331. The Pros and Cons of Taking on a Partner for your Coworking Business
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Register for our upcoming class: Funding a Coworking Space in 2024
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Masterclass: 3 Behind-the-Scenes Secrets to Opening a Coworking Space
TRANSCRIPTION
331. The Pros and Cons of Taking on a Partner for your Coworking Business
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. I am recording this after having gotten stuck in a crazy downpour. I live in northern California and it is raining season,"
00:00:55,"which also means it's snowing season. So that is a positive, but it rain when it rains here, it's like build an arc kind of rain. It's intense. And this is the second rainstorm I have gotten caught in. I was refereeing, it's a winter league soccer here, which you don't have on the west, on the east coast I should say."
00:01:17,"So winter league soccer and I, it was the first weekend so I was like, I'm gonna get out there and referee. So I was refereeing some nine-year-old boys and it had not rained all day. And then I was refereeing from 2:00 PM to 3:00 PM and the most torrential downpour I have like ever had to endure for almost the whole hour. The kids, it started raining harder and harder and the boys started crying."
00:01:46,"This one boy was crying so hard, I could not understand what he was saying. And finally he was like, it's raining so hard. And I had to walk him off the field to his coach. I was like, this kid needs a hug. One of the moms came and took her kid off the field and went home, just left. So it was kind of an interesting like life lesson though because the game was one zero and our town was winning and,"
00:02:17,"and it was seemed pretty evenly matched, you know, it was kind of fun to watch. And then in the second half, our town kind of, you know, got their panties in a bunch about the rain and the other team went to town. This one kid, although he was, I'm not sure what he was doing in the first half because he was serious business."
00:02:41,"He was like, we're getting this done and scored like four goals in a row. He, I, I think he looked around and he was like, okay, if these kids are gonna be, you know, distracted by the rain, I'm going in. And I thought, this is really interesting. I, I kind of wanted to say something to him after the game because I thought it was like one of those like arbitrage moments that he was taking advantage of."
00:03:08,"Although again, he was so good. I almost think they were like sandbagging the first half. So I'm not totally sure it was a life lesson but the, our team could just not like get it together When it started boring, I mean it was really bad. My clothes weighed like 40 pounds, it took like days for my shoes to dry out and then I just went out with the dog."
00:03:30,"So my new, I have a book recommendation ready, it's called Outlive by P Peter. I think it's Atia, I think that's how you say his last name. I follow him on Instagram but I never hear see him, hear him say his last name. It's called Outlive. Somebody recommended it. Oh I think my neighbor, I think I was at my neighbor's for dinner and they were talking about this book and she's the doctor."
00:03:54,"So I picked it up and I tried to read it and it's really technical. He does a pretty good job at the beginning. And then the middle of it is just really technical like biology stuff. And as much as I was interested in it, I would like get sleepy every time I read it, I'd read it like on a Sunday and then I'd want a nap."
00:04:16,"So my girlfriend started reading it, my CrossFit bestie Christine and she started talking about, you know, all the concepts in the book and I was like, okay, obviously I have to get through this thing. So I decided to do the audio version, which was much better. And Peter, the author narrates the book and that was much, much easier."
00:04:36,"I got through it much faster. Anyway, he's super into like longevity and you know, I'm a CrossFitter so CrossFitter friends listening, we gotta think about our heart health. So he's very, he was a doctor passionate about out basically heart health is everything and I'm not gonna do it justice, but you have to do a lot of zone one and zone two cardio and CrossFitters,"
00:05:03,"they, we zone two or three, we don't have a zone one. Zone one is like, I don't even do zone one and warmup zone one is like conversational pace running, which I probably used to do a lot of. I did run a marathon when I was much younger, but I don't do that anymore. I just do things that are hard and heavy and fast."
00:05:22,"So that is good for you because it builds strength. So obviously you wanna be strong when you're older, you wanna be able to carry your groceries, you don't wanna fall. Breaking a hip is really highly correlated with not living a lot longer when you're old. So you wanna be super strong, you don't wanna fall, you wanna have a lot of stability,"
00:05:43,"which I'm also working on balance. All these things are really important and are not necessarily included in your, you know, average everyday workout. So my friend Christine was like, okay, here's how you're gonna get your zone one, because I was like, Christina, I don't have time to zone one and like do my CrossFit workouts. So in 2016 we attended the CrossFit games."
00:06:05,"We did not compete, we watched and they were selling weight vests and for some reason she decided we should get them and we did. So we got weight vests that had our like name patches on them and the 2016 CrossFit games patch on them. And I barely use it. I almost never use it. It's ridiculous. I've had it forever and it was not inexpensive."
00:06:29,"So she's like, you can wear your weight lift weight vest while you walk the dogs and if you know that, that'll probably get you into zone one. It actually does not. If I'm just walking, it is 20 pounds so I have to sort of jog with it. So I do have to like get a little sweaty when I walk the dogs."
00:06:43,"So I did it this morning and then I just did round two and a complete downpour on the way home. So I'm sure my neighbors think I'm a nut bar for running around the neighborhood in my 5.11 tactical wait fast with my name on it and my dogs. But it works. So I'm zone wanting. And then the zone two work is actually a lot of work."
00:07:10,"I did some yesterday and I was exhausted afterwards. So anyway, that's my, I'm not really a new Year's resolution kind of person, but I am, I do love like the new year, new you kind of thing. And I think this outlive sort of concept just happened to kind come at the end of the year and getting into some new routines."
00:07:31,"My husband on the other hand is the guy who just joined the gym. He's always worked out, but he works out at home and he's not really like me. He's not as like self-motivated to work very hard when no one's watching. So he just joined like a hit gym downtown. So he was, you know, he's the guy who's taking advantage of the New Year's specials,"
00:07:52,"but good for him. So I'd love to hear if you guys are running any New Year's specials. We have so much going on. Let's talk about Coworking instead of zone one and longevity. But pick up that book. It will change your life. But you might wanna try the audiobook because I couldn't, I was having a trouble, I was having trouble,"
00:08:09,"I was highly motivated and still having trouble getting through the print book, print book. But it's, it is a good reference 'cause it's nice to go back and reference some of the things he's talking about. Okay, so today we are just rocking and rolling. We had our monthly Community Manager training this morning. Huge shout out to our Coworking Community Manager coach Janelle."
00:08:32,"Janelle sent me a note earlier this week. She is in Alberta, Canada and she was like, I can't go into the office because she has a Flo, she lives in a flower farm and has other animals, sheep, et cetera. And it was gonna be 36 degrees below zero Fahrenheit. So she had to stay home and keep the animals warm and give them extra feed."
00:08:53,"But she ended up being in the office today. I was like, so when it's that cold, do people just not come to the Coworking space? She's like, no, they still come. She's like, life goes on. We're used to it. I mean I, you know, I fall apart when it rains outside. So anyway, Janelle is awesome and did some training today that I was taking notes on and need to go through like sort of step by step."
00:09:15,"Of course we record everything. So if you've seen on Instagram these like super fast tutorials about how to bulk create social media content using chat GPT and Canva. But that's what she did the training on tonight and it's awesome. So some folks in some markets will do well with social media as lead gen, but mostly it's like a brand builder and you wanna engage your members and you wanna have a presence and it's not so much a discovery tool or a lead gen tool."
00:09:44,"And so if it's not a lead gen tool, then you wanna be pretty efficient about it. We can't afford to spend a lot of time on social media if it's not bringing in the members. So we want to figure out how to create processes and use tools that help it go faster. And that's one of the things we're helping our community managers with."
00:10:04,"So she did, today's topic was efficient social media content creation with the help of artificial intelligence. So using chat GPT and the Canva bolt creator and it was amazing. So we record everything so it's never too late to join our Community Manager program. We are also kicking off our Coworking Startup School phase one live cohort this week. Kim Lee is one of our coaches."
00:10:31,"She is amazing. So she is kicking off that cohort. We have a lot of folks who are excited about opening a space in 2024 and we, I'm working on a feasibility study in Michigan. I'm not gonna say what market, but I love learning about new markets. I'm super bullish after doing a lot of research on this market. So I'll have to share some details once I've wrapped that up."
00:10:53,"This is for a landlord that has some space and was approached to do a management agreement and is trying to decide does this make sense? Is this something I wanna do? And wants like the real details around the model. So we start big picture just like we do with our Startup school students. Who's your ideal customer? I do some work on the market and whether or not it's a good Coworking market,"
00:11:19,"what does a supply look like? We do some brand positioning work, look for gaps in the market. We do full pro forma, all the things. So we're playing with some scenarios right now. I'm gonna see what that looks like. We're working on a space takeover and supporting a group that is taking over a space and has, it's a property management group."
00:11:40,"They've decided they wanted learn how to do Coworking. So we're working with them and we're doing some advising on a sale, on a couple of sales actually. So that stuff is happening. And I love this. I I love one of the deals I absolutely love and it kind of brought on the topic that we're gonna talk about today. But before we jump into that,"
00:12:02,"I wanna mention that I know it's the beginning of the year, just like I said, new year, new you. There are a lot of folks who will be focused on their goal of opening a Coworking space in 2024. And one of the topics that folks are always trying to figure out and can be a big barrier is, how am I gonna fund this Coworking space?"
00:12:23,"Interest rates are really high, there's a lot of challenges to opening a physical brick and mortar space in 2024. So we are going to host a class and we're gonna dive into that topic, let's get into it. We're gonna cover things like how are, how, what is the funding environment like in 2024 mistakes We see people make misconceptions about funding the most common ways to access funding the pros and cons of those methods and how to get creative in a challenging funding environment."
00:12:59,"So if you are starting a space or expanding in 2024, come join us for this class. You gotta sign up, you can join us live or get the replay if you sign up, but can't make it live. But we'd love to have you live and we'd love to answer your questions if you're there live. So to register, go to Everything Coworking dot com slash funding and that's gonna be Thursday,"
00:13:21,"February 15th if you wanna join us live. So we have a couple of week, few weeks. We don't just have a couple of weeks, we have a few weeks before that's coming up, but we wanted to start talking about it nice and early. Okay, so back to our topic for today. So I've been talking to a couple of of folks about selling their space."
00:13:42,"One of them is an owner that wants to transition out of the space and has a couple of folks that she's been working with for many years. She knows them well and they're interested in taking over the space. So we did there, she's in our Everything Coworking Academy group and office hours comes with that membership. So if you are looking for some support,"
00:14:09,"we do office hours every month as part of that program. So we got on the phone and talked about what that might look like. So she actually invited the ladies that want to buy her space. And so we were talking about what that might look like and the advantages of buying a space that's already built out with members with revenue. Amazing. Because the hard part of building a Coworking space is that first 18 months,"
00:14:34,"right? Or actually before you even get your deal signed and making sure you get that all right. Which is what we help with in our Coworking, Startup School. So these two ladies were super enthusiastic and so I was trying to figure out like what's their relationship? And I said, okay, so you two are going to partner on this. I said,"
00:14:53,"okay, do you have an agreement in place? And they said, of course we're working on that. And I, you know, brought it on that a little bit and one of 'em said, oh, I totally get it. She said, I've had a partnership go wrong. And she said that breakup was worse than my divorce. And I was like,"
00:15:10,"that's my point. Exactly. So I was glad she already knew how important it was. And I also had an email from somebody thinking about starting a Coworking space overseas. And she was kind of going back and forth and asking me a few questions and I cannot answer questions over email. I get too many emails as it is. So I thought, you know what,"
00:15:30,"I'm gonna address this in a podcast 'cause I like the topic and she was asking me about finding a business partner. And so what I wanted to cover is reasons that folks look for partners, good reasons to have a partner, and then some of the common reasons that people want partners that I think are bad reasons. And what you should have in place if you decide that you want to have a partner."
00:15:59,"Okay, so here are some reasons to have a partner. These are good reasons that might make sense, might be reason, like valid reasons for finding a partner, complimentary skills. So you might say, okay, this is a business where maybe you have a real estate background and you wanna partner with somebody who has a hospitality background. I love that this business,"
00:16:26,"I totally understand the, and agree with the approach that this is a human business, right? And it happens to take place in real estate, but because it involves signing a lease, it involves relationships with landlords. Today more than ever, it involves management agreements, it involves looking at the real estate as an ecosystem, having understanding real estate, speaking,"
00:16:54,"landlord speak, speaking, investor speak. That is a huge advantage in this business. And if you also can pair that with the focus on humans, on relationships, on experience, hospitality, that's a pretty big win. So if you have one of those but not the other, and you're looking to have more than one location, then it can be great to take on a partner that has a co has complimentary skills."
00:17:24,"So I will mention, I'll take this point to say, if you are only going to have one location, you gotta be really careful about having a partner. It depends on your goals. Now I talked to people with goals that are all over the board. I talked to somebody the other day who was buying a, a location and she's probably listening and I,"
00:17:45,"I was all set up to talk her out of this because I did not think this was a good purchase. And we got on the phone and I said, okay, well tell me what your goals are first. And she kinda stopped me in my tracks because she had a very strategic reason for wanting to take over the location and she did not need it to make very much money."
00:18:03,"And I said, okay, then I'm with you on this. So you never know what people's goals are. I always go for the, like, let's assume you're trying to pay your mortgage. If you wanna pay your mortgage with the space, your first location there with a single location, it's possible to support partners, but it's harder because you know,"
00:18:27,"you're talking about like a 25% margin. So you there needs to be enough there to share and meet both partners financial goals. So this is where you really need to understand the business model and understand the numbers. So bring your partner to the Coworking Startup School. We often have partners go through the program. We have groups of partners right now going through,"
00:18:50,"so they're learning the numbers, getting to know them really well, and making sure that they create a business model, choose a space size, et cetera that supports the goals of both partners. And maybe it is a longer term thing where on the first location, neither of them have really high expectations, but they're gonna understand what it looks like to scale over time,"
00:19:11,"which kind of gets to the second reason for finding a partner. Shared risk and investment. So this is an expensive business to start. It can be useful to have a partner that shares the financial burden that can help with the capital that it takes to start the space. So maybe you're the visionary, you're the hospitality person or the ops person. You wanna run the space,"
00:19:35,"you want to create the brand, you wanna do all those things, but you don't have the capital to do the full project. So you could take on a partner. Now that partner does not have to be an equal managing partner. That partner could be a capital partner that gets some sort of return for their investment and maybe they have an advisory role,"
00:19:57,"but you are the managing partner. You make the decisions and you figure out what that looks like. Maybe your financial partner is not very actively involved in the business, but they buy into the vision and maybe they're more than an investor or they're more than just debt, they're a little more actively involved. So there's lots of different ways to structure these relationships,"
00:20:19,"which we will talk about in our funding session on the 15th. And again, that's at Everything Coworking dot com slash funding. So lots of ways to structure that. But I do want you to think about the fact that a financial partner does not have to be an equal operating partner. So I had the experience, I've, I had a financial partner in my Palo Alto space,"
00:20:41,"they had extensive operational experience. But here's the problem. I need to be in charge. I say that with the serious face, but I, I, I, or maybe I'm saying it in a sarcastic or joking way, but I mean it very seriously. I need to be in charge. I'm an Enneagram three, I need to be in charge."
00:21:00,"So I have to be the managing partner, I have to make the decisions. But having a financial partner is awesome because it can help you expand. And I did not have a financial partner in my first location. And I'll talk about reasons. I often thought I wished I had a partner, but really I didn't, should not have a partner. I am not a good personality to have a full partner unless they are completely different from me."
00:21:24,"And I do have folks that I collaborate with and I'm, you know, kind of working really closely with, like Giovanni, we do a lot of work together and we have totally complimentary skills. We do not have any overlap, or at least we don't have overlap in the things that we actually want to do. So collaboration and support. Okay, so this is one reason that folks want to have a business emotional support here."
00:21:51,"This is, I, I'm gonna jump into the, my sort of punchline for this discussion, which is, I think this is the reason a lot of folks wanna have a partner. I think fundamentally, if we were to sit down and sort of go through a coaching process and get to the underlying reasons that people wanna partner, it's usually because they are afraid of something."
00:22:17,"They're afraid of making decisions, they're afraid of failing, they're afraid of being alone, they're afraid. So I see this often and I think most people or they're overwhelmed, which I think is like a little bit of a, you know, a friend of fear. So I think most people are pursuing a partner for the wrong reasons. Not all the time,"
00:22:42,"not all the time. I certainly see partnerships that work, but I think that people, most of the times I see folks with partners and it's, they sort of came to this idea to together in some way. We've had, like I said, we've had a lot of partners go through the Coworking, Startup, School, and it's totally working for them."
00:23:04,"But I think if you don't have a natural partner in hand and you're thinking, but I want a partner, it's probably because you're afraid of something. And again, I'll say afraid of making decisions, afraid of failing, just afraid of, of doing all of this alone. And I will say, I've often thought it's not that fun to do it alone."
00:23:24,"You know, I've said, you know, before, like I, I've thought many times about finding a partner, even though I know I should not have one because it's not, you know, it's lonely to be an entrepreneur sometimes, right? And until you can hire a team, once, you can hire a team. But even then you're often hiring folks who are working on your team."
00:23:46,"But it's takes a while before you can hire an executive level folks that you can really relate to on an owner level, right? Most of the people you're hiring report to you and that's a very different relationship. So it's less lonely that way, but it's still not the relationship that you crave that person that you can really sit down and ride the highs and lows with."
00:24:09,"And I have often said that in my first space in Chicago, I was really passionate about creating a workspace. And this was in 2012, I opened in 2012, the beginning of 2012. So really it was 2011, which was early days of Coworking. And my passion was around creating wellness in, in a i, I never, I don't think I really had it like a clear vision,"
00:24:38,"but it was what I wanted to create something. So my tagline was workspace plus wellness. My brand was innerspace for energy and I just, I wanted a place, and this is a place that most of you also want today, wanna design. Just a place where people could be like the best version of themselves. But I also wanted to make it easy to be mentally and physically."
00:25:02,"Well we had a gorgeous fitness area, a pretty substantial one like hardwood floors, showers, all those things. Totally UNM un monetizable, it was a giant mistake. We did meditations, we did mindset stuff, we did yoga, we did a lot of those things. And I, but I never really was sort of all in on it in the way that one needs to be in order to go after that kind of positioning and to scale."
00:25:34,"And I've often said probably if I had a partner who was sort of more ballsy than I was at the time, it was the first business I'd ever started on my own and I had no idea what I was doing. We won't go into that story, but that's a lot of the reason I, you know, do what I do today, is because I want you to feel less alone and get the support that you need without having a business partner."
00:25:57,"And I think I just really was not brave enough sometimes and I certainly was not gonna go pursue funding, you know, that had a lot to do with life stage and things like that. I started my first Coworking space when my daughter was, it opened when she was 10 weeks old, so it was a little crazy. So, and then we moved and she was,"
00:26:19,"you know, one and two, she was very young and my husband was very busy. So lots of reasons. But I often thought, you know, what if I, I would have been braver with someone at my side. So I, I do appreciate the possibility of having a partner that might help you go further than you would on your own."
00:26:41,"So, but I want you to be careful that you're not just sort of worn out by your business or worn out by making decisions. Because having a partner is very challenging, right? If you don't have complimentary skills, listen to, I know a lot of you do the podcast, how I built this. Oftentimes there will be folks who had business partners or co-founders and it doesn't work out."
00:27:05,"You know, they have massive falling out, very hard for partners to stay together and for that to really work over the long term. So it's more likely that those relationships fall apart than not. And so here's what I would say, unless you have this very natural partner and it, you just know it's the right thing and this is what you're gonna pursue and it works for you."
00:27:29,"Think hard about how else you can get that support. Hire a coach, hire a mentor there. You know, there are lots of ways to get that type of support that you don't have to feel like you're alone and making decisions. You can get that accountability, you can get that expertise without having a financial partner if you don't need the financial partner."
00:27:52,"And again, maybe you wanna have silent capital versus a partner in capital, but whatever you ag decide to do, if you take on a partner, you must have an operating agreement. So you're gonna have an LLC that you form and you are going to have an operating agreement that really, what's the word I'm looking for, dictates how your relationship works."
00:28:20,"It's going to be very specific about roles and responsibilities, who's the managing partner, what share of the company each partner has, and what happens if you break up The real purpose of an operating agreement is what happens if we break up, if someone, god forbid, passes away. If the business is sold, how do we decide how to exit the business?"
00:28:45,"And those are all things you have to talk about in order to write this operating agreement. And if you can't get through those conversations, then you shouldn't do the partnership. But if you can get through those conversations, then you have a roadmap for how to deal with this if it happens. And I mean it is just negligent if you have a partner and no written legally signed operating agreement,"
00:29:13,"you have got to have that in place. That is my advice there. So have the operating agreement, it's the roadmap. It'll take some of the emotion out of a breakup. Not all of it, of course. Can there still be lawsuits? Can it still be messy? Yes it can, but at least you are prepared and you've reduced the risk of some of that."
00:29:38,"So those are some thoughts. A couple of other reasons for having partners network. Again, I don't know if that really matters in this business, right? You're not selling to your network and if you think you are, you're really not. You're selling to people searching on Google. So think hard about that. Increased credibility. I would be very careful about that in this business as well or in any business."
00:30:05,"But it's a reason people think about having a partner. You could have an advisory board. So I, lots of folks who go through my Coworking, Startup, School have an advisory board and they have really impressive folks who are on that board to help them make business decisions. And also when they're fundraising, et cetera. And I'll put in one more plug for our fundraising class on February 15th,"
00:30:29,"they have, that's a board and that they can put on a slide in their pitch deck that increases credibility for fundraising balance. So here's what I would say to balance. If you are looking for a business partner to help sort of take on part of the work because you have other commitments, yes and no, but if that partnership doesn't go well, then that's another major source of stress in your life and may actually take up more time and more energy."
00:30:58,"So I would again say, can you solve that by hiring someone rather than taking on a partner that goes for any of the work that needs to get done. And I, you know, back to the sort of overwhelmed, sometimes people think they need a partner 'cause they're overwhelmed. Get a coach and figure out how to get to a place in your business where you can hire someone to help with the things that are overwhelming."
00:31:20,"You. Paying people to do things is an easier way to relieve some of that pressure versus taking on a partner. So just some thoughts, pros and cons to everything. Different ways to handle, handle every situation and what's right for one is is not right for everyone, but wanted to give you some food for thought. So that is it for today."
00:31:46,"I just did an interview with Daniella Cornue. She is the founder and CEO of The Village in Chicago, and she is given us the behind the scenes on how to make a Coworking in Childcare Model work. So that will be live in the next few weeks. So stay tuned, hit that subscribe button if you are a new listener and it's a new year,"
00:32:15,"lots of folks thinking about opening Coworking spaces. So if you love the podcast, leave us a review and help others find it. We would love that and 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."
00:32:44,"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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