Podcast Appearance: Chariot Tech Cast
I haven’t done one of these in a lonnnnng time, but in preparation for my talk at Philly Emerging Tech 2012 I joined Ken Rimple on the latest Chariot TechCast.
The 30 minute discussion is as multi-dimensional as my days: we talk about Indy Hall & coworking, my work at Wildbit on Beanstalk and Postmark, and of course the topic of my ETE talk: my work at Pro World in giving their number one cost center – their e-commerce website and infrastructure – a fundamental makeover.
I tried not to give away too many goodies about that talk. So even if you’re coming to ETE, get that podcast episode synced to your favorite podcast-listening-device. And if you’re not coming to the conference on April 10th – maybe you should. Tickets are $375 until February 15th then $450 until the event, and from what I hear are likely to sell out!
Find out details or sign up below. Save $75 by using the code DANGER.
Don’t mistake “feedback” for instructions
Jeff Atwood is a prominent programmer, and wrote this article about dealing with community feedback in his prominent programming community…but the lessons are 100% for coworking communities, too. These lessons become particularly pertinent to helping our communities scale beyond our grand openings.
Summarized and slightly interpreted for coworking:
1. 90% of all community feedback is crap. But that means that 10% of it is absolutely awesome.
Communities at scale trend towards these numbers – early on you’ll see much more absolutely awesome than 10%. I think that the “absolutely awesome” ratio can be maintained as better than 90/10 by following a lot of the guidelines below and making sure that you get your “first 10″ members right.
2. Don’t get sweet talked into building a truck.
Hybrid solutions end up ultimately pleasing no-one. Pick one solution and execute it completely.
3. Be honest about what you won’t do.
Don’t be afraid to say no. We also do everything we can to explain what it would take to turn the no into a yes.
4. Listen to your community, but don’t let them tell you what to do.
Often when a question hits this list, we’re the wrong person to be asking – so we say “ask your community”.
That said, you don’t need to do exactly what they tell you. Their answers are clues, not directions. Look through their answers for what they really want. People can only ask for what they know is possible. It’s your job to introduce them to new possibilities. “If I had given people what they asked for, I would’ve built a faster horse” – Henry Ford.
5. Be there for your community.
This one is insanely underrated. People aren’t used to being listened to.
Sometimes, your members don’t need to you to do anything. Your instincts might tell you to respond to anything that happens, good or bad. 99% of the time – you just need to be present. Not just physically present, but mentally present. They need to know that you’re paying attention, and genuinely care.
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How Much Does It Cost To Start A Coworking Space
I answered this qurestion on Quora and decided to post here for the rest of the normal world 
.
This question actually has 3 questions hidden inside:
1) How much does it cost to start a coworking space 2) How much does it cost to open a coworking space 3) How much does it cost to run a coworking space
I’ll address each one.
1) How much does it cost to start a coworking space
Starting a great coworking space can cost absolutely nothing, because coworking doesn’t require a dedicated space to do it. In my essay How to Fund Your Coworking Space I explain the importance (and value) on developing community before opening a physical workspace with all of the associated overhead.
Even if your goal is to run a coworking space as a business, this process gives you a number of advantages – you open with revenue, momentum, and buy-in from community members. You can ask them questions rather than guessing. You can avoid spending money on things they don’t need. A lot of the hardest work behind you, because finding people is much more challenging than opening the doors to a shared workspace. And you have complete ownership of your business and the ability to answer to your community instead of an investor – because the community IS your investor.
You don’t need to worry about finding your ENTIRE member-base before starting, you can start with 10 people. Not just 10 people who are interested in coworking, but 10 people who are addicted to being around each other and would happily pay for access to have a place to do that on a regular basis.
It’s easy to think of this process as building the club and then building the clubhouse.
So you can – and I’ve often advised that you should – start a coworking space by spending $0 and focusing on the community first.
2) How much does it cost to open a coworking space
Your start-up costs will vary depending on some of the following things:
- The size of your initial & anticipated community
- The needs of your initial & anticipated community
- Local real-estate conditions
- Available real-estate connections
Costs to consider, with examples of what we pay (or paid) in Philadelphia:
Our initial 1800 square foot Indy Hall $6,000 for rent x 3 (First/Last/Security) $2,000 for 20 desks & chairs from Ikea $150 for a wireless router $500 for a 1 year insurance policy $300 for misc things like trash cans & bags, cleaning supplies, etc
This does not include operating costs (like electric, internet, etc), which I’ll talk about in the 3rd section. It only includes costs needed to open the doors.
When we started this space, we had ~20 members, but only 2 full time members – the rest were only coming a few times a week or once month. We gave many members the option to pre-pay their memberships for up to 6 months (with incentives to do so) and collected ~$4,000. I put $10,000 of my own money into the pool for a total budget of ~$14,000. This allowed us to cover the above expenses plus a couple of months of operating expense runway until we could cover our ongoing expenses with memberships. Inside of 3 months we were breaking even and inside of 15 months we returned my $10,000 investment.
Our second (replacement for the original) 4500 square foot Indy Hall $18,000 for rent x 3 (First/Last/Security) $1,600 for additional workstation furniture $600 for first conference room table & chairs $300 for whiteboards $3,000 for networking equipment $2,000 for projector & installation equipment $5,000 for misc furniture, lockers, kitchen supplies, etc
Again, this does not include operating costs (like electric, internet, etc), which I’ll talk about in the 3rd section. It only includes costs needed to open the doors.
We were able to move a lot of our existing equipment and supplies from the original space to keep our costs down. Moving into this space we had grown to 21 full time members, and nearly 50 basic & lite members.
We invested in our network because near the end of our stay at the original office, the load on our wireless network became problematic and we decided that it’d be useful to run gigabit ethernet to all of the workstations. We went a little bit overboard in hindsight, but it was still a worthwhile investment for the group once it had grown past >25 daily attendees.
This move’s costs were covered by ~$15,000 in savings from profits + a $30,000 loan from one of our members. When we proposed the growth to our community and asked for their feedback, multiple community members stepped up offering to loan us the money. We considered taking the money as an investment and bringing the funder on as a partner, but ultimately decided against it – not because we didn’t want him as a partner, but because we felt that money was the wrong reason to bring somebody on as a partner.
With a total budget of ~$45,000, we were able to successfully execute the move, carry the idle costs of our original space for ~2 months until we found a new renter for the landlord, and have some runway to get the new space up and running. We were able to break even in ~5 months, began paying the loan back inside of 12 months, and the loan will be paid back in full inside of 36 months.
In addition to local costs being varied, both of these scenarios depend heavily on having a community first. This bootstrap approach not only affords you the money, but the ability to leave certain expenses out of the equation, including unneeded equipment and labor costs. Need to paint the walls? Have a painting party. Assemble furniture together. The process of co-designing and co-creating the workspace helps transform the coworking space in your members minds from a “serviced” space to a place where they can – and should – contribute to it’s ongoing creation.
It also depends on the space being in “constant beta”. Being willing to not do certain things means keeping your start costs low, and always be introducing new things. Many new things being introduced will be at the request of members, meaning you haven’t spent money on things that aren’t being used. Once again, having rough edges that your members can find and contribute to the polishing of helps them define the space for themselves. This not only alters their expectations and subsequently, their interactions, but it tends to improve recruitment and retention as they will be more excited to bring friends to participate and stick around longer.
3) How much does it cost to run a coworking space
Much like starting up, ongoing operating costs vary heavily depending on location. Local utilities, taxes, etc contribute heavily to the varied budgets.
This list is not exhaustive, but instead an overview, of our monthly fixed costs.
- Rent + taxes
- Part-time office staff
- Electricity
- Internet
- Cleaning service
- Coffee
- Management software (Basecamp, etc)
- Office supplies
1800 square foot Indy Hall
Total monthly operating costs were ~$3600/month at our peak costs, slightly more in winter and summer months when electricity usage spiked.
4500 square foot Indy Hall
Our total monthly operating costs are around $9,000.
One thing to note in both cases is that our staffing costs were able to stay extremely low because of our community-oriented approach instead of our service approach. Part time office staff supplemented myself to make sure the office was opened/closed each day, and keep administrative tasks moving along, but overall it wasn’t more than 10 hours/week of actual task work. Community members contributed heavily to operations, pitching in where paid staff would normally service office share-ers. This is again part of the expectations set by being a community member – “cheap rent” comes with some additional expectations.
Because of our “constant beta” approach, money is spent each month on introducing new things to the coworking space as well, but it’s largely variable by what it is and how members contribute to introducing/creating it.
We also often trade services “in kind” for membership, either discounted or full membership offers in return for things like design work, event management, and other contributions. This helps keep members engaged, and our costs low.
Also missing from these figures is the time invested by myself, Geoff, and many of our early members. Again, the value of this time was anything but “lost” by doing it ourselves – in fact, it’s part of what made our community as rich as at is. But if you’re in a position where you are paid for your time (as I was when I started Indy Hall), those opportunity costs should be factored in. Making the transition from hourly work to higher-valued retainer work and longer-term contracts had a huge impact on my ability to stay focused and financially comfortable.
I’m open to sharing as much as I can about our operations. If you have specific questions that I missed in this outline, please let me know in the comments and I’ll address what I can. You can also join me for my next Coworkshop, where I’ll spend a half-day covering all of the ways that this approach to coworking can be executed and grown with success.
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Social Capital & Cool Kids Clubs
The topic of social capital came up on the coworking google group today. My boy Trek, from Workantile, was cited for his usage of “social capital and debt” to determine which members might be not worth retaining.
I love Trek’s simple equation, it’s one I personally live by as well and has done well for me. In coworking, it manifests in lots of other ways, too. One thing we actively work on at Indy Hall is making sure it’s a place to DO work, not a place to GET work. Not to say that people can’t find or get work within a coworking space – in fact we all know it happens and happens a lot.
But members who show up with the express desire or need for work, for example, tend to find less of what they want. It’s like trying to withdraw from a new bank account that you haven’t made a deposit into yet.
On the other hand, the people who contribute before they take (make a deposit before a withdrawl) that get the most.
Teach a skill. Share a lunch conversation. Recommend a book or article. Simple stuff pays back 10-fold.
The Dark Side of Social Capital
All of that said, within social capital, there are also two kinds to consider and balance: bridging capital and bonding capital.
Bridging social capital is accumulated between heterogeneous groups, and bonding social capital is accumulated between homogeneous groups.
There are negative consequences of too much bonding capital:
- exclusion of outsiders
- burdons imposed on group members
- increased pressure to “fit in”
- a trend towards lowest common denominator social norms
Basically? Cool kids clubs are their own worst enemies, and many coworking spaces have the same problem.
Tricky, especially for guys like me who preach “build the club, then build the clubhouse”.
Luckily the antidote is simple: balance bonding capital with bridging capital.
Think of it like diversifying investments. You (and your members) want to diversify your social capital across the coworking space and it’s members – but actively encouraging people to invest their social capital in other neighboring groups as well is often overlooked.
Co-host a party with another group. Develop an event series with a bunch of partners. Invite cross-industry/community collaboration everywhere you can. Break those bubbles, get out of your comfort zones, and leave the treehouse once in a while.
Protip: this practice can start long before you open a coworking space.
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The Sweet Spot Between Business Partners
This post rang true of a comment that I’ve made many times about what to look for in a great business partner, and one of the reasons why I think it’s impossible to find a great business partner with the “speed dating” approach.
I met Geoff DiMasi after Indy Hall was already getting started – not as a workspace, not as a business, but as a community.
Geoff saw what I was up to, and we connected over my goals for the project – improving Philadelphia, improving our industry’s visibility, and making a difference in how work gets done.
I was green, too. I didn’t have a lot of business experience other than my solo practice. I had no experience in commercial real estate or rentals. And lets not forget – I was 22 years old with visible tattoos, piercings. I wasn’t exactly a shining example of confidence for a new business partner.
But Geoff saw past the exterior, and saw what I had already accomplished – and I think, what we could accomplish together.
All that said: I think the most important thing about the success of our working together is our differences.
Differences + Alignment = The Sweet Spot
Geoff and I don’t agree, we’re aligned. I believe the difference is one of orientation.
Alignment is something that comes with a deeper understanding of another person and empathy for the differences in their worldviews and objectives. Empathy doesn’t require that you agree with someone – it requires that you recognize their feelings and have the capacity to share. Those feelings may be emotions being experienced at a very specific time, but it also includes understanding another person’s general feelings about certain ideas, goals, etc.
As business partners (and team members in general), this is extremely useful.
When Geoff and I disagree, its a clue.
By acknowledging the disagreement, we can make sure that it’s not about ego and instead about the matter at hand. If it’s about ego, there’s a chance to let it go (or call the other person on it). If it’s not, we press on.
If you were to draw our opposing ideas as lines, they’d start as parallell lines.
We can trust our alignment to let us get through the disagreement, the lines start trending towards a center point.
Essentially, our alignment helps turn our disagreement into a divining rod for a “sweet spot”, an option I often refer to as “hidden option c”. When a disagreement is focused on the idea, the common place to end up is in whose idea is right or wrong, better or worse. Alignment helps us transcend our own ideas and look for “hidden option c”, a new conclusion that we can share.
This also reminds me of Steven Johnson’s theory in “Where Good Ideas Come From” that there’s no such thing as a single eureka moment, but instead the collision of two “slow hunches”, two half baked ideas, that need each other in order to be a complete (or more complete) good idea.
If Geoff or I didn’t work with our alignment, the only options we’d ever have at our disposal would be the result of our own approaches. By allowing our alignment to navigate us to the sweet spot, we uncover a new idea, often more innovative, than either of us could have easily had on our own.
If I look back at every project or company that I’ve been involved with that’s been successful and/or innovative, it’s included a partner or teammate with a differing viewpoint but an overall alignment towards a goal.
If you’re looking for a great business partner, teammate, or client – spend some time focusing on your alignment, rather than the idea itself.
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