188. Why Your #1 Competency as a Coworking Space Owner Should be Customer Acquisition

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188. Why Your #1 Competency as a Coworking Space Owner Should be Customer Acquisition

00:00:01 Welcome to the everything co-working podcast, where you learn what you need to know about how the world wants to work. And now your host coworking space owner and trend expert. Jamie Russo, Welcome to the everything coworking podcast. This is Jamie Russo, your host, and this is episode number 188. Today we are talking about the very important topic of customer acquisition.

00:00:41 Before we dive in, though, I have a few things to cover first, a huge thank you to a reviewer Weezie, Mackie. She is in Houston, Texas. She left me a Christmas gift. Her review came into Apple podcasts on 1225. Thank you Weezy for thinking of me on a holiday. I so appreciate it. And that may just be when Apple podcasts process that review,

00:01:10 but I will take it. Her review is titled all your questions answered. She says I walked into running a coworking space almost by accident as a writer and behind the scenes kind of person. I'm not sure we'd still be open if I didn't have this podcast to listen and re-listen to, and it's a long review, so I won't read the entire review,

00:01:31 but she says Jamie's been there. So she knows, and her interviews are thoughtful, but real, which means warts and all. So thank you. Weezy and Weezy happened to join my flight group program. And she mentioned the design to thrive workshop, where we met each other in person in quotes for the first time and wheezy. If you're listening, I knew then that I really wanted to get to know you better.

00:01:55 So I'm grateful that I've had the opportunity to do that. And thank you again for re for the review. Speaking of boards, I wanted to share an experience that I had last week and I'm breathing hard. I'm at elevation. So I feel like even just docking makes me breathe harder. We're skiing for winter break. So I was out of town and went to a coworking space that I've been to a couple of times.

00:02:22 And I got there. I went to the coworking space because the internet at the ski rental is not stellar. So we cannot have multiple zooms going on at once. I had six straight hours of zoom calls, so I needed to book a room and just dive in and go for it. Well, before my zoom marathon started, my husband texted me with some very sad and shocking news about a family friend.

00:02:52 And I read the text and I literally couldn't react or respond to it. My six straight hours of zoom calls were about to start. I don't know if this has happened to any of you, but it was kind of a, a weird day because I just had to pack it away and move on because I didn't really know what to do with my schedule of zoom calls.

00:03:13 And so I packed it away and didn't really consciously think about how to manage. So I had these zoom calls and there was almost no one in the coworking space except someone, yeah, right next to the room I was in. And as we all know, rooms are not soundproof, but she did not have any headphones. And I was starting to go a little bit crazy and I walked out.

00:03:40 Yeah, I thought, do I say anything might not say anything. The space was unstaffed, there's no community manager. The owner was not there. There was no one there. And I don't know anyone because I was a visitor. So I, I could see the headphones next to her on the desk. And she was on zoom meeting, lots of folks.

00:03:58 So we get to hear the whole conversation and I was kind of going nuts and starting to feel sort of road ragey about the whole thing. And I actually posted in our Facebook group about it. And in hindsight, I so and messaged me about the post because they knew where I was. And at that point I was actually embarrassed by my behavior because I thought first I know better.

00:04:25 I should put my big girl pants on and knock on the door and ask the woman to put on her headphones, if it's that important to my work and be, I certainly should not be posting in a Facebook group about how frustrated I am. So what I noticed from that experience was, you know, my frustration after I got home and could sort of process my day.

00:04:47 And the news that we had was that I was mostly upset about the news. It was not about the headphones. The headphones were very frustrating, but the feelings that I had, the severe frustration and the feeling I needed to like act on that was not really about the headphones, but I didn't realize that at the time. And I thought, you know,

00:05:08 if there had been a community manager, maybe I would've stormed up to that desk and gotten kind of demanding about having her do something about that. And I thought, you know, this is a good reminder that we don't always know what's going on with our members. And it may not be as bad headphones. It may be about something else that's going on with them.

00:05:28 And maybe they don't even recognize it. So humans are complicated. We need to remember that. I will say, however, please put that signs up in your space that you should wear headphones at all times. I'm sure she didn't realize what she was doing. And I kind of looked around, there were no cues anywhere about headphones and kind of general etiquette.

00:05:48 And it was very distracting even though I overreacted to it. So, okay. What is next on topic that has been hot, hot, hot is management agreements. So I have lots of folks in my sphere that I interact with that are thinking about management agreements and really stuck on how do they actually work big picture? What are the risks and rewards?

00:06:13 Should I pursue one? Am I qualified to pursue one? How do I negotiate one? What are the terms, how, you know, all of the details. So we decided to do something about that. If you're a landlord or a coworking space operator, looking to enter into a creative partnership structure, that's not a traditional lease to put a coworking space in a building that has the right upside for both parties while being competent,

00:06:39 that you've covered all the who does what and what ifs before you commit. You probably recognize you need to get educated and become a bit of an expert on the co-working management agreement format. So I've partnered with Mike Abrams. He's been on the podcast. I think he was episode one 68. He is a management agreement expert. He's done management agreements for hotels,

00:07:06 retail, and commercial office real estate. So we have developed a four week course that covers structuring and negotiating a management agreement from a to Z. So if you're a co-working space operator looking to expand through a creative deal structure or a landlord looking to offer flexible workspace in your building, and you want to understand management agreements from both a strategic perspective, active and a tactical perspective,

00:07:34 we designed this course for you. You can get many more details and everything. coworking.com forward slash management grievance. We're launching our first beta cohort. The week of March 15th. We are going to live seats for that session. We're testing, we're learning. So if you're interested, get your spot, get more info at everything. coworking.com forward slash management agreements.

00:08:00 Okay, so today we are going to talk about customer acquisition and what prompted this conversation for me was Notel filing for bankruptcy at the end of January, 2021. I saw that news and the media coverage of it. Okay. And I was feeling defensive. I found myself feeling the best word I can come up with defensive about the media coverage of no tells bankruptcy as more evidence that the coworking industry is struggling.

00:08:29 The industry is struggling as a result of a global plan endemic. We all know that I don't debate that at all, but no tells model had two significant weaknesses pre COVID. And I also would not classify Notel as a co-working business. So let's unpack their weaknesses a bit and talk about how developing a strong competency around customer acquisition is key to the co-working model.

00:08:57 The way most of us define it. The key to thriving in the key to expanding through creative deal structures is having a really strong competency around customer acquisition. If you own a coworking space, your number one indicator of success is how well you can acquire customers. The second driver is probably how well you can retain them. The goal is to attract the members that are the best fit for your business.

00:09:26 So they're retaining them is built into your processes. Notel files for chapter 11, according to a commercial observer article, which I will link up to in the show notes. Notel had net losses of 225 million in 2019 and lost about 49 million in the first half of 2020. According to leaked financials obtained by business insider. By the end of the first quarter of 2020 Notel owed vendors.

00:09:52 There's 84 million. That probably does not sound like you are a business. Thank goodness. The media refers to Notel as a coworking company. These days, the term coworking is a very broad term that encompasses variety of business models. And in my opinion is Notel is not a coworking company. So I want to explain their model and what lessons from hotels downfall might apply to your business model.

00:10:19 If you're more of a coworking model, as we will define it in here. So for those of you who don't know much about Notel founded to offer mid-size and enterprise companies, private workspaces with their own branding, the company's own branding, not noting health branding, the spaces were managed by Notel and carried flexible lease terms. So the space operated by Notel were least they may have had some management agreements at the end,

00:10:47 but largely they were signing long-term leases and then turning around and leasing those spaces to small and mid-sized companies on a shorter term for a premium. So maybe Notel took out a five-year lease and then they would turn around and lease to another company for one to three years. When people talk about the co-working model being lease arbitrage in quotes, the Notel approach is really what they're thinking of.

00:11:14 I mean, one can call what I refer to as the co-working model, somewhat as lease arbitrage, but we're laying layering a lot of elements on top of space. And we have many, many, many customers. We don't have only one customer. The Notel spaces are not serviced. They were managed like property manage, but not community management. Again,

00:11:38 they offered flexible, flexible lease terms in the neighborhood of one to three years. If this sounds to you, like it's more similar to traditional lease terms and brokerage, I think it is. They worked with real estate that would have signed with great uncertainty five-year leases for their unpredictable team size and space needs, but Notel would take, so maybe it's a tech company that's growing,

00:12:05 right? And they say, well, we need 3000 square feet, but we don't know for how long, because we're hiring a lot. So instead of that company, that tech company, having to commit to a five-year lease on a bigger space than what they needed at the time, they would go through Notel and Notel would give them a one-year term,

00:12:22 for example, so that they could assess at the end of the term, whether that space was the right size for them or not. Of course, that tech companies paying a premium for the furnished space that serviced by Notel again, not community management, but you know, anything happens to the space that, you know, office manager calls, Notel not the landlord and the terms are flexible.

00:12:45 So Notel was acting really more like a broker willing to take the risk on shorter term leases. And that's not how the typical coworking operator works, right? But even a WeWork Notel is not the same as we work because we work we'll take 50,000 square feet and they have probably thousands of members in that space. At least hundreds of members, they do not have one member that they are serving.

00:13:11 And so the risk to Notel was high in this model, right? They have a lease, but just like a landlord, they had one client in each space, not hundreds, like a typical co-working space, a larger co-working space, or, you know, dozens, but one, if something went South and that company could no longer pay where their lease term was up and Notel couldn't fill the space and hotel was still on the hook for rent.

00:13:36 So as would any coworking space B, but when you're a coworking space, unless you're in a global pandemic, your members don't all get up and leave at once. So Notel may be called a co-working company, but I would refer to it as a flex office company. The only co in their model might be coffee and they don't actually provide the coffee.

00:13:56 So there's really no co no community manager, no multiple companies working co working in the same place, no service, no hospitality, actually, no coffee. So much more flex office than co-working, which I think the media does not really understand. They don't talk about it that way. And so I want you to understand that. And when I was thinking about,

00:14:19 you know, we'll know, tells not really coworking and feeling that defensive, like I want people to know this sort of feeling I was thinking, well, you know, what else fundamentally is it about their model that makes it really challenging and risky. And it's really about customer acquisition. The first competency that a coworking business has that a flex office model like Notel does not have is customer acquisition.

00:14:46 So Notel has to acquire a customer, but it's really more like a broker, right? They're taking, finding one customer for one big space for a year to three years. That is very different from what the typical co-working space. So there are more competencies that a coworking space has to have, right? That I know Tel didn't have community building service,

00:15:09 hospitality, professional development opportunities, all the things that we layer onto that experience. But today I just want to focus on that one aspect of customer acquisition, because it is very specific to the co-working model. So what might you, if you're a coworking space operator listening, take away from the Notel model and what happened to them, the ability to acquire customers,

00:15:35 to fill a coworking space, to, you know, 90 to 95% capacity, which is our goal, right? And then replace customers every single month as members inevitably leave that is central to a coworking space. Operator's ability to survive. You have to have that competency in the better. Yeah, you are at it. The healthier your business will be.

00:16:00 And if you don't build and optimize a customer acquisition machine, you may not fail because of that. The diversity of your membership, because again, not everyone typically is going to get up and leave at once, but you also won't thrive. I often tell people thinking about starting a coworking space. It probably, you know, for the average independent operator,

00:16:23 it's not that you will fail miserably, but also won't meet your goals. You won't meet your occupancy goals and your financial goals. If you aren't good at it, acquiring members, the ability to acquire it, there are many individual or small teams as customers every single month is really what differentiates coworking from a landlord or a commercial real estate broker. In fact,

00:16:49 I think the proven ability to acquire new members every single month is one of the things that will make you a candidate. If not the one major thing that will make you a candidate for a management agreement with a landlord. And this exact competency is what will prevent lamps words from operating, not I'm just talking institutional landlords like a petition inspire, or, you know,

00:17:15 folks that partner with an industrious. But that's exactly why they partner is because landline don't have a customer acquisition competency, right? So when we think about, you know, smaller lens and Lord who might open a coworking business and compete with a coworking operator, the reason that's not going to happen is because they don't have a customer acquisition competency. They don't know how to market and acquire many customers for one space,

00:17:44 right. They work with brokers to fill one customer in one big space. So when Lords might operate flex models of the Notel variety on their own, right, they can figure that out. And you know, probably they have a broker partner. Yeah. That helps them with that. But I are new members every single month is simply outside of the competencies that they already have sure they can grow them,

00:18:08 just like every coworking operator learns to grow them. But they've not done that before. And that's one of the gaps that a partnership with an experienced operator can fill. And one of the reasons that it's difficult to get a management agreement deal with a landlord as a first time operator, is that you can't show a track record of filling the space. And that's really what it's all about.

00:18:28 And we talk about that in our management agreement course is that is one of the competencies you have to show that you know how to fill a space and keep it at a certain level of occupancy. Again, this is all outside of living through a global pandemic, which is not typical. What is customer acquisition for those of you who are feeling a little fuzzy and vague about that,

00:18:50 because a lot of us get into coworking because we're really passionate about bringing people together. And so the vision we have is, you know, sort of the bigger why around building that community, which is also a very different Y from Notel. But in order to get those people in the room, you have to be able to market to them, get them to come in.

00:19:12 So let's talk about customer acquisition. It's having a sales funnel in place that outside of a global pandemic attracts leads to your website, compels them to book a tour, gets them to show up for a tour and converts a Fairview predictable percentage of leads into members. Your first step in optimizing your customer acquisition engine is knowing your numbers throughout your sales funnel. How many leads do you get to your website into your GMB listing each month?

00:19:41 Is anyone sick of me talking about the GMB listing yet? What percentage of those leads book a tour? What percent of those show up for a tour? What percent of those convert to membership after they've been in for it to her? And on average, what is the tenure of your members across your product lines? So how long do you office members last?

00:20:00 How long do dedicated desks? How long do you hot desks? And once you track these metrics, how do you improve them? Maybe you're, you know, you're not going to be great or know what's great when you first start out, but what activities drive the best leads into your funnel. And this may be different depending on what type of member you serve,

00:20:20 what type of market you're in, what type of space you operate, what are your inbound lead generation activities? Examples include SEO, yo paid digital ads, organic member referrals, hosting events that bring your ideal customer community avatar into the space. Again, when we can host events again, what are your outbound lead generation activities? And we're going to talk about this more on the podcast,

00:20:43 because I think a lot of us rely on inbound and we're not honing our outbound lead generation skills. For example, member referrals, programs where you actively ask for leads, developing relationships with local businesses that might refer members to you establishing a formal broker program and more the outcome I found lead gen activities can really depend on, again, the market you're in the member,

00:21:12 you serve your connections to the community, et cetera, but there are things that we can do to kind of systematize that. If you're not getting leads, what's missing in your marketing mix. If you're not converting leads, what might be wrong with your product mix or your pricing when you allocate your time, spent on your coworking business, most of it should be spent on building your customer acquisition system for most of you and your community managers.

00:21:41 The rest of the work is easy in quotes, right? The community building comes fairly naturally picking the cough. All the things that come with operating a business may seem sort of important and challenging printers. Anyone, if you want to talk about challenges, but those are the little things, right? The things that we need to be focused on are the things related to our customer acquisition systems.

00:22:06 That is the hard work and we need to be doing okay, hard work. So I'll close with this. If you're sure was setting up your sales funnel and tracking and measuring the right things and getting the leads that you need to thrive. We have launched a new mentorship program that provides one-on-one support for operators that have already launched, but are seeking support in their growth phase.

00:22:29 If you are interested in learning more about that, you can schedule a free call with me to learn more@everythingcoworking.com forward slash mentor. Thank you for sharing your time with me today. I will be back in your ear next week.

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