In the summer of 2007, Geoff and I sat down to figure out a membership model for Indy Hall. There wasn’t a lot of prior art in coworking: the couple of models we had to reference were focused heavily on full time desk users and “anchor tenants”.
We’d been getting to know with our community, and we knew for certain that most of our community members did NOT need full time desks. In fact – we opened with only 2 full time members, and I was one of them.
On the contrary, we had a lot of people who wanted to be a member of the Indy Hall clubhouse but rarely needed a desk to work at. They were more interested in making sure that we could keep hosting events, and be a gathering place for people they enjoyed spending time with personally and professionally.
Rather than look at rental models, we looked at subscription models for membership. This is years before I was intimately familiar with the patterns and systems behind subscription business models, so I have a bit of retrospective analysis I can share here to help others come up with their own approaches.
Geoff and I looked a couple of places for inspiration. We have different backgrounds – very different backgrounds – so we had some pretty unique tools at our disposal.
An Artist and A Frat Boy walk into a bar…
Geoff brought his experience in arts collectives to the table. Many arts collectives had small fees for access to the gallery, supplemented by required volunteer time keeping the space open during openings, but this gave the artists access to the gallery for to show their work at least once in a period (quarterly, annually, depending on the size of the space and collective). They then had larger fees for studio space, if they offered studio space at all. They also had supporter memberships – low cost memberships for people who enjoyed attending openings but didn’t need art resources for themselves.
I had a different story. In college, I was a part of a fraternity. Less like this. More like this. Social skills aside, there were two levels of membership: in-house and out-of-house. In-house brothers paid a premium membership that included their bedroom. Out of house brothers had a lower per-term fee that helped keep in-house brothers’ rent down and pay for house maintenance. We all had access to the house, but were rarely ALL at the house at the same time. This meant that while our in-house brother count had a limit, our out-of-house brother count did not.
The two things that these models have in common is that they create a solution for the limitation of square footage imposed by a fraternity house, an art gallery, and hey…a coworking space!
Where do numbers come from?
So we ended up creating a full time membership for the 2 people who wanted full time desks. I was one of them, so I was an easy person to poll for how much I was willing to pay for a full time place to work. 4 years and a 3x larger space later, our full time membership is still $275.
We also decided on a basic membership. It’d be $25/month and include a drop-in day. We decided that it’d be good to make drop-in days and the basic membership the same price to make an upgrade a no-brainer to somebody who planned to return. Our conversion rate from drop-ins to at least basic members is extremely high, nearly 2:1 on average. Once we decided that drop in days and basic memberships would both be $25, “additional” member days became a discounted version of that price point, $15/day, giving basic members flexibility.
We had a few members that didn’t want a full time spot but planned to be in a few days a week. We decided together 3 would be the likely average, so a loose 12 days a month. We did some simple math: $25+ (12 x $15) = $205/month.
We felt that this was a bit too close to full time membership, and by dropping it to $175 we had a nice price point with a good pricing incentive to upgrade to lite membership if you’re coming in a few days a week but aren’t ready to go full time. It’s also not TOO far away from the full time membership that an eventual upgrade there is going to be painful on the wallet. Our lite membership was born at $175/month.
Bring a six-pack
We ran exclusively on these numbers and these numbers alone for 3 years. Our book keeper noticed that we had a growing number of basic members coming in around a half-dozen times a month – 1-2 times a week. To reduce recordkeeping and the potential for invoices getting missed, we crafted a “six pack”. This was simply a basic membership with 6 drop in days included instead of 1. No discounts. Just straight arithmetic. $25 + (5 x $15). This model also filled in the pricing gap between $25/month and $175 a month quite nicely. We don’t list this membership on our website yet, it’s been a bit of an ongoing experiment but has been a fairly popular basic member upgrade.
The importance of basic membership
Geoff and I agree that the basic membership is the most important “innovation” we’ve brought to coworking, from the perspective of making coworking able to be a sustainable business while being community focused.
The existence of a basic membership allows us to explain Indy Hall in a way that decouples membership from desk usage. Yes, you can use desks at Indy Hall and that’s a huge value. But it’s not the only value. Over 60% of our total membership are basic members (or 6 packs, which we consider a basic member derivative). 50% of those basic members never – and I mean NEVER – use desks.
But basic membership is also our fastest growing membership level. Basic membership lets us decouple our revenue from square footage. Some people pay the $25/month as an “association fee” to be a part of the club and have a channel to get to know the smartest, most interesting, creative people in Philadelphia. Others enjoy our chat room or our private forum. Others just like knowing what’s going on. Others only attend events. Others only organize events.
We’re also able to stay strong to our principals without having painful barriers. Our conference rooms are in demand. Sorry, they’re for members only. Want to sign up? You might find other things you’ll enjoy about Indy Hall. It starts at only $25/month. Want to attend Night Owls, our pilot program of evening working sessions? All it takes is a basic membership! This event is growing very fast as a hybrid productivity/social gathering, and every Wednesday being included in our basic membership has created a growth spurt large enough that we’re still deciding how to manage.
From a business perspective, this means that close to 40% of our revenue is generated by 60% of our members. Why is this important?
It’s a core value. So its a part of our model.
Many coworking models depend on an anchor tenant or tenants to survive. These larger rentals subsidize things for the community. The issue is that every time one of these anchors leaves (which happens, which is okay), the coworking space scrambles to replace them. This is a distraction from the community.
Instead, our model puts our foundation – 40% of our revenue, enough to cover our rent expense – on a distributed platform of basic members. Not only does this foundation have less risk than one or two anchor tenants, but it’s also the part of the membership model with the most growth opportunity. We’re never trying to figure out “how to fit more full time desks because we need them in order to pay the bills!”, which is a common solution I see implemented with little success.
Current membership counts (as of 2011). You do the math.
- 30 – Full Time
- 18 – Lite
- 9 – Six Pack
- 79 – Basic
In the last year, we’ve fluxed between 30 and 35 full time members depending on the season.
Update: in 2015, these ratios are remarkably similar…there’s just more of us!
We’ve kept our membership simple – this removes confusion about which membership might be for you. We also made them relative to desired participation. Of course, we’re also providing month-to-month agreements and you can upgrade or downgrade with 30 days notice.
“Flexible” memberships are only half of the equation. The memberships need to make sense for the members and the business. If they only make sense for members, the business will die. If they only make sense for the business, the members won’t be able to maintain their memberships.
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