

00:12:58 However, it's sometimes OK to sell a five or 10 day pass. Never say never right. I think it's super important to be is consistent as possible because your members will talk.

00:13:08 You need to know what's right for your business, and you need to stick to it. And if you can't sell full time memberships ever,

00:13:15 you need to fix your business model. You don't need to start offering lower price memberships that don't move the needle on your memberships.

00:13:21 However, there are times right. So here are a few of those, and if you have more times,

00:13:28 or if you're kicking it with five or 10 day passes I want to hear from you. Jump into the Facebook group everything coworking club dot com and tell us why five and 10 day passes air working for you.

00:13:40 So when might we sell a five or 10 day pass and have it be okay? So sometimes for a strategic member,

00:13:47 we're gonna have an off menu option. There are times when we want someone to be a member. They might be an influencer.

00:13:54 They might be someone very visible in the community. We need a lighter option for them. That's not on our menu.

00:14:00 We're going to do it, and we're going to tell them that it's an exception and they need to not tell people,

00:14:06 so people will understand that again. This is a strategic move. This is not a move out of fear.

00:14:12 This is a move out of confidence Number two when you're selling a larger package to a corporate team and you're including some alight access as part of a larger,

00:14:22 more lucrative bundle. So I don't like people don't discount too much for corporate members. They have budgets for space.

00:14:29 They know how much it costs them to have people on site. They have budgets for this. However,

00:14:35 you will do deals. You will do your packages. You will figure out what the value proposition is for everyone.

00:14:41 And sometimes you might work in some light access that is less than a full time membership. As long as you're negotiating as part of a bigger bundle.

00:14:49 Totally support that. And here's the other thing. You may choose to do a small number of them.

00:14:56 It's part of a founding member package to get people in the door. I suspect this won't help very much to the point I made earlier.

00:15:04 Those people TRIBE pilot is not in the space very often, and they're not as committed, and so they may not be helpful in making your space full.

00:15:12 However, if you want to test to see how these play out in your market, set a limit.

00:15:18 Say I will sell five or I will so eight of them and then I will make myself stop and you can see you could,

00:15:24 you know, test it and see what it does with your sales final. It's gonna be hard to make a good decision on that.

00:15:30 At the beginning, you need to. You know, any time you're testing something in your co working space,

00:15:36 you gotta give it some time. There are no silver bullets in business. You need to wait it out.

00:15:42 Where? Commented on a post in the Facebook group. I'm not laughing at the person. I'm laughing because I get it.

00:15:47 We've all been there. You open and you are just like I gotta find out what works and yours do and stuff.

00:15:53 You stop doing stuff if it doesn't work, you pick up something else. Super tricky. But you gotta pick stuff and go with it and test things for a while to figure out what works you're not gonna fill up overnight.

00:16:04 And there are no silver bullets, so I'm okay. If you say, try to sell some of these again.

00:16:09 I want it. I'd prefer that it be a more strategic member that you're doing this for, but you contest them when you first open.

00:16:16 But I'd prefer that you not establish your value. Establish your confidence. It's a membership. Its monthly.

00:16:23 It is not 10 days. You can have a day pass. Look like I said, the crossfit example.

00:16:29 The gym example. You know orange theory like you can buy punch cards, but they're at a premium,

00:16:35 so you should not be selling five and 10 day passes that are the same day rate as your full time membership.

00:16:41 They should be a lot more if you can make that value proposition work. That's totally cool. One of my flight group members called me out on that in our call last week,

00:16:49 she said, Well, I do 10 day passes. Remember, that might have been five days, she said.

00:16:54 I get these people want to be a part of the community. They want a little bit more than coming in for events they want,

00:16:59 like one day a week. So I sell him five days. But she told me the price, and it was at a premium versus the day rate of a membership,

00:17:07 a full time membership, so they didn't want to commit to a full time membership. But she it was like almost as much as a full time membership so great she's making that work.

00:17:17 There are examples, but I want you to think very hard, make its strategic and make sure that it works for your sales funnel.

00:17:23 Take a look at the block post. Look at the math of you need to re convince yourself. Okay.

00:17:28 But again, if you've had a great experience selling five and 10 day passes, I'd love to hear from you happy to have a productive discussion about this.

00:17:36 But I wanted to provoke some thinking because I think mostly we do this out of fear and it doesn't turn out well and were underselling our value.

00:17:43 And we need to be selling full time passes. Awesome. I'm gonna sign off for today. Make sure if you're starting a coup working space this year.

00:17:51 Get on the notification list for the Coworking Startup School, which opens first week in March. Go to www dot co working started school dot com tucked in next week.

00:18:02 Thanks for joining us on this episode of everything co working. Be sure to click the subscribe button so you can stay up to date on the latest trends and how to until next time.

For the full show notes of this episode, click here.

Want to join our coworking conversation in the Everything Coworking Facebook Group? Find us here!

Looking for a specific episode? Go to the episode index here.


Jamie Russo