351. Top 5 Coworking KPIs - Part I
Resources Mentioned in this Episode:
Feasibility study for landlords - evaluate a coworking business or partnership with clarity and confidence with industry-benchmarked coworking financial metrics and a pro forma customized to your market and your project.
Everything Coworking Featured Resources:
Masterclass: 3 Behind-the-Scenes Secrets to Opening a Coworking Space
TRANSCRIPTION
351. Top 5 Coworking KPIs - Part I
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 thought provoking operator 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 co working industry."
00:00:43,"Welcome to the Everything co working podcast. This is your host Jamie Russo. We're going to talk about KPI's today and we I could make a book about this. So I should prefit this by saying that I have been overthinking this episode quite a bit and so I'm just going to go with five and I might change my mind about these five at some point. We might elaborate on these five."
00:01:09,"We might add to them. There are lots of KPI's that you could be tracking in your business. Well, let's start with what is a KPI? Before we go too far, a key performance indicator. These are metrics that you're tracking to assess the health of your business, to make sure you're going to define your KPI's and say these are the most important success metrics of our business. I actually recorded another version of this and I just decided I wasn't happy with it."
00:01:37,"And in that episode I actually went through KPI's for different segments of co working operators. So those that are more focused on economic development versus community focused versus profit focused. I think that's very complicated. And so I'll just preface this with saying there are lots of KPI's that you might have that might be unique to your co working why? But this is going to focus mostly on KPI's that are relevant to folks that are trying to run a profitable co working space."
00:02:15,"So you may have lots of different whys or how you deliver on the business model. We're going to focus on those that are trying to deliver a profit and create an owner distribution for the owner or the investors. It might also, you might also use the term OKR, which is for objectives and key results, corporate speak. Call it whatever you want, but make sure that you have these metrics and that you're tracking them."
00:02:40,"And again, you may have your own metrics and we're only going to go through core KPI's. You could have lots of we'll call them sub KPI's. So before we dive in, I want to mention something new that we're offering that we've been doing kind of under the radar, and we're going public with this offering. If you are listening and you own a building, you're an asset owner and you are looking at higher vacancy rates, or you want to activate a building and you've been thinking about converting some space to co working or flexible offices, or you've been presented with an opportunity to take on a partner through a management agreement approach, but you're not sure how the business model works."
00:03:24,"You have a lot of questions about whether this is going to work in your building. You want to look at a benchmarked pro forma so that you can compare maybe what's been presented to you with an unbiased look at what's possible in your space. So we've been doing this for folks really for the last year across the United States. We can do this in any market in the US and we have a great system that we use."
00:03:51,"We have a great team that does it. And so we can do this pretty quickly to get you clarity and confidence in your decision whether you decide to move forward with co working or not. So we want to help you make informed decisions. We want to help you understand if we can help you with co working to decrease your vacancy rates, increase revenue in your asset, and just really give you clarity around the important aspects of the business model."
00:04:19,"So we have a three step process that we follow and you get really customized results. So we want to give you a market analysis that includes a market demand report, potential brand positioning, competitive landscape review, pro formas that are specific to your space, which will be based on some assumptions, but pro forma that is based on you operating it yourself, which you may have no interest in doing, but it'll be a benchmark for you."
00:04:52,"And then a pro forma that will look at sort of industry standard for operating with a partner, although there are many different ways to partner, so we can talk you through that as well. We will also make sure that through this financial exercise you have clear revenue forecast expense breakdowns and detailed startup cost estimates. And we will do Zoom calls with you at the front and the end of this process to make sure we understand your specific needs and situation and to walk you through all of our findings and recommendations so you can learn more about that process at everythingco working.com."
00:05:26,"forward slash feasibility we'll put the link in the episode description so you can grab it right on your phone and there is an opportunity on that page to schedule a short call if you want to understand what you know a little bit more about the deliverables or you have specific questions about whether this is a fit for you or not. Everything Coworking.com forward slash feasibility okay, back to our KPI's."
00:05:53,"I think the genesis of this topic, you know, right here and right now is that I did a ask me anything session for the global Workspace association a couple weeks ago now and I felt like I was on a game show. We had lots of questions and I don't know, I just, that's sort of the mindset I was in. Like answer all the questions as fast as I can and do a pretty good job."
00:06:15,"And so I felt like I couldn't give my best answer to every question. And John Herring from fuse workspaces asked a great question, which is what are your five co working KPI's? And so I got to mulling that over after the the session was over and wanted to answer that more fully for those of you who couldn't join. By the way, I did send an email about that to the entire email list and then realized it was only for GWA members."
00:06:41,"So I'm sorry if that was confusing. I hadn't read all the fine detail. So yeah, it was a great session and it was lovely and I knew a lot of folks in the call and it was really fun to spend time with folks in the industry, which is one of the wonderful things about working in this industry is all the great people in it. We'll get into the numbers based KPI's shortly."
00:07:03,"So number one is delivery on brand promise and business model. So I think this one's really important because whenever we work with folks to launch co working spaces or think about whether a co working space is the right fit for them, we think a lot about what's the business model and what's your brand promise. And the very exciting fun aspect of co working, and also challenging is that there are so many different versions of the business model and what the brand promises and what you're delivering on."
00:07:39,"For example, there are folks listening that run more traditional executive suite businesses where your promise is really a professional place to work. A great mailing address, a wonderful community manager at the front desk who acknowledges you and sees you, maybe greets your guests, you have meeting rooms, you have coffee service, you have everything you need to do great work, and that's what you're promising to your clients. I spoke with an operator the other day that has been in our programs."
00:08:14,"I worked one on one with her a long time ago after she had signed her lease. She has a pretty large space of all open space, which she's not going to do again. But on the other hand, she has done some really beautiful things with her business model that I think are, we're going to start to see a lot more of, but also that look very different from some of the models that are operating now."
00:08:37,"She has a very heavy event component, and that is partly because the space that she has really lends itself to significant events. She had a partnership with a caterer. They brought that in house. So they catered the events and they do food and beverage for their members. So they do charcuterie plates. So you can reserve a meeting room or come in to their very large open space and have meetings and order your charcuterie plates for your meetings and be really well taken care of from a food and beverage and amenity perspective while you're in the space."
00:09:12,"So some people just look at this as like their go to place to have meetings because they have all the amenities they need in a beautiful space and they're going to double down on that in a new location. And so there are so many different approaches to this model and so many different ways to deliver on a workspace. So one of the things for you to just consider and figure out how to evaluate is are you delivering on your brand promise and your business model?"
00:09:43,"And how does that show up on your website in the reviews that are on your Google business listing? And is that why people are coming? And is that helping you to succeed? And that's, we're going to kind of talk about this as we get into the more numbers based metrics. So how might you evaluate whether you're delivering on your brand promise and business model member feedback and satisfaction so you might survey members?"
00:10:13,"This, I know, is very challenging. We're having that conversation in our community manager slack group right now around, hey, how do you get members to fill out these dang surveys? So that can be tough. And some of this might be qualitative. You might have a few questions that your team is tasked with asking folks more casually when they come in, in the morning, when they see them in the coffee room, et cetera."
00:10:37,"And you can try to get these surveys filled out. Event participation and community engagement. So if this is an important aspect of your business model, then track your attendance at events and attract participation in social activities and see what that looks like over time. And is this meeting your expectations and does this align with your brand, promise, amenity usage? So the example I gave at the beginning with the charcuterie board, they also have a full fitness center."
00:11:08,"So they're monitoring usage rates of these amenities. They have very high utilization of the catering services and the sort of, you know, kitchen service, but lower utilization of the fitness, the full fitness space. So they've observed that there are a few things that get a lot of use in the fitness space, like the personal training and some of the cardio equipment. And so in a new location, they would stay strong on the food and beverage offerings and then reduce the fitness offering so that it is more aligned with what's actually being used by the members."
00:11:45,"And these are some of the lessons that you learn when you've been operating for a while. So it's hard to get everything right in your first location. And that's one of the reasons why you want to evaluate, because you might want to make changes to your initial, you know, your, your current location, or you might be looking to leverage these insights to make adjustments in your second or third, et cetera, locations."
00:12:09,"Net promoter score so I mentioned Alathia, who was at Common desk, and she talked about, this was at our juicy panel that we did in Chicago in 2023. They were at the time measuring net promoter score. So they were using this to measure customer loyalty and the likelihood of members recommending your space to others. And that this, I think if you have a more unique business model, or even if you don't, you have a traditional business model where you're just providing a very professional, productive place to work."
00:12:45,"If you have customers that are a great fit for your space, and they are there because their needs align with what you are delivering and promising, then their needs are met and they are going to recommend your space to others. And this can be an incredible marketing tool. And I think that there are a lot of spaces who actually are not delivering on this brand promise or they're not as consistent and clear about who they're for."
00:13:14,"And so they don't benefit as much from this type of loyalty. I hosted another panel. We're not talking about KPI's. It was a marketing panel at the GWA. I think this was 2022. And Javier Garcia Iza, the founder and CEO, he's the co founder with his brother and CEO of iOS offices in Mexico, said that their top marketing tool is word of mouth. Now this surprised me because they have a very sort of corporate premium brand that serves enterprise customers in Mexico, and this works really well for them."
00:13:53,"Because any business that wants to expand into Mexico, who, who's looking for a great office that's been around for a long time, they have 40 plus locations and they've been around for 20 years. I think they're a great solution. And also they are incredible in terms of the hospitality that they deliver. Giovanni Palvicini is my co host of the Flex Uncensored podcast and he. I'm sure we talked about this on one of our episodes because he was at one of their locations recently, he was in Mexico for his mom's birthday, and he just went on and on about the incredible hospitality delivered to him by this team."
00:14:34,"And this was not unique to him. This is how they roll. They have bartenders that make cocktails and coffee drinks and are just really focused on member happiness. And this shows they do a lot of things in the space that aren't. Don't revolve around cocktails. They have running clubs, they have markets, they have all sorts of special events, and even though they're a premium space, do a lot to engage the community and their members love them and tell their friends."
00:15:04,"And Javier shared that this is their top marketing tool, is word of mouth. And I was actually in another meeting with a corporate client and I will not share all the details, but this corporate client had put some of her remote teams into iOS locations and was blown away by the experience that they had in that space. So. Okay, so, so this is because Javier and his brother Adrian are very clear about what they want to deliver to the end user, who their perfect end user is, and really track whether or not they're delivering on that brand promise."
00:15:47,"So again, this is a little bit squishier, but I think it's becoming more and more important and I think it's also challenging sometimes when you're, if you're a newer operator. So I'm talking to the newer operators here, you might have a brand promise and then you might open and you live through those painful 18 or so months of getting to stabilization and building your occupancy rate, which we're going to talk about as a KPI, and the, you know, the little voice in your head or the little devil on your shoulder or whoever it is that whispers in your ear and makes you doubt things will make you wonder if you've done the right thing, if you have the right model, if you're serving the right customer."
00:16:31,"Because unless you're full from day one, you are going to wonder if you're doing the right thing because it takes time to build a membership base. And as we're building that, it's hard to trust the process of your sales funnel and the brand promise and know that it will build over time. And you start to wonder, and maybe you start to water it down a little bit because you want to attract a broader user base."
00:16:58,"So that's why I think it's important to know who your best customers are, what your brand promises, what your business model is, and stick to that until you're really sure it's not working. Okay, we're going to move on to KPI number two, which is around desk revenue and pricing strategy. So these are not. Yeah, these are in a decent, we're okay with the order they're in. Number two, desk revenue and pricing strategy."
00:17:26,"Okay. This one is important, and I think sometimes overlooked as a KPI, and it is important because if you run a pro forma and I run a lot of them, you will see that if you hold all things constant, but you change the price per desk or the price per seat, the model is very sensitive to that price. So if you are looking at a ten year pro forma and you have 100 seats in your space, and you price your, your 100 seats at $300 each, this, your seats are not all going to be the same."
00:18:07,"But just for the sake of easy math and easy discussion, then your monthly recurring revenue is going to be a function of the price per seat, times the number of seats that are sold. And you want your monthly recurring revenue to go up as quickly as possible, because that's how you get to break even. But over time, if you look at a ten year pro forma, that seat price, if it's $300 versus $400, that's a huge difference in the total revenue earned in that space over ten years, because the difference of $100 is multiplied times 100 every single month."
00:18:50,"If my math is right, that's $1.2 million in over ten years, with a difference of $100. So the math here I did is $100 times 100 seats, times twelve months in a year, times ten years of a lease, $1.2 million. So your pro forma is very sensitive to desk price. This is important when you're looking at a space and looking at a market, you need to under, you need to really pretty deeply know whether you can charge 300 or 400 and does 300 work and does that deliver the profit that you need to get on the space, or does it not work?"
00:19:33,"Can the market handle $400 a desk? These are random numbers. They could be higher. Hopefully they're not much lower, but the model is very, very sensitive. And here's, here are some of their risks. You might pro forma desks at $400 each, and so your performer looks great. Well, then you open, and as we just talked about, you start to get nervous because your occupancy isn't ramping up as you thought."
00:20:01,"So you start to do deals. So now instead of $400 a desk, you're doing 375 a desk, 350 a desk. So now you're discounting, and now you have members that are used to discounts and maybe can only afford the discounted price, and it's hard to get them to leave. And so then when you tell them, okay, the discount's over, you've been here for a year, we have to go up to the price that we pro forma'd, so we're going to dollar 400 a seat, they leave, and so now you have to replace that member or you let them stay."
00:20:34,"But now you have discounted seats all over the space. So it's really important to make sure that you avoid undercutting your pricing when you open. Don't go to desperate mode any faster than you have to. I totally understand that at some point, if you're not filling a space and you got the pricing wrong, generally price elasticity does hold true in co working. If you drop the prices enough, you will fill the space, maybe not with the pricing that you thought, and maybe not with the type of members that you thought."
00:21:03,"So be very careful there. Dynamic pricing. So we're starting to see this more and more. Platforms like flexpace liquid spaces has some dynamic pricing tools that they're working on. This is something that hotels use and have used for a very long time. It's pretty new to co working. So you want to be thinking about how can you do this in an automated way? Or if you have to, then make sure you're checking local desk rates on a pretty consistent basis or so dynamic pricing sometimes is more relevant for things like meeting rooms, where there's more demand during the week than on Mondays and Fridays."
00:21:45,"And so you're going to price higher during the week and do better deals on Mondays and Fridays. But you want to understand what's happening in your market. And don't make the mistake of going by through a year where your desk prices could have gone up from 400 to 410 and you didn't make that move because that $10 times 100 seats times twelve months in a year times ten years adds up."
00:22:09,"So you wanna make sure you're using tools that help you with dynamic pricing, or at the very least, you're reviewing pricing quarterly and making sure that you're at market rates. And another thing that tends to happen is we ramp up after opening sooner than you thought you might, or all of a sudden your occupancy starts to grow. Sometimes in co working market forces can be a little bit mysterious."
00:22:40,"We see this happen all the time. We host operator mastermind calls and folks will be doing pulling every lever they can pull and having a challenging time getting their occupancy up. And then all of a sudden it will all start to click and their occupancy will start to go up. And if you're starting to sell desks quickly, and I'm using desks pretty generically here, this might be a co working membership."
00:23:01,"This might be a desk in an office. This might be a dedicated desk. This might be a desk in a day office. If you are starting to get momentum on your sales and it's moving quickly, then your prices might then need to go up. So if you're sold out, if your occupancy, and we're going to talk about occupancy as a KPI is really high, like above 90, then your prices are too low and you need to nudge them up."
00:23:27,"And again, don't let that little voice on your shoulder say no, we don't want to do that to our members, we don't want to take advantage of our members, blah, blah, blah. Have an automated price increase in your contract at the very minimum of 5% a year. And if you've been paying attention to inflation rates, that 5% of year is not actually enough to keep up with recent inflation rates."
00:23:51,"And so you're doing yourself a giant disservice if you're not managing your pricing. Again, this is certainly dependent on market demand and we understand that can be sometimes be challenging. But you really want to keep your eye on revenue per desk and making sure that your pricing is as strong as possible and gets updated regularly. Because remember that $1.2 million, you don't want to lose that because you're not paying attention to your metrics and not making moves as needed."
00:24:23,"I know we only made it through two KPI's. This feels like a good place to pause. We will go through the other three KPI's in the next episode, so don't miss the next episode. So just a quick review. Our first two KPI's are delivery on brand promise and business model and desk revenue and pricing strategy. So we will dive into our other three KPI's next episode. And don't forget, if you are an asset owner thinking about co working or evaluating a partnership proposal, head over to everything Coworking.com"
00:25:01,"forward slash feasibility and we can help you there. 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. If you'd like to learn more about our education and coaching programs, head over to everything coworking.com. we'll see you next week."
For the full show notes of this episode, click here.
Want to join our coworking conversation in the Everything Coworking Facebook Group? Find us here!
Looking for a specific episode? Go to the episode index here.
.