330. Ten Criteria for Buying or Selling a Coworking Space
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330. Ten Criteria for Buying or Selling a Coworking Space
00:00:00,"Welcome to the Everything Coworking podcast, where every week I keep you updated on the latest trends and how tos in Coworking. I owned and operated Coworking spaces for eight years and then served as the executive director of the Global Workspace Association for five years. And today I work with hundreds of operators and community managers every month, allowing me to bring you a thought provoking operator,"
00:00:26,"case studies and inspirational interviews with industry thought leaders to help you confidently stay on top of what's important and what you can apply to your own role in the Coworking industry. Welcome to the Everything Coworking Podcast. This is your host, Jamie Russo. Happy New Year. This is airing the first week of January, 2024. Here we are. I am not fully back to the office,"
00:00:55,"although I worked all day today. My daughter's out of school this week, which drives me nuts. I wish she had the two week before Christmas off. She does not. And so I feel like everyone goes back to work on the second. And I still have a kid at home that I wanna spend time with and my and eight gram three does not like it when everybody else is back to it."
00:01:15,"And I'm not quite there yet, although I do have a full day on Thursday and Friday. So we are actually in Trekkee waiting for snow at Palisades. We're getting some overnight snow. My daughter is frolicking on the deck because we have a few fresh snowflakes. It has been very sadly devoid of fresh snow. The mountains are making some snow, but the skiing has not been very exciting yet."
00:01:42,"As a matter of fact, on Saturday the day before New Year's Eve, we went for a stunning hike with no snow. Here we are. That's okay. We'll take what we can get. We'll make the lemonade out of lemons. Okay, so while I am not technically working this week, things mostly that just means I'm not taking meetings, I'm sneaking in the work and working on some fun projects that I thought I would start sharing a little bit about."
00:02:13,"So one of the topics, so we, we get a lot of inquiries and lots of inquiries from building owners who are thinking about doing Coworking spaces. We've been very busy working with those folks. If you are one of those folks, we do projects with building owners, thinking about doing their own space or partnering. We help them understand the business model,"
00:02:38,"do a feasibility study, et cetera. So I'm actually working on one, I won't give away all the details because we'll keep that, we'll keep that private to the building owner, but I'll share some case studies at some point. I just totally nerd out on these. I love this. I love, we have some really good frameworks. We improve them all the time and most of the landlords just wanna see the numbers."
00:03:02,"But we'll talk about some things here today. It is not just about the numbers, we can't start with the numbers, we have to start with other things. So we'll talk about, we'll do a case study on one of those. But one of the other topics that comes up a lot is buying and selling Coworking spaces. So people I, I'm gonna try to sort of look at this from maybe both lenses from the buyer and the seller."
00:03:25,"I actually sold a Coworking space. I should start with that. I sold my Chicago Coworking space to a brand that was operating in Minneapolis and wanted to test the Chicago market. It was after I had moved to the B Bay area. So I was running a location in Chicago and running, running one in Palo Alto. This was in like 2013 to 2016 ish."
00:03:48,"I operated in two very distinct markets, which is an anti scaling strategy today for brands who have expanded. Know that the ideal approach is to do a little, you know, hub and spoke approach in a market. So if you're gonna go in, you wanna have line of sight on multiple locations that are at least within driving distance. It doesn't make a lot of sense to,"
00:04:14,"there's just no synergy to having one in one market and one across the country. I learned a lot that I can share with you though. So I did sell a Coworking space, so I have that perspective. That was a long time ago now though. That was in 2016. Crazy. So that means that was eight years ago. Wow. Okay."
00:04:34,"Anyway, trip down memory lane. But this is happening a lot today and it happens for many reasons. I had moved so that was a life change that I, you know, had not expected and I held onto that location 'cause it was my baby and I did not want to sell it and it was doing well so I didn't wanna leave it. It had did have some challenges,"
00:04:54,"that's for sure. And so people may have life changes, the business may not be super profitable. I think that's the most common reason that people will be looking to sell. Maybe they, you know, need to take care of someone in their family, maybe they've had another kid and it's really hard for them to kind of manage a business that they started."
00:05:17,"Who knows lots of reasons for wanting to sell. I will say that the, I think there's a little bit of a myth when people talk about kind of overall, you know, macro industry trends. I, they talk about sort of, you know, roll ups and that happens, you know, in a lot of industries, right? Where bigger brands will acquire smaller brands and then the,"
00:05:40,"the industry will become less fragmented. I think that's very hard to do and does not happen very often in our industry because locations are pretty specific in terms of look and feel. It's hard to take over another location for a brand that already has very specific brand standards and look and feel customer experience, the kinds of locations that they like. So it's much easier to start from scratch than to convert a location."
00:06:12,"And also I think this is probably a much bigger factor is that profitable locations typically don't want to sell unless they have something come up in their personal life that makes them want to sell. But even then you can run a location remotely. I ran a location when I lived remotely in northern California and ran a location in Chicago. So that's also not a reason to sell."
00:06:39,"Lots of operators run locations in other states. So usually the challenge is that the operator kind of got it wrong, got the location wrong or got the product mixed wrong. And that is usually most typical. So there's a product market fit issue and it's usually around the build out of the space. It's not big enough or it doesn't have enough offices and that is expensive to fix."
00:07:08,"So I think that is one of the biggest challenges in our industry is that if you get that wrong, you've gotten that wrong before you even open your doors and is really expensive to fix and it will impact your business for the life of the business and it'll make it very hard to sell. This is why we're so passionate about our Coworking Startup School program."
00:07:31,"Our whole mission is to get in front of you before you open a Coworking space and help you really understand the business model, get your real estate deal structure right, pick the right location, get the right location size, and get the right product mix so that you have a really good product market fit and people really discount how important that is or think it's easy to figure out."
00:07:52,"And it is the reason why I saw a stat, I think Poloto mail published an email and I think it was, maybe it was their last, it might have been a subject line snafu, but something about, you know, 50% of Coworking spaces are not profitable. That is because of what I just described. Wrong product mix, wrong location, wrong size,"
00:08:15,"it's as simple as that. The rest of it is fixable. And most Coworking space owners are totally equipped to fix customer problems, staff problems, pricing problems, that stuff fixable. So I am not sure I buy, I think the sample size is, has some challenges, but if it is the case, the 50% of Coworking spaces are not profitable."
00:08:42,"It's because they're too small and they don't have enough offices, which makes them very challenging to make profitable. And again, those mistakes are made before you ever open your doors. If you're thinking about opening a space, come join us. Actually our next cohort starts on January 11th, which is next week. We have several folks enrolled so far. We have a great group,"
00:09:03,"we're excited. This is our, might be our fourth cohort that we're running live and we, you don't have to come live, but we'd like you to come live and we workshop all of the sections so you really understand the process. Okay, anyway, I'm digressing a bit. Let's dive in. I wanna walk through kind of a list of things that a buyer would be looking for."
00:09:28,"And so if you're a buyer you can use this list. If you are a seller, then think about how you match up to this list of K kind of criteria. So I have this framework where the criteria are down the left side and then scale of one to 10 and then some notes. And this is kind of a simple framework, but I like it just to kind of as a place to start when thinking about a location,"
00:09:54,"and I'll just give the caveat as I always do, this is what like the kind of typical things you'd look for. There are always exceptions to every rule. Okay, let's start with, I have a list of 10 things on here that are pretty critical that a buyer should be looking for. And therefore if you are a seller, you should evaluate yourself based on these criteria."
00:10:21,"Lease and location, okay? I mean it's everything. So that, and number two, which which is build out optimized for smaller private offices, the combination of those two things is pretty much everything. So if you are a buyer who's looking for a really profitable operation that you can just take over like a no-brainer, walk-in smooth sailing and that's what you are looking to buy again,"
00:10:47,"that's gonna be hard to find because those locations are have, are profitable. So they did everything right and the stuff that wasn't, they didn't do right, they just fixed because it was fixable. Like the marketing, like the Google ads, like the furniture in the office, like all changeable except the lease and location in the buildout very hard to fix."
00:11:09,"And I had to fix those things in my first location in Chicago. Very expensive. You've, I, I will just share this if you're a long time listener, you've heard me talk about this before, but I did not have enough offices in my first location. I had no idea what the heck I was doing. So I opened it and interestingly enough,"
00:11:26,"all of the tours I gave were interested in private offices and I had a handful, I did have a stunning view and I was building a great community and it was a very beautiful space. But people wanted offices. I used my consulting checks to build more offices, which was painful. So you can change not having enough offices, but it costs money and it's mentally challenging because you've,"
00:11:53,"you, you had in your mind what it was going to cost you to make an investment to open this business and now it's going to cost you more because you have to make all these changes. Not if you'd taken the Coworking Startup School, which is why I started it. Don't make the mistakes I made on the first location. And that we see unfortunately a lot of operators make."
00:12:10,"So lease and location is number one. If you don't own the building then the lease matters. So if the operator ha, if you the operator has a lease, then the length left on that lease. So when I sold MySpace in Chicago, there was maybe it had already been open for Al maybe four years. So it had a five-year lease with a renewal option with a very minor market increase."
00:12:38,"And this was super valuable because the area I was in, which was near Fulton Market, so if you're in Chicago, Fulton market is hot right now. When I opened it was not hot at all. It was like the meat packing district, it was not super cool. So that's a less lesson for another, another episode. But it started to just really ramp up."
00:13:04,"Lots of construction, lots of residential, lots of a hotel. Google moved its headquarters a block down the street. So it became a amazing, and I have to just interject this, even though we're going on a tangent a little bit here. If I had, if someone had said to me what maybe you could buy that building and if I had said what would it look like to buy that building?"
00:13:27,"Even though I had no idea if I had done a little research, I might have been smart enough to buy that building because it was thir roughly 30,000 square feet, the entire building in a neighborhood in Chicago and the owner had inherited it, wanted to be done with it. I could have maybe bought that building but I had no idea that I should think about buying that building."
00:13:45,"So it never crossed my mind. And that building's value must have gone crazy. I'll have to look it up on CoStar actually now I'm curious because of the, what happened in the market. So market rent went through the roof and that would've ruined my business model, but my lease was very favorable. That's the only thing that my annoying, frustrating broker did for me was I had a very favorable renewal term."
00:14:11,"So I had a lot of time left on that lease in very favorable terms. So that was attractive to a buyer. So if you're buying, you wanna look for length left on the lease, either that or you need to negotiate the renewal terms as part of the sale because you can't have a year left on the lease and then have the lease significantly go up."
00:14:32,"In my Palo Alto location, my lease doubled at renewal doubled. So no one wanted to buy that doubling lease, right? You have to be really careful about that. And if you're on the side that I was on, no you're not gonna sell your business. I did not sell the Palo Alto location unfortunately. So sometimes that is the hand that you're dealt."
00:14:54,"I could sell the Chicago location though because I had favorable terms there. So that would be another thing I would say if you're an owner, you might need to be happy with cash flow because this business is not hard to sell or not easy to sell unless you have scale and then there has to be somebody who wants to buy your scale. We could go on and on."
00:15:12,"I'm gonna finish with my criteria here. So number one is lease and location number two is a really good build out. So you as the operator has made the investment to create attractive, functional, smaller private offices that appeal to your ideal customer and work for that market. So there are brands that appeal to enterprise customers and that's who they're selling to. That's tricky right now,"
00:15:37,"this is the challenge that WeWork is having. WeWork's floor plans are very enterprise friendly. If you go into a WeWork, they might have an entire floor that is like open space that was sold to one specific company and then you might go to another floor and it has these giant team rooms in the corners of the floors, giant like 50 people that are full of sort of this dedicated desk product and they're,"
00:16:05,"it's hard to sell that product right now. So if you have smaller private offices, I would say offices for one, two, and three and you have a lot of them, you are in good shape and that build out is not cheap to finance, especially today you are if, if you are an operator who invested in that, then hopefully you are in shape for a resale I should mention,"
00:16:31,"okay, I'll mention this in a little bit. On a scale of one to 10, we're gonna rate the lease and location and then the build out. So again, you could buy the business and renegotiate the lease with the landlord and if you're close to the end and the landlord is uncertain and would like to keep the buyer as a tenant, maybe they would negotiate,"
00:16:57,"you know, like no increase in rent on the renewal. Maybe you could get a little ti but you're probably not getting $40 of ti, you're probably not getting $50 in ti. So you're not getting enough to do the cha make the changes that you need to make most likely. So make sure the build out is roughly how you want it with some updates."
00:17:19,"I will mention this here, I had a, he had already bought the business we did, he thought he was going to through the Coworking, Startup, School, but he ended up going through our operator mastermind and our Community, Manager University, he bought an existing business, it had been in business for like 20 years and if you think Coworking is new is definitely not."
00:17:39,"And the building was really attractive, still modern, like had been a fairly new building when it opened and the business was quite profitable and it needed some updated furniture, it needed some updated common areas. So he took over the business and I think he'd had some funding set aside to do the updates. Got some ti from the landlord and made those updates and he's doing great."
00:18:00,"So he's occupancy has picked up a little bit and he took over a profitable business, he changed the brand. So we'll talk about all that in a minute number. So number three related note, physical assets. So I'll use my, this example of this gentleman, we'll call him Dave. Dave bought this space kind of an like outside of a major metro US market and it had been operating as profitable."
00:18:28,"He bought the business which included the furniture, the equipment, the technology, all that good stuff. Now here's the trick I would say about that. If you are a buyer, you should know that the operator really has no option for that furniture. You, they might be able to sell it to a liquidator, maybe think about all the markets that are swimming in extra furniture right now."
00:18:52,"So the value to the operator is essentially zero because they might have to pay to get it taken away and they may, they could do a fire, fire sale on Craigslist and get rid of some things, but probably not. So it's going into the landfill or it's going to a liquidator. If you are a buyer, you, here's the sort of flip side,"
00:19:17,"you should know that the assets don't have a lot of value for the operator and yet if you had to replace them, then that's going to run you 15 to $25 a foot if you are creating sort of higher end, nicer Coworking space. So there is a replacement value for those assets. So you should consider that for sure. And this is assuming you like the assets."
00:19:41,"Now the gentleman I'm referring to, we'll call him Dave, who bought this location. Some of the furniture was a little dated, but he bought it all because it, it was included in the sale, but it was really included in the multiple of the sale. So he, I don't think he bought it a la carte, it was just assumed like,"
00:19:58,"look, this is part of what you're buying, part of the value because this is the thing, right? You have to ask that question as a buyer, what are you paying for? What is the value? And on a scale of one to 10, how valuable are each of these things as they are, as they are applied to this particular location."
00:20:20,"So if the furniture is like really dated and is not gonna attract your ideal customer, then the value's really low even though it's a physical asset and you could apply some dollar amount to it, you don't want it because it doesn't align with your ideal customer, your brand, et cetera. But if it's fairly new, I mean we've seen some people kind of take over maybe a sublease and there was a tech company in there and they leave all their furniture and it's super,"
00:20:48,"you know, hip and current and they're happy to have that and it's a great value. Okay, so physical assets, the other thing you might be buying is, I mentioned technology like door access, access points, you have to be careful with all that, right? Because that has a, well, door access is great as long as it's a current brand that integrates with the technology that you'd wanna use."
00:21:10,"Access points have a shelf life, so you'll wanna get an inventory and if you're a seller that I can remember still how painful it was to inventory everything we had in the business. All the chairs ev like every, literally everything we had to create an inventory sheet for. So as a buyer you would want to ask for that inventory sheet and understand how old everything is and you know,"
00:21:31,"does it have a little bit of life left to it or does it need to be replaced? Okay, call number four, client base. So does this business have an existing member base? And what do their ongoing contracts or commitments look like? This is super tricky and this is part of the reason this business is super hard for business brokers to value or anybody who values,"
00:21:55,"right? Because, because the lease aspect, there's almost no value if there's nothing left on the lease unless you can renegotiate the lease and the build out is valuable because starting from scratch is really expensive, especially with today's interest rates. But the client base, okay, so a lot of operators operate with month to month contracts. We did that. This like there's,"
00:22:20,"I would say I, I always get through this with our Startup school students and even the folks in our mastermind, it's really like a personal philosophy. That being said, if you are building to sell, then you want longer term contracts, six months a year, you can operate on month to month. My view was always like, look, if somebody wants to leave,"
00:22:39,"they're gonna find a way to leave and that's gonna be hard. And our typical LTV or lifetime value was more than a year. And so having a contract just didn't really have a lot of value unless I was planning to sell the business, then I would've wanted contracts because that's something tangible that a buyer can value, right? Okay, there's a year left on this contract and it's,"
00:23:06,"you know, not easy to get out of it. And so they can value that contract in terms of valuing the business. So that would be important, especially if you're strongly office based, which is the most profitable model in general? Not always in general. So if you have 80 offices and you have year long contracts that sort of have staggered renewals,"
00:23:29,"then you're in pretty good shape. And if somebody takes that over then they can learn how to, you know, sort of keep the, keep the, what's the word I'm looking for? It'll come to me in a second. So this, this is the next really important criteria that you're looking for. Financial health, this is really important. It goes back to the 50% of Coworking phases are not profitable."
00:23:53,"Well that's probably because they're small and that doesn't mean that all small locations are not profitable or that there are not reasons to have small locations. We've talked a lot about that on this podcast. Those locations though are probably not being built to be sold. They might be built, they might be taken over by someone, they might be passed on, they might,"
00:24:17,"you know, play another role and have an ongoing life outside of their original owner. So we are not judging small locations, we are just saying they're probably not being built to be sold and to make a profit for the owner or recoup investments for the owner or that kind of thing. So again, small spaces have lots of value in other ways. Often they're just probably not being built to be sold because they're probably not usually very profitable."
00:24:46,"And when somebody's looking to buy a build business, it's usually because they're looking for cashflow. So financial health, cashflow, revenue streams, profitability and most importantly a proven process for consistent customer acquisition. So I immediately look at things like what does their website look like? Someone reached out to me recently about buying a location and so I pulled up the location's website,"
00:25:13,"not a single photo of the location on the website. How could this be? And people will say, well we're not selling physical space, we're selling productivity and community and whatever. Well sure, and I need to see what the space looks like because I have some bougie design tastes and I wanna know what the space looks like. And so if I cannot see the space and I'm also looking for things like are there phone booths,"
00:25:38,"are there comfortable chairs? Like what's I, I know what I'm looking for, I need to see some photos. This website, zero photos, pretty good Google reviews, although the Google reviews were not very current and I popped over to their Instagram profile and they have not posted in over a year. If you are trying to sell your business, you all of these things have to be current and they have to be working really well because as a buyer,"
00:26:07,"if you are buying a business, again, you, one approach you might be taking is I am as a buyer looking for a great lease and location with a great build out and I don't care about the rest because I think I can do it better than the current owner. So if that's the case, okay, that's cool. Then the rest of these things don't really need to be in place because that's more of a private equity mindset,"
00:26:33,"right? I'm gonna buy something that has good bones but is not being operated at, you know, top speed and I am going to do better. If that is the case, then the buyer just needs, again, good lease, good location, good build out and they can figure out the rest. But if somebody is looking for a space that they can take over and keep running because it's working well,"
00:27:01,"then you want to have proof that you have a sales funnel that's pretty predictable. So again, good website, a good sales process. You when you have a potential customer, it's very clear what their customer journey is, what the follow up looks like, et cetera, et cetera. So if someone is going to take over those processes, you're handing them a sales funnel and a customer acquisition strategy that works for your location and in your market and that will have a lot of value if you have a savvy buyer and buyers,"
00:27:40,"make sure you look for this. If you wanna buy a location that is already kind of humming along and the flywheel is spinning and you are not going to have to sort of rebuild the sales and marketing function. So the next one on here is brand and reputation, which is sort of a generic criteria to put, you know, on a business that you might buy."
00:28:01,"So establish brand goodwill with customers and a strong market presence. This only matters if you're not going to change the brand. And what I see most of the time is that if somebody's gonna buy a business, they wanna put their own stamp on it, they have their own idea about what to call it. They have their own logo that they wanna use,"
00:28:24,"they have their own colors. And so none of this really matters. But unfortunately, if you are wanting to buy sort of a going concern, you gotta start over. You cannot transfer a Google business profile to a new business name even at the same address. Nope, you are starting over. You have to build your own website that converts really well."
00:28:47,"You have to create your own sales funnel. So be prepared for that. If you care about all your own stuff and your own brand and your own logo, all those things, you have to start over on things that may have been working really well. So you wanna kind of get under the hood, figure out what was working and then you wanna replicate it with your new brand,"
00:29:09,"which still is a little bit tricky and a little bit like starting over. And so make sure again that the location and the lease and the build out are really good. If you're gonna start over on the customer acquisition side. So number seven, staff and talent. This one is kind of interesting. I have a few things that I want to call out on this one."
00:29:34,"You may want, if you're a buyer, you may want the owner to stay and help you transition because you're feeling like, well I don't know how anything works. Ideally there would be documentation on all of the procedures, although in this industry that is not a deal breaker. We are just wrapping up an operations handbook that will likely be included as a bonus for our Coworking Startup School."
00:30:03,"And so that is pretty easy to acquire and get training on. You can, if you're a new buyer, you can join our Community, Manager University and our operator mastermind and we got you covered and Startup school if you want. So isn't that hard to learn and get access to really great operators. I mean our Community, Manager, University pool, they know answers to everything that you wanna know and they're really good at their jobs."
00:30:28,"So you don't necessarily need the staff and talent to stay. But what you wanna be careful about in this business is that the team can matter a lot if the space has a strong community, if it's hospitality focused, if the level of service is important, if there are layers of value that go beyond the real estate, you wanna make sure you can replicate that secret sauce."
00:30:56,"And if the value is, because if all the Google's review reviews say, and this is like really good and really bad at the same time I had a Community Manager who was with me for over three years, which is almost unheard of. I know we have some of our community managers in our program who have been in there for three years. So it's not that it doesn't exist,"
00:31:19,"but it's not typical. And lots of my Google reviews talked about how fabulous she was using her name and I was like, okay, that's amazing because they love her and she's doing a great job. So she's good for sales, good for member retention, all those things that are good. But that means what happens when she leaves is every, you know,"
00:31:42,"do the members leave. So that's always a concern. If you have team, you and the team is good and the members like them, then you should try to retain them and do what you can to make that a pleasant transition and try to entice them to be a part of your new business. And again, you wanna be careful that the value of the space is not tied up in the owner."
00:32:09,"So owners, dear owners who are listening, if your members are there because of you and it's very hard for you to take vacation and everyone wants you to do the tours, you is gonna be hard for you to sell that business because the value is wrapped up in you. And I had this experience when I first opened my space in Chicago. I don't remember why he offered to do this,"
00:32:33,"but I had a corporate marketing friend who was really interested in what I, I was up to and he was like, I'm gonna do some market research for you. I don't even know like what the question was I was trying to answer. He was like, I'm gonna talk to your members. So he did phone interviews, he was a really senior marketing guy,"
00:32:50,"I still can't believe he did this. He did phone interviews with my members and then he called me to debrief and he said, okay, well good news, bad news, good news. They really like you, bad news. He's like, it's, you're the brand. And so if you want this to scale, then what if you're not at the other locations?"
00:33:11,"And shortly after that's exactly what happened. We moved and I had two locations and I was very rarely at one of them. And then the other one, I always had a team who was running it. I always had other things I was doing. I was the executive director of the Global Workspace Association. I did consulting work for a long time. I started the programs that I do now."
00:33:31,"So I was, I did not long term, you know, run the front desk. So I always had other folks doing that. But at the very beginning when I was the the Community Manager in my Chicago location, people really liked me because I was a business owner and I, you know, grave Gate gave great tours and I, you know,"
00:33:52,"could relate to the members and all those things that probably a lot of you experience. And if that's the case, you may need to extract yourself from that to prove to a buyer that the business does not equal you, that the business will be successful in terms of acquiring and retaining customers without you being there. So I have another member who is listening,"
00:34:15,"she moved very far away and I think this was really positive for her because she realized the business could run without her. She found someone wonderful to take over managing the community. She's still very much involved but more of a working on the business and she does some backend stuff. But I think that was really positive for her to take a break and be able to be away from the space and realize,"
00:34:40,"wow, you know, this business is really set up very nicely and can run without me and I could transition this to another owner if I wanted to. So that will also give you confidence in the sales process. So set yourself up to at least take a long vacation please. Okay, number eight, operational systems. This one I think is not,"
00:35:02,"I don't put a lot of weight onto this, but it is something buyers should look at in my opinion. If you are profitable, we'll go back to number five. So if you're profitable, cashflow revenue streams, you've got good customer acquisition, you probably have the operational systems down because this is a very operational business and as an owner you know that,"
00:35:23,"you know, if you aren't on top of things, you're not gonna attract and retain members. And so if you are profitable, you probably got the operational systems down and also there it's easy to, pretty easy to learn to, yes, the operation's not the hard part. The customer acquisition and the community building stuff's the hard part. If you're an asset owner,"
00:35:47,"we can teach you the operational systems and we can help you with the other stuff. But the operational systems, that's not, we're not worried about that, that you can pick up. We are worried about you hiring the right team and you getting your customer acquisition system humming. Number nine, intellectual property. This is probably not super likely to be the case unless you as an operator have some really unique brand."
00:36:16,"You've got something unique that you're doing in this space. I'm having a hard time, like even thinking of an example here, if you guys can think of an example, send me a message. But something to think about. But I don't think it really exists in this industry. Which again might be why it's also not that easy to sell a Coworking business because you have to have the first few things,"
00:36:41,"right? And after that it's hard to have unique ip. I'm not saying it's easy to run this business and do it really well. I don't think it is. I think it looks simple and that it's actually much harder to get all of these things right, but we're not running around with a lot of ip. Okay, number 10, growth potential."
00:37:00,"The potential for future expansion and growth based on what you're doing and current market trends. So this one may or may not be that important to a buyer. It depends on what they want. If they want a lifestyle business and they want to take over a going concern that's profitable and they just want that cash flow and maybe the opportunity to make it a little better and they just really like the business,"
00:37:21,"most people get into this 'cause they really like the business not because they think they're going to get rich. So I'm not saying you can't be really profitable and have a very strong lifestyle business, but most people also really like the business model. 'cause if you wanna get rich, you're gonna buy an In-N-Out burger just saying, or an orange theory. Those are the two things I would buy if someone wanted to hand me the cash to get those licenses."
00:37:45,"This is something to consider though, are you set up to be replicated or do you already have multiple locations? This whole discussion is kind of, you know, based on the idea that there's one location, but certainly if you have multiple locations, this one would apply more to you. Or if you had a buyer who's interested in scaling the brand into a couple more locations,"
00:38:08,"then do you have all these things in place? The 10 things we just walked through in order to support a fairly quick expansion, if they can find the right second location or third location to, to expand to. And then this is sort of a bonus one, but I'll mention it. You wanna be just careful that you don't have any legal challenges or weird contracts or liabilities that would impede a sale and buyer."
00:38:36,"You're gonna ask for all those, shoot, what's the word for it? Disclosures as part of the buying process. So this is not really meant to explain legally how you buy a business because I also remember when I sold the business, I was like, oh, this is so much more involved than I thought it would be. It was pretty intense."
00:38:58,"That lot of paperwork. Lot of paperwork. I'm gonna run through the 10 really quickly. Lease and location. A good build out. Mostly small private offices, not that it can't look otherwise, it can have a really strong mix. It could have great meeting rooms, it could have big meeting rooms, which are so in demand right now. It might have a coffee shop,"
00:39:22,"it might be, do you remember Jace from a few episodes ago? I would like to buy his business, right? Profitable coffee shop, profitable Coworking space, mushed together in a great location. That guy could run that thing in cashflow that forever. So maybe it looks something like that. Some good physical assets that have some life left on them. A client base that has some contracts that are longer term financial health,"
00:39:46,"which means you're profitable, you and you have a really good flywheel going for customer acquisition. You might have a strong brand or reputation in the market. You might have staff that will remain and keep an ex an consistent experience for your members. Operational systems in place, everything's running smoothly, everything's documented, and maybe some in intellectual property, we're not really worried about that."
00:40:19,"And then growth potential, which really means that all of the above are kind of in place and this business could be scaled. So here's what I would say. Even if you're not thinking about selling your location, these are all attributes of a successful Coworking space. If there was a criteria on this list that you're like, yeah, that's, we don't really have that down."
00:40:41,"Good thing to work on for 2024, even if you don't wanna sell, it will surely improve the financial health of your business. Make you happier, give you the opportunity to step, step away from your business if you want. Okay, I'm gonna wrap there. Happy New Year again. We have some great interviews coming up. We have Amy Tomar coming back to talk about Google business listings."
00:41:02,"I have an interview next week with a childcare plus Coworking operator, so I know lots of you'll be excited about that and some more solo episodes. So we will see you next week. Thank you for listening to today's episode. If you like what you heard, tell a friend, hit that subscribe button and leave us a rating and review. It makes a huge difference in helping others like you find us."
00:41:30,"If you'd like to learn more about our education and coaching programs, head over to Everything Coworking dot com. We'll see you next week."
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