251. Carl Sullivan, a Coworking OG on Sticking to your Knitting

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251. Carl Sullivan, a Coworking OG on Sticking to your Knitting

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 coworking space owner and trend expert, Jamie Russo. Welcome to the Everything Coworking podcast. This is your host. Jamie Russo. My guest today is Carl Sullivan. He is a Coworking, OG. He, his base,

00:00:41 which the brand is Your Desk is about to turn 11 years old at the time of this recording and curl mentions in our recording. I did not do the math while we were talking. I only thought about it after the fact, he said he is now 35. So that means he was 24. When he started Your Desk. Is that not amazing?

00:01:02 Carl was a builder and a house flipper who picked up on an office sharing trend that he saw happening in Sydney or nearby Sydney and creative agencies and architecture firms. He was looking for something different to do so he channeled his ideas into Your Desk and opened his first location outside of Sydney, Australia, way back then we work had just opened probably its first location in Brooklyn.

00:01:31 So these were the early days. His first location was about 26 flex flex desks. Today. His model has a lot more private space. So he shares, you know how his model has evolved over these 11 years, what his locations look like today, how he survived. COVID some of the things he's learned, how he's shifting his thinking about marketing the business as a family business,

00:01:57 which is always fun to hear about. So he, I won't spoil it in the intro, but he shares what his team looks like. So he shares his story, his learnings. I think you're going to be really interested to hear how he approaches his business and some of his learnings over the year. And just to hear his story. So Carl,

00:02:18 thank you for joining us. And without further ado, here is my conversation with Carl. I am here today with a great accent from new south Wales, Australia. Carl Sullivan is the co-founder at Your Desk. Carl, thank you for joining me morning for you afternoon for me. Yeah. So it's Tuesday for you Monday for me Monday afternoon for you. Yeah,

00:02:49 it's nice to be on part of the world. That's like I struggled being on the west coast being an east coaster. I feel like I'm perpetually behind. Well, tell me it's weird, but I wake up and I'm like, people in New York have been working for three hours already. So you're you get a jump you're like a day ahead of us,

00:03:11 but So born and raised in new south Wales or Yeah, one race in Sydney. And so they just, you know, my parents used to flip houses when I was a kid, so I'd renovate them, sell them, renovate them, sell them. And that's sort of where I picked up my building skills and then we lived for two years in Kiev and Ukraine.

00:03:34 Oh, Wow. Yeah. So I was like a teenager, probably 11 to 13 years old. My dad was an accountant at the time. So we had a bit of an ex-pat life, which was fantastic. Really sad was sort of what's happening in there at the moment. So, you know, I've got friends, I went to school with reaching out on socials and letting us know what's happening.

00:03:54 So, and then after that we moved home and I just sort of finished schooling in Sydney and go to the green building and Sydney and have been sort of, you know, doing building stuff and Coworking stuff ever since. Okay. So how did building get into, what were you building? So I guess I in America probably called like a large contractor.

00:04:17 We basically did project management. So I worked on prisons, schools, hospitals, large scale residential, high-rise, you know, big, like a hundred million, $200 million projects. Wow. Kind of you drive by and you're like, how do those get done? Those fascinate me like the project management that goes into those must be, you know, just like step-by-step by step.

00:04:41 And somehow, Honestly we have the same, which was the projects, no different 20 other, just other couple of zeros. So, you know, a couple of million more in funding, a couple of hundred more people on site, obviously more materials, but it's essentially just your house times a hundred and that's how you build it. So yeah, it's,

00:05:02 it was quite exciting. I loved it, but you know, it got quite boring and quite formulaic. So they kept, Hey, the day was doing the same thing over and over and over again. So I wanted a new challenge and at the time on the side I was flipping houses. So I'd sort of renovate them and sell them just like my parents did when I was younger.

00:05:24 But that got harder as well. You know, like I actually taught some guys both in my office and some of the trades I worked with started bidding against me at auctions. Cause I had this like, yeah, You're a great teacher. It's it quickly turned from something that was quite profitable to something that was a lot harder to do. And so literally looked around and said,

00:05:45 like I got these skills. I could keep putting them into homes to renovate, but what if I sort of transitioned and maybe put those skills into an office to renovate. So at the time sister was working with an agency and they had, I think, 25 desks and they would rent out, you know, for the aid of them, to their freelancers.

00:06:05 Okay. Just like as a right, like a convenient way to have their people nearby, Pretty much wasn't Coworking, but you know, for $600 a month or we're offering the space in the office and then there's a synergy there with that. So they pick up more work if they're in there all the time. So I knew that was a business model cause I'd seen some architects do something similar in Sydney.

00:06:25 So they got together as a collective. I think eight of them had like taken an office and they'd share work between themselves in the office, but they were all their own different businesses. So I had that as my template, 2011, 2010, 2011. So I started Your Desk in may of 2011. So yeah, it's, it was back in the days where you'd have to educate people like what it was,

00:06:54 you know, and, and how it works. And you know, back then we didn't even do offices cause everyone wanted to work together. It was all these people that are a bit lonely that worked at home alone and they want to, you know, social interactions. So our first iteration was just 26 open plan desks. Yeah. That was like drum Chang early,

00:07:15 you know, Jerome, have you met, have you ever met Jerome? I've met him once. I was five briefly. We talk a lot on the Everything Coworking Facebook group too. And throw 'cause. I think he started around the same time. I mean, not a lot of that was when did we work start their first 10 months earlier than Australia.

00:07:35 About the same thing about a year ago, Brad. Okay. Yeah. I think we would want the first dozen co-working spaces in Australia. It's very hard to quantify. So don't hold me to that. You can stick that claim from back then. Yeah. Yep. Yep. So one quick side note is that I used to go to the work tech while I went this year,

00:07:58 actually. So sometimes I go to the work tech conferences, it's like a, kind of a corporate like workplace strategy kind of crowd, you know, but they talk about Coworking and I went to one, a New York, actually it might've taken Brad's place. I think Brad was supposed to speak and he couldn't make it. And he slotted me in. So this was maybe like 2013.

00:08:22 It was pretty early. But I remember some case studies from Australia and, and them talking about Australia being pretty kind of like forward-thinking in terms of like real estate and commercial and office. And partly because it was this mindset that like you're so removed that there's like a propensity to like go see all the things that are happening out there and like, you know,

00:08:47 try to be, it was an interesting like mindset, like try to be on the forefront of things. But I'm trying to remember who it was, the case studies, there was a lot of like right. Sort of creative use of space happening and sort of sharing. And it was early, earlier than it was being adopted here. Like activity-based working,

00:09:08 I think it was kind of a concept they were talking about. Do you feel, do you feel that like Yeah, definitely. So our biggest telecommunication provider in Australia is Telstra, which is similar, I guess, to 18 teen America. I remember, I think it was somewhere between 2013, 2015, they switched their entire office to activity-based work. And they said,

00:09:35 Yeah, Totally. I think that they partly because they were telecommunications, you know, they were on the forefront of that sort of like mobile toolkit that they could give to their employees. But they ended up saying to their employees, look, you can't come in more than two or three days a week unless you have a really good reason. Otherwise you must stay at home.

00:09:54 And so, you know, for such a large corporate company in Australia, the staff doing that, I think that really flagged to everyone else what was possible. I think then like parallel to that is most Australian property markets are like, pick your hottest property market in America. Like let's say LA or Austin or New York, most Australian capital cities are right up there in terms of,

00:10:21 for the ability. Yeah. So when we were starting out, we realized pretty quickly that people had two options. They could either rent or get a second bedroom on their mortgage. Genuinely there were spending, you know, another $300 a week, let's say for that resource or they could keep just one bedroom and they could step out of the home and then come work with us for,

00:10:48 you know, half that $200 a week. Yeah. So I think that always sort of drove the economics in the early days, was people going look, you know, we need this resource. And also I don't really feel comfortable bringing like a second or third person that I work with into my, My extra bedroom. Right. Yeah. So what is The bar to get into real estate though?

00:11:10 I mean, that's what I find where I am I'm so I'm just out of San Francisco and San Francisco CBD is on the struggle bus right now because people just aren't going downtown. Well, they're not going like into the financial district. I think spaces that are neighborhood-y are doing better, but you know, the rent is so expensive that it's very hard for an independent operator to start when you were in Palo Alto.

00:11:38 And when our lease was up after seven years, our rent was doubling to $70 a square foot. So it's really hard to get in. So is, is that the case that you're taking a pretty significant risk to lease the space? Like yes and no. We signed our second space that we got, we signed that in 2015 on a 10 year agreement.

00:12:02 And so we really locked in some really good pricing that, you know, really helped us and it's still helping us to this day. Prices did go up commercially for office space for sure. But you need to sort of match that with what happened with residential property in 2028, went up 20% in Sydney and in 2021, it went up another 25%. So 45% increase in prices over the last two years.

00:12:27 Like people are going insane just to find anything. And I think that's really forcing people to look back at, you know, like having the workplace, not in their home, you know, I'm working on my garage because I've literally just bought a house that's frankly, a bit too small for us. And so it's the only place I've got where I can actually focus and have some other kind of,

00:12:49 you know, like privacy room doing work without, you know, a two year old running up and tapping me going, can you coloring with me? Wait, what will you do when it gets cold? Get a space heater. I mean, we're lucky Sydney. Well, I'm not in Sydney, I'm on lake Macquarie. So I moved down to Sydney all the way through COVID But the whole temperature here is,

00:13:13 is quite Southern California. It's it's very comfortable. Okay. Okay. So you, so you just saw like kind of a trend when you were early. Cause back then, cause I start, I opened the beginning of 2012, so I signed my lease in 2011 and you would Google, like there just wasn't stuff online, you know it wasn't so you just made it up.

00:13:38 So, okay. Talk about your, so yeah. Tell us about your first location and then did you get to three, but now you're back to one. So love I'll explain it to you. So We started an area on the fringe of the Sydney CBD called Surrey Hills. It was like a trendy factory district that had been gentrified, lots of cool cafes and everything.

00:14:04 The first version of it was just 26 open plan desks. And really the, the idea back then was, we're not trying to break any records here. We're looking for five to 10 good companies, that's it. And if we can find that, find those five to 10 companies will be great. And at that time we'll also read Tim versus four hour workweek.

00:14:26 And I was quite committed to this concept of, I could run Coworking four hours a week. And so in 2013, Starting a passive business, Pretty much starting and passing a business. But to my credit, I almost made it work. I spent three or four months, I moved six hours south down to the ski slopes in Australia. The only place you can ski.

00:14:52 And I spent three or four months down there living and I come back every second week to, you know, restock the paper and make sure the claims were done, but otherwise the guy, so they just took her to themselves in hindsight, that wasn't a great way to approach it because obviously, you know, people were more and more increasingly looking for,

00:15:10 you know, that concierge service. Yeah. So you're more of a, self-serve more like, yeah, sort of like a more true flex model where it's based on demand, but not really serviced because you were skiing. Yeah. I think that in part, because it was such a small space, everybody in definitely knew each other. And so any conflicts of the rows could be handled to the,

00:15:35 between members, any resources like we, you know, set the pantry up, but they were welcome to go into the pantry, grab what they want, you know, then you will, the cleaning stuff was, we just had a whiteboard managing or meeting room bookings. It was very low tech. Awesome. Was it profitable? Did you make money on that space?

00:15:52 Yeah, we were making maybe three or $4,000 a month, Which Seemed like a lot of the time, but now it's not, It's not a lot. If there's any risks, you know, right involved, you could get to get back to break even pretty, pretty quickly. If people leave That first year, the ration was very much a case of see,

00:16:12 I didn't know what I didn't know. And then literally the weekends, I moved back from the ski slopes to Sydney permanently the guy that had the space next door to us said, look, we're moving out. We've only got six people in this big space. Do you want to take the back half of the office? So we then spent the next couple of months essentially doubling that location and went well more than double.

00:16:37 And I went from 26 desks up to 80 desks, Still open plan. We had one or two offices, but everything else was open plans still. And that was, you know, 2013. So once again, the design language, hadn't caught up to speed, at least where we are now and change. We're very much looking for cost-effective and flexible options where they could sort of expand their team.

00:17:03 And we'd see that time and time again, we'd see one to two person companies come in and then by the time they exited out of Your Desk, they were at 10, 12, 15 people and, you know, looking for their own space Or were they mostly tech companies? Like what was the makeup of your membership? No. So we have a lot of tech focused coworking spaces set up specifically in Sydney and some other little cities in Australia.

00:17:26 So they tended to grab the traditional startup ecosystem. And so we were always focused on sort of creative individuals and small scale professionals, which I think still to this day are sort of underserved, you know, four person, accounting companies, two person legal teams, you know, three person recruiting teams. And then you've got agencies of every description, social media agencies,

00:17:50 digital agencies, design agencies. So we really just focused on that group and we really made the space really inviting so that people would love to bring their clients in. And, you know, especially if you're a creative, you really want to sell that as one of the benefits of the company that you're working with. And then What was it about the space that made it compelling to clients or made them feel comfortable?

00:18:17 What were some of the things you did? The first thing is what we've done in all of our offices. We've got really high ceilings, you know, like we're talking 15 to 25 feet and that in itself really sets you apart from, I think your average space, because you've got vertical space, you've got just a really nice aesthetic. It's like all the like a hundred year old buildings that we're in and people still to this day love it.

00:18:45 I mean, there's a lot of building challenges and a lot of operational challenges around having such an old space, But from an aesthetics point of view, it really knocked it out of the park every time. Did you design, did you do like the interiors design yourself? So my mom's an interior designer. The family is like self sustaining In my family.

00:19:11 My mom's an interior designer, my brother and I both builders. And then my sister is a creative director, specializing in events, planning, Sorry, I'm very much leaned heavily on the family and still to this day, you know, it's a family run and owned a business. And I think that was partly because we had so many complimentary skills to sort of put into Your Desk in the beginning.

00:19:33 I love that how was work, how was working with the family? How does that go? It's being, it's being challenging and rewarding equally. You know, I think with family, you never have to pull punches with what she had made or say. Yeah. I think the downside is sometimes you should probably pull punches with what you mean and say,

00:19:53 because you know, you're working with that person and you know, sometimes you feel so passionately about something and sorry that I, and if you're in a traditional workplace context, you would definitely find some appropriate languaging to sort of communicate how you feel. But I think with a family setting that can sometimes get thrown to the side, I think the other big challenge is,

00:20:15 you know, I originally founded Your Desk myself and you know, my mum helped me set it up, but my dad didn't join until a year or two later. My brother didn't join till a year or two later. So, you know, it's always been hard to the like telling my dad what to do. That is something still 10 years later,

00:20:33 it doesn't really come that naturally to me. Right. There's a lot of wiring that I don't tell dad what to do. Yeah. Yeah. We've gotten into a nice, happy medium even to this day. I don't call him dad at work. I call him by his name now because people get really confused. They're like, I get it. But like that person you're talking about,

00:20:52 what's his name? You know, just simple things like that, but it's been really rewarding. And you know, especially having young kids, nobody understands that better than my dad and he's thrilled towards let me, so they have some extra time off in five minutes being with the kids and you know, vice versa. He'll also take them if like, you know,

00:21:12 if the kids are sick and my wife, can't not go to work, I can just bring them with me to the office. And one of us can take care of them. And that's really nice. We are kids in general allowed in your space. Can members bring kids? Yes. Within reason kids and dogs have essentially the same policy, which is so long as they are well-mannered and don't impact on the professional professionalism of the office.

00:21:39 Then we're more than happy to have them. So generally speaking, we'll see, you know, one or two kids in during school holidays, maybe in a meeting room, watching a movie, we're fine with that, you know, but I think that takes away from the experience at all. If you're just a person coming in for a meeting, Totally.

00:21:55 Hey, I just wanted to jump in really quickly before we continue with our discussion. If you're working on opening a co-working space, I want to invite you to join me for my free masterclass three behind the scenes secrets to opening a coworking space. If you're working on opening a co-working space, I want to share the three decisions that I've seen successful operators make when they're creating their Coworking business.

00:22:20 The masterclass is totally free. It's about an hour and includes some Q and a. If you'd like to join me, you can register at Everything Coworking dot com forward slash masterclass. If you already have a coworking space, I want to make sure you know, about Community Manager, University, Community Manager, University is a training and development platform for community managers.

00:22:43 And it can be for owner operators. It has content training resources templates from day one to general manager. The platform includes mini courses that cover the major buckets of the Community Manager role from community management, operations, sales, and marketing, finance, and leadership. The content is laid out in a graduated learning path. So the Community Manager can identify what content is most relevant to them,

00:23:10 depending on their experience and kind of jump in from there. We provide a live brand new training every single month for the Community Manager group. We also host a live Q and a call every single month so that the community managers can work through any challenges that they're having or opportunities get ideas from other community managers build their own peer network. We also have a private slack group for the group.

00:23:37 So if you're interested in learning more, you can go to Everything. Coworking dot com forward slash Community Manager. Okay. So first desk expanded your we'll link to your space in the show notes, by the way. It's beautiful. Yeah. I mean, I could, from the pictures, I'd love to visit someday, but okay. So expansion than what?

00:24:01 Well, we really just kept expanding based off the money we learned, we were very much sort of a bootstrapped company. So we took a second location in Sydney CBD in 2015, which was three floors, 900 square meters. I think it's 9,000 square feet give or take In 2018, we then took three more floors in the building next door to ours.

00:24:29 And that was also about another, you know, 9,000 square feet. And at that point we were starting to get smarter without design. So, you know, we started to have a lot more offices, like 60, 70% offices, 30% open planets. I mean, I love that your first locations worked with open plan. They stopped working was the problem.

00:24:52 Okay. As you say, for anybody listening, right. That generally doesn't work. I get very anxious. Somebody emailed me recently and wanted to do only open plan. And I was like, I cannot support that. I am not going to answer any more questions you can not do only open plan. Yeah. Look, it's not to say that it can't work,

00:25:12 but you've really got to have something unique and special about what you're selling and what you're providing to make that a feature. Otherwise, especially post COVID people just want private space and there's just, there's nothing around it. You know, we, our 2019 expansion was just larger offices. It's literally a hundred percent office space. And it was around that time,

00:25:38 we realized our very first location on the city fringe wasn't working. We weren't finding the people, people, it was getting tired as well. You know, it was like seven or eight years old. So we're getting to that point where we need to sort of like reinvest another couple hundred thousand to like redo everything. No, that's the trick with the 10 year lease.

00:25:54 Isn't it? Because at some point, yeah, you gotta, you gotta refresh and have budgeted for that. And you know yeah. Like the furniture we had seven years, the furniture was generally good, but like the carpets and you had to paint, you know, a lot of yeah. And just things change, right? Aesthetics change, preferences,

00:26:13 change, you get sick of the space. I was like, no more orange chairs. I can't take it. Yeah. I think also sometimes you can see a little problem and go, oh, I'll get to that. And you know, like sometimes it's a year before we go, that problem I've seen for a year. I really need to fix because I'm slacking.

00:26:35 But no. So 2019, we actually decided to sublet that first Coworking location, which was about mid 2019. And we found one company to take it. We had back-to-back agreements between our head lace and then the sublease. So we had no risk and goals and that worked out fantastically because as you know, that was nine months before COVID kicked off. And that's,

00:27:02 it was on, is about 20% of our cash flow, but that really locked it in and made it a lot more stable. And we had a really good base to ride through the next couple of years with COVID. So really was very happy. We did that, especially for such an underperforming asset. And I don't think we'll turn it back into a coworking space again.

00:27:22 So you still, but you're still now in the CBD. Yeah. So we still have 1800 square meters. So 18,000 square feet of co-working space in the city, we have opportunities to take, I think, four more floors in our building at the moment. So we're, you know, talking to the landlord about what that looks like and Hey, by the way,

00:27:49 have you heard of this thing called management agreements? Maybe we could do something there instead and renegotiate everything. So, you know, it's been equal parts, challenging and exciting to sort of see Coworking sort of evolve. And really, I don't want to be dramatic, but so the Phoenix out of COVID to be this thing that has gone from, you know,

00:28:09 I thing we used to have to teach people about to like the most desirable sort of sub sector of commercial real estate now. Yeah, Yeah, yeah. It's yeah. Amazing nursing. So the CB the decision to be in a CBD has not been an issue post COVID. It has been at times it's not come, we didn't have our challenges. What did your occupancy do during COVID We?

00:28:40 So we had two main lockdowns. We had one in 2020 where our government said, basically, if you can work from home, you must work from home. It was quite strict. And that was from, I think may till about October. And then again from like July through till December, we had essentially that same thing in 2021. So during those times we had a couple of large businesses stay with us,

00:29:06 which was really fortunate. I'm still to this day, very thankful for their support. And, you know, if we went down to sort of 35% at some points, and then we'd sort of chip back up to 50 or 60% and the second lockdown would come and we went back down to 35. It seemed though, like we had sort of a really cool group of people who were staying with us,

00:29:28 but I even feel then their patients are starting to get thin towards the end of 2021. I'm sure. So will you still pay, were you paying rent during the lockdowns? The Australian government have a thing in place where landlords were forced to come to the table and drop down their rents in line with what your turnover was from like say that month compared to that month in 2019.

00:29:54 So if you lost income, they had to feel that if you didn't, That was, for example, one month we lost 70% of income compared to that period in 2019. So we got our rent reduced by 70%. Then all of that reduction, half of it was waived completely by the landlord. They couldn't get that back. The other half was deferred,

00:30:19 which meant that we had Your Desk had to pay for it at some point in the future. So what's effectively happened is we've got like a, let's call it an interest free loan for a two to three year period. But for your, this we're coming out of it with, you know, at least a quarter of a million dollars in, in additional debt that we never,

00:30:40 we never budgeted for. And that's really difficult because there are expansion opportunities, but also we need to honor the deaths that we've sort of built up over COVID and we're trying to find that balance. Yeah. Wow. Although it does seem like a reasonable approach to ask the landlord to sort of share in the pain, but if a company didn't lose revenue,

00:31:03 I would hear that from folks in the business who were also landlords and they'd say, well, I have, I know I have tenants that didn't lose revenue, but they're not paying so, but still, wow. So you mentioned, you know, potentially looking at a way to partner with the landlord. And I would guess part of that is like,

00:31:22 right. How do we sort of come out of this together? I remember Brad saying from hub Australia that, you know, you made the point earlier in our conversation that vacancy rates were so low, that there was just no interest in management agreements. No, thank you. I have a high credit tenant that would gladly pay for the space. Has that shifted post COVID what's?

00:31:46 What do you think the temperature on that? I heard some funny stories prior to COVID that, you know, you know, a hundred year old beautiful building is like say 50,000 square feet. You'd have five to 10 coworking spaces, all submitting offers to take that building. So of course they weren't going to be that flexible because they, the mom was through the roof.

00:32:08 I think Pauline through that process, I explained with sort of how landlords had to negotiate with tenants during COVID that's really, to me, at least for the strained market opened up this thought that, you know, landlords do and should have to share some of that pain, whether the government says so or not. Yeah. And I think the, the robust benefits that Coworking brings in almost any market,

00:32:35 except for like, you know, lockdowns can really take building and maybe shift the risk profile from what you typically see on your average commercial real estate to the holding. So we're really saying, look, you know, we've already got this framework in place where we've been adjusting our rent. So that according to our performance, we'd like to consider do something like that in the future,

00:32:57 but obviously make it advantageous to use that genuinely speaking will never happen. And then as a part of that, you know, we've got this sort of new facility in place that is, has different demand, curves have, has different offerings even has different customer base. And so our income as a space is protected and therefore your investment in our space is protected and we really think it's near should consider.

00:33:25 Yeah. So are you thinking about working with the landlord to be a kind of a broader amenity for the bill? So you're in two buildings that are next to each other. We're in two buildings next to each other. If we took all the spaces in our primary building where our reception is, we would have access to a ground floor, which would be great.

00:33:48 People would just walk straight in, off the street, have access to a rooftop, which would be great. We could have events and communities in the evenings. And more importantly, with the exception of one other floor, we'd actually have the whole building. Oh, wow. Okay. It's a smaller building. And I think by default, you know,

00:34:07 we will eventually sort of just be managing the building because we've got the whole Yeah. Which will bring some interesting flexibility in terms of yeah. What you do with the space and will you, so then you have a space next door. Have you, have you thought about the, like the HQ model sort of the, like we'll take, you know,

00:34:29 2000 feet and give it to one company. Yeah. There's a lot of those companies already doing that. Like I feel like that's not sort of a point of you like the sort of smaller spaces, higher service. Yeah. I also, I've always thought about, you know, this concept of sticking to your knitting. We've got a lot of big companies,

00:34:53 venture backed companies in Australia. So there's the hub. We work as code commons, surf, Corp Regis, they're all super Intercore as an Australian company, Australian, We've got all these companies that have gone the venture backed road and have millions of dollars to deploy. And they're doing that, let's say 100 person plus enterprise space. Perfect. Yeah, We don't have the team or the resources or frankly the know how to sort of pull that off.

00:35:25 Our biggest office is 30 people. Okay. It's still, 30 is 30 is fine, but like 30, I could still know everyone's name and a 30 person office and a hundred person office. That's not happening. I know Brad had mentioned that in, Brad's been on the podcast. It's been a very long time, but yeah. But it's really different when you go to significant scale,

00:35:48 it's just a different business. Yeah. Different based entirely Danny, in addition to that, we never built one or two person offices. So the first office you can get in our space is a four person office And that's a huge missed opportunity. So we literally want to go and take floors and just turn them into one person offices, because that's really where that's where the most demand in the Australian markets.

00:36:16 I know. No that is everywhere. Actually. I have another podcast interview later this week. And my question to that, and I'll ask you since you're, you know, I assume you manage your build-outs. I mean, the trick with that is that build-out gets expensive really quickly. Yeah. A lot of walls, electrical, HVAC, all the things,

00:36:39 but you would still do it because the demand is make sense For a couple of reasons. The demand makes sense. Also it's a segment of sort of the Australian Coworking marketplace that we're not capturing at all. And I really think that had, we've had one person offices at the end of lockdown. They literally would have been the first to go. Yeah.

00:37:03 And so our recovery, might've been a little bit faster if we had that, you know, so I think to anyone thinking about, you know, should I shouldn't, I think about all the money that you losing having, you know, a 30 person office available for six months, we've had whole floor string COVID that haven't been touched for 18 months because you know,

00:37:23 nobody was interested in, in bigger spaces, Right? Yeah. Yeah. I'm impressed with your recovery, given that your office has started for, we learned, right. I know you've seen such a, I mean, starting with full open plan and then 10, 12 years later, you know, Going all one person offices. Yeah. So you have to be willing to,

00:37:49 you've been in for, for quite a ride. Okay. So you let's see what so office, okay. Looking at my list of questions for you, what does, so you mentioned, So you mentioned, you know, being inspired by Tim Ferriss four hour work week and coming back every other week or so to manage the space, I'm interested to know now that you have,

00:38:20 you know, roughly 18,000 square feet, what does your team look like? How do you, how do you manage the space? Yeah. How has that evolved? I'm guessing it may be shrunk a little bit through COVID or not. Yeah. I mean, we've got two and a half people running the whole thing. Okay. Yeah. So, you know,

00:38:43 my mom's on board. She, she manages a lot of the cleaning, a lot of the design or the styling. So it just keeps an eye on, make sure that we keep a high standard. And then day-to-day, it's just my dad and I sort of running the space. We're still a very low touch self-service space. We've set our pricing accordingly.

00:39:02 And I think that's one of the things that we're sort of unique in the market. Lots of people throwing lots of money into high-end amenities and coffee shops and all this sorts of thing, which is great. I love it. But that doesn't mean there's not a market for other people that, you know, just want something a little simpler. So you ha you guys,

00:39:22 between you and your dad, you handle marketing, lead gen tours, operations, all the things. Yeah. Everything, everything accounting, you know, space management, maintenance. I'm even putting on my tool belt on the weekends and going in and patching walls and Maybe March, I live two hours away. So I've actually In Sydney, My home two hours north.

00:39:51 So when I'm in Sydney, I work from so like seven in the morning, I just punch it all out. And then when I'm at home, I, you know, that gives me the space to go. I've done a really good job. I can relax here. Yeah. I kind of love that. So I also love, I think you're a great case study for knowing like who you serve,

00:40:15 how to set up a space to do that and what your team looks like and what, you know, it's aligned. It's all aligned. Yeah. Over the years, I have been primed to over promising multiple different times and almost always, it blows up in my face. You know, don't write a check that you can't cash. Yeah. It's really difficult because once you've disappointed them,

00:40:42 you need to work doubly as hard to get back to where you started essentially. And so over the years, I think just saying, no, we're being really realistic with our capacity has been really helpful in, in sort of guiding us out of some sticky situations. So how do you attract your members? What is your lead gen look like? How do you,

00:41:05 how do they find you? Sure. We have a couple of methods. We still, to this day, we've never done any sort of social media advertising. We do do social organic social. You don't do social. Nope. We were. I'm very bad on social. No, it's so interesting. I love that. You're just like throwing that out there.

00:41:28 No, my Instagram account right now and I'm pretty sure the last post was 2019. It's not something I'm proud of. I'm getting people involved to help me. Well, what, tell me about that. Do you think that there is a missed opportunity or do you just feel like you should? I don't know. Like we, I know a lot of people use Instagram for slow,

00:41:49 like checking out a portfolio, so to speak how businesses are interacting. But you know, around the time we had an agency take care of it for us and they did a terrible job, They were really expensive. I bet Generic. It was just a, it was a company isn't in the space at the time. And they had friends that did this other thing.

00:42:11 So it was just a bit generic, just a bit basic. We, as the owners, weren't passionate about it. So we weren't interacting with anybody in any way. And I think going back to, I was talking about, it's one of those things, if you're not doing it well, sometimes it can work against you. So we've typically just done advertising with real estate agents.

00:42:32 That's sort of work local in the area and a lot of the ministry, no understand Coworking. Yeah. So a lot of commercial agencies, Again, you're on the forefront because ours don't know, sorry to anybody listening. Cause the broker who does, they know they're in the minority, A lot of large commercial leasing agents have a Coworking arm. Now they have one or two people that do the exact same thing,

00:42:55 small. So we've been working with, you know, let's say a dozen different companies. So they're helping us refer leads in. We Do pay a commission for that. Yeah. It's usually around 10 to 15% of whatever the contract value is. We also just have our own website, which performs reasonably well performs better than it should. Once again, given the amount of effort I've put into it.

00:43:22 Yeah. Although you have the benefit of longevity. Yes. Yeah. Which helps. So we're, you know, really looking into sort of doubling down with a lot of the Google sort of stuff. So Google reviews, you know, making sure we're answering calls. So they're coming in off Google, that sort of thing, Especially no ads just SEL In running any ads.

00:43:49 And you know, that in itself sort of picked up the space from like 30 to 80%. And then I think the other two really big things was we just kept touching base with our existing membership base and said, we've got more space available. What are your plans? And a lot of them just upgrade. And so, you know, we play with a Tetris,

00:44:10 10 goes to a 15 and a six goes to a 10 and then the fall goes to a six and then everybody's happy. But you know, we've turned all our open plan desks now into hot desks. We put 27 inch monitors on them. So I think for the first time ever, we've actually got a product that could really benefit from proper advertising on social channels,

00:44:31 you know, communicate the benefits. Yeah. So I, but I think it's interesting, you sort of 80, 20 you're marketing, you're like, look, we're going to get most of our leads organically or referrals or through internal growth, right? Like that's the best when you can just sell more to current members. I, you know, the coworking spaces I think tend to take social very seriously and I,

00:44:57 it can be important, but I also do think, you know, I ran a space in downtown Chicago and I just felt like this little like cog in a very big wheel. And I, you know, I think social can be really critical when you're in a smaller town and you're really interacting with other local businesses and there's a real community like connection to the outside community.

00:45:21 I think it can be hard to feel that and to feel like it matters a lot when you're in a big city. I mean, while I've learned over the years is whatever you do, you just have to be really authentic about it. Every time we haven't been authentic, that person leaves within six to 12 months. Yeah. They don't, they're just not aligned.

00:45:39 It's not a, Probably the COVID we used to track sort of our customer lifetime value and lifetime sort of time spent in the space. And it was over 40 months. Wow. The average average client. And so that meant that we also, we weren't having to replace them every 12. That is a big deal. Isn't it? In this business,

00:46:02 I was the GWA did a marketing, a sales topic for one of their webinars recently and I didn't make it live, but I was listening to it after the fact. And you know, they were talking about sales and CRMs and their processes and, you know, Kane, Wilma, who's a great operator said, they're, you know, they're basically turning their business every year,

00:46:27 Which is Cotton, right? Like you got to have a serious marketing engine for that. And so if you've got people staying for 40 months, that's amazing Also think of this, Jamie. So when you get in a new employee on, everybody knows that takes, let's say three to six months to get that person really up to speed, the same thing with a member,

00:46:46 you know, when they join your space, it takes six to 12 months to really get comfortable with everything and how it works. But if that member's been there for five, six years And it really adds to the community, it makes it really authentic because they've literally lived in that space for, you know, half a decade. Right. So you benefit from that too,

00:47:04 because even though you have a lot of private space and you're not especially high touch, you have like this organic long-term community probably knows each other. Has that been in the space for, you know, five years each and fantastic. Yeah. That's amazing. Okay. So since your mom is the designer, I didn't confirm this before we talked, but I heard you mentioned on a call,

00:47:28 like one of your strategies about offering some custom design for your offices. Can you talk about that? Yeah. We, I think going off, you know, companies staying so long, they're going to be in this space. We'd love to see them make their own investment to so that their immediate workspace, it works generally with offices only, but anything we can do to make them feel more comfortable to make it feel more customizable is great.

00:47:57 So, you know, like I said, I'm often thereafter hours hanging up TVs for clients. We'll often saw some fake plants or, you know, a bookshelf and we'll style it nicely. Often the company has their own ideas and they'll, they'll brand it inside. They'll, you know, set their desks up with even simple stuff like monitor stands and everything that they need to make themselves feel really comfortable.

00:48:21 And, you know, that's sort of doubled down recently because everybody's zooming. And you know, if you a professional provoke approaching this professionally, what you want to do is have a beautiful backgrounds. Yes. Not my garage. Right. Although it is a unique background, it's memorable. I look, you know, like this backgrounds, it has a lot of interest.

00:48:49 It's not just a white wall. I think that white wall Totally the white wall. I totally agree. I see a lot of white walls and photos. I think the styling makes such a difference. We had, I had a member who in Houston and she she's like, I can't move this office. And finally she painted it a really bright color,

00:49:11 but she styled it and she's like sold, done, you know, it just took a little, so do you take custom, how do you, do you charge for custom design requests or how do you manage that? It depends being a very small company. We can be quite flexible and we don't necessarily have to have these like corporate rules that govern how we operate.

00:49:33 So for example, if somebody wants a whiteboard and I've got a whiteboard in storage, I'll just give them the whiteboard. If somebody is after something a little bit more complex or a little bit more involved and we just sit down and we work out the price, and if that's something that they're willing to pay them, we set it up, you know,

00:49:50 we've done 30, $40,000 fit-outs for sort of clients that really want to make it special. And then we've had others that are like, can you just hang this one picture or this one decal on the wall. So it's a pretty big gamut To the bigger build-outs. Do you then ask them to commit to a term? Yeah, always. I think always be clear with sort of what you're doing in terms of wherever you've got services being changed for money.

00:50:18 We really clear contract does nothing but health. It just says, this is what I'm promising and the exchange, this is what you're promising. And if we both do everything right, we even need this piece of paper, but you know, it fit ounces complex. And sometimes I think the most complex thing is actually communicating what you want versus what you get.

00:50:39 And so trying to make that process as clear as possible, really sort of mitigates the risks involved in it. Yeah. How long are your typical, do you require a year when someone takes an office or what are your terms? We used to, since COVID hit, everything's been month to month, we're actually looking at July. So there's like coming back into a lot of the things we used to do before COVID.

00:51:04 So we used to have pricing discounts. If they're on 12 month agreements, be about 10 to 15%. And if they want to go month to month, super happy for them to do so it's just a slightly higher rate as well. So we're bringing that back in. We used to do 15% offer everything if they were 12 month and we typically wouldn't sign longer than 12 months because there was just no benefit.

00:51:30 They really pricing stayed very consistent in Australia for a number of years. I think it will start to spike. Now that demand is grown so much. And we'd like to have that flexibility to really move with the market. Cause it's been tough the last couple of years. Yeah, exactly. Yeah. And certainly right. Not taking pricing on renewals, but even though,

00:51:50 okay, so you used to require a year, but people were staying longer, so they would just sort of auto renew. Yeah. Pretty much just the contract roll over to a new agreement, easy to write and easy to enforce. Do you have to ask a tactical question? Cause everybody always wants to know, do you use a space management platform?

00:52:14 Like an officer and B or a Yeah. Having two of us has been really important because you know, we don't have the resources to, to follow up everything ourselves. So we've got Office RnD, which is the main system and then we've just clipped a bunch of stuff onto Office RnD. They're just sort of like build it out a bit further. So,

00:52:34 you know, we used to have direct debit. We get 80% of our income on the first of the month for that month. Yeah. But he who doesn't do that. I think it's totally crazy. No, I'd run Your Desk for the entire likes of the nine years before. COVID that way very used to it. And then we decided when COVID hit,

00:52:55 everybody was a bit iffy about their cash flow. So we turned it off And our accounting got really tricky and really messy. And I was like, These guys pay and yeah. Yeah. So we're now once again, we're actually looking at switching providers, but we're going back to a direct debit system. We're going to go back to automatic contracts on hosted on Office RnD.

00:53:16 We're going to go back to, you know, all the bills being processed through Office RnD. We've got easy, which manages our printing software. We have a package in which managers, so the reception packages coming in the Package then, And, you know, Office RnD is built out new, like the reception app as well so that people can know the guests when the downstairs,

00:53:39 so, and we've got, you know, beautiful iPads on every meeting that makes it so easy and so clear to see what's available. And when the NEDA, Yeah. What about door access? What do you use for direct access? Most of our access, most of the offices aren't walkable At all At all we had. So we ordered these sliding doors.

00:54:04 I didn't realize at the time sliding doors, lot harder to lock them. Oh my gosh, they're totally harder to lock. Yeah. I didn't know that either. I had some startup school students who did the sliding doors and tried to salt, you know, you salt out when it's like the hell a lot of trouble with those. It wasn't a big deal.

00:54:20 We figured out you can just have a sort of a pin drop into the ground, the pin drop into the ceiling and then the door locks. And then during the out process, we found out that we had a cistus flooring. And so all of a sudden we couldn't fix anything to the flooring at all. So we just don't offer it. And you know,

00:54:44 we do lose some clients because of that. But everyone else, like the floors are lockable. You know, we've got key access to every floor and because we've got multiple floors, we can have just one as the, sort of the reception area where there's public access and everything else has private access, Which sounds Good to really meet the guide from that point of view.

00:55:06 And we're not very concerned about it and neither were our members. Yeah. Well, especially those that have been there for a long time, it probably just becomes like, yeah, it's fine. I've had two people claim that some plumbing was stolen and they found it. And we had one break-in Where like four or five things were taken. Ironically, they don't take iPhones,

00:55:30 iPads, computers anymore. They're all too trackable. It was just using a bottle of scotch. You know, we replaced a lot for like 500 bucks. Wow. Wait, I want to go back to your expansion because one of the things that some folks struggle with is funding expansion. You did, you fund mostly with cashflow, but you just kind of wait until you can do the next one.

00:55:56 And then when you had three locations, did you ever, did you have a Community Manager at the open plan location that's not in the CBD or was that still, was that kind of self-serve okay. We, they were close enough. They were like within a 10, maybe 15 minute walk from each other. So it was quite easy to go from one position to the other.

00:56:17 We generally have someone there from like, say 10 until two every day, but probably not full-time. Yeah. And you know, given the way we'd built that community out over years, everyone was fine with that. It worked. Yeah. Yeah. The staffing, the humans, it's one thing to be able to invest in a build-out and then another to add people as you expand and then you've not ever run ads.

00:56:43 So your marketing's always been organic, which I feel like is lucky. Yeah. Yeah. Don't try this at home for anybody listening. Look, it's been very lucky and you know, every time I've gotten close to running ads, we've just picked up a big client and Yeah. But I am very aware of the fact that probably some of the other people in the Australian Coworking market have bounced back faster because of,

00:57:13 And it's something that we should focus on probably six months ago to sort of understand and get ready for this period. Now Always evolving Carl, you, I mean, after you said 11, you're turning 11 soon Next month. Okay. So right. So you gotta have some challenge left to, so, I mean, that's maybe, maybe a good question to end on is what's next?

00:57:38 You talked about maybe management agreement. Maybe if you have to take over the building any additional locations, are you going to kind of stick to your knitting as you? Yeah, I think it's taken me 10 or 11 years to figure this out, but it's, I feel like it's been like a day. I mean, does it, has it just gone so fast?

00:57:57 Depends on the day it feels like either a day or a lifetime. So Especially through COVID yeah. Well, you know, like I'm only 35 people my age. They don't stay in jobs for 10 years. No. Oh my gosh. Yeah. So, and that, honestly, that was why my brother left. He was like, I've been here for seven or eight years.

00:58:16 I, I want a different challenge. You know, he's, he's three or four years younger than me. He's like, I'm done. I want to go do my own thing. He started up his own building company now working with events, producers. So yeah, it's, it happens all the time, but you know, I've always been really passionate about Coworking.

00:58:36 I found a very, you know, I had mental health problems for the first time during COVID, which I sort of struggle with. Cause I've always been really optimistic about the industry and you know, so they're coming around the other side again, I've started reconnecting with the community. I think that's been something that I've missed. I noticed that once a couple of years ago,

00:58:55 hadn't been to a juicy in a couple of years and it was getting into a bit of a funk. And literally by the time I came back, I was so full of energy. I was ready to take on the world. And then we had the same thing in Australia. We just launched the flexible workspace association To talk about that. Cause for anybody listening,

00:59:13 who's in, I'm guessing word of mouth is fairly well. Australia is a really big country. Yeah. So maybe word of mouth isn't as easy as I is, I think, but yeah. Share a little bit about that. Cause I know Fiona was spearheading that, right? Yeah. We look, we had some of the best minds in Coworking in Australia.

00:59:34 So they've like, come together. We I'd been a part of two other attempts previously and I don't think there was the right mix. And I think everybody finally understood what we wanted the association to be what its goals were and how that would help all of us. And you know, it's been fantastic. We've only been going, I think we'd launched the start of this year or September last year we launched so still quite new,

01:00:01 but you know, we're tackling it from a bunch of different angles resources for sort of people within Coworking to make them better, you know, working with government, working with industry to make sure that they understand sort of what we're doing and you know, really shaping the narrative of our industry and, and how it's perceived by the wider market. I think there's a lot of value in that.

01:00:21 Yeah. And a new challenge for somebody who's been doing this for 11 years, You challenge. And as an aside for me, it was the first opportunity since COVID hit to really reconnect with my peers, you know, I bounce out of my funk and that was fantastic. So It's Coworking it's re can be for, for owners can be lonely, Very lonely In your garage.

01:00:43 I mean, I know, I know you're running this phase for a month, so you're just taking a break, but yeah, it's, it's a strange, it's ironic. Yeah. A lot of your members aren't necessarily your peers because you're on a different levels. So Yeah, there are very few people that I can sort of go to and say,

01:01:03 I had this problem or Hey, is this funny? Really understand my perspective on, on the matter. So Yeah, you're the owner. Well Carl, thank you for sharing your story and some of your learnings. And I think just people love hearing other people's stories and how they approach their business. And I'm always so grateful when people are willing to share.

01:01:26 So thank you for taking the time to do that. Having me, like I said, it's been a real pleasure. I've been listening to you for years and really excited to be part of it. Yeah. Thank you. Hey there, thanks for sticking with us through the end of the episode, don't forget to subscribe on your favorite podcast player. And if you were enjoying the podcast,

01:01:47 please go leave us a review. It helps other folks find the podcast who are thinking about starting a coworking space or already operating a coworking space and are looking to stay up to speed on tips and trends. And we started a YouTube channel. We'd love to have you catch us on video. You can join us for podcast, videos, and Q and a videos and other things that we post to the channel.

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