The question usually comes from new coworking spaces that haven’t opened yet, and are still in spreadsheet mode. Sometimes, it comes from established coworking spaces who are trying to eek out some extra revenue to get profitable, or improve their profitability.

Either way, the question of occupancy estimation comes up pretty often in coworking. You might think to look to other industries like hotels and restaurants for ways to calculate capacity.

I think this is a fundamental mistake.

See, I’m in the camp that coworking at its best isn’t an occupancy based business at all. If the only time your members can get value from their membership is when they’re in the room, you’re limiting the potential of your community AND fundamentally you’re limiting the size of your business by tying it to your square footage.

This is why I get frustrated when I see people convinced that their only options for boosting revenue is to add more private offices and event rental options (both of which are almost always at the cost of their community experience).

In the long run, tying revenue potential so closely to square footage hobbles the growth potential of many otherwise wonderful coworking communities. Often worse, it creates a vicious cycle of “add more space! fill more space! add more space! fill more space!” as the best means of growth.

If your priority is to lord over square footage, power to ya. My priority is to bring people together, and square feet are valuable but overrated. More on that in a minute.

How I think about optimizing revenue per square foot

Since we do have space, I do have a strategy for making sure that it’s balanced functionally and economically. We’ve tweaked this a bit over the years, but…not a lot. And this spread tends to be one of my fundamentals in developing membership strategies for new spaces.

Within core coworking operations, I generally start building a model from a maximum of 50% of the workspace to be dedicated in any way (1-1 member to unit, or if you do team spaces, team to unit). Those spaces can only be sold once at a time, and are often the most expensive to replace when a member leaves.

The rest of the options is a variety of flex options, which can usually be sold 3-4x to 1 member to unit without any real risk of oversubscription. The income per member is less, but I can comfortably get 2-3x total revenue from 3 flex members per flex desk than I can from a full time desk.

@Angel_Kwiatkowski did a great breakdown of how this works on a small space too, showing that her revenue per square foot is basically 2x as effective on flex desks than private offices.

The way we get to 3x+ our revenue potential is because around 60% of our paying members almost never use a desk.

By focusing all of our energy on building a community that people want to be a part of, membership to Indy Hall is more like joining a professional association that happens to have a clubhouse. This turns our community into something where people can truly participate even if they’re not physically in the space. One of our members actually wrote something a couple of weeks ago that I think really captures this:

Your completely virtual People at Work Summit conference was my introduction to what virtual coworking could look like. I had used other collaboration tools before as a part of a team, but I was struggling to figure out how to leverage it to find and invite my local community to engage in similar ways. After the Summit ended, I was missing that creative energy, so I joined IH as a virtual member to see what it was like day-to-day (since I couldn’t convince my wife to move to Philly).

I imagined I’d show up and feel like a poor little street kid standing outside a restaurant window watching the “real” Indy Hallers enjoying the music and break room banter. I imagined myself logging in and holding my tattered little hat in smudged fingerless gloves, nose pressed against the glass of my computer screen, staring in from the cold snowy virtual sidewalk hoping someone would invite me in.

The actual experience of virtual coworking was more like walking up to an open air patio where the conversation trails out past the sidewalk and into the street. The members of Indy Hall are engaging and welcoming and there is a sense that you are encouraged to jump in and contribute. I experienced the pervasive mindset of ownership and inclusion that I’d read about and heard about in the podcasts and interviews.

Having my virtual membership has given me a way to find my tribe at IH and then venture out into my local community in new and more confident ways. I am learning great skills of hospitality, communication and creative growth from an IH family who is generous enough to share, and share well.

We’ve also seen dozens of similar stories of people seeking out our community before they move to our city, as a way to build connections (professional and personal – some have even found housing this way!).

Others keep a membership to stay connected. We just had a team outgrow us and move into their own space in the neighborhood, and around half of their team members decided to keep memberships because they didn’t want to lose the connection to the community. Others use it as a way to augment the stilted relationships in the stuffy office they have to go to with a community of coworkers that actually support each other.

There are so many ways to feel isolated in your work and your life – and so many ways to address the problem.

With this model at our core, we’ve been able to expand our membership & revenue repeatedly without needing to add the overhead of more square footage, and when we do expand physical space, it’s only because it’s strategically valuable in some way.

In 2019, the vast majority of our expansion plans are all centered around memberships for folks who don’t need a place to work but want the benefits of a creative business community that supports them.

Space might become a factor, but it’s secondary to everything else.