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The Magic Ratio (How many memberships vs desks?)

7 minute read
by Alex Hillman

In the world of coworking, most operators make the mistake of optimizing for occupancy.

I mean, I can see why most people make this mistake.

“Wanna grow revenue? Look for the easiest way to fill every desk, every day.”

Except…there’s a problem with this approach. A few, in fact.

The first problem is that this model is it creates an incentive for you to sell full time desks (and offices if you offer them).

And a room full of full time desks quickly creates lots of problems:

  • Your revenue becomes tied directly to your square footage. Not only is this limiting in a practical sense, it’s also limiting in a strategic sense. It’s hard to break out of the mindset of “space = value.” Our approach of blending full time and flex memberships decouples revenue from square footage, which means an income ceiling doesn’t appear when you run out of space.
  • Limited membership base - most people aren’t actually actively looking for a replacement for the office, they’re looking for a periodic alternative to the isolation of working form home and from cafes
  • Full time memberships are the most “expensive” loss when someone cancels a membership. Having a waiting list can help (if it’s genuine - bogus exclusivity breeds distrust) but it’s still better to spread out your risk.

…and that’s just a few of the more tactical issues.

An occupancy-based mindset is a short-term mindset. You need a more long-term, more strategic mindset.

If you’re optimizing for anything, make it potential relationships and the sharing of knowledge and experience.

This are where long term value is created.

This is where value is most readily increased, without incurring additional costs to continue providing that value (a.k.a. sustainable value).

This is how we increases the value of Indy Hall to our members, and while increasing the average lifetime of membership.

This is how we counteract the risk of turnover that comes with offering monthly memberships instead of long term leases, by making sure that people can still get value from their membership before and after they need a desk.

Instead of optimizing for occupancy, we optimize for a balance of members who are at Indy Hall “full time” (or roughly treat it as their primary home base for work) and members who join with our various flex memberships.

If you want to learn more about how we came up with our membership structure itself, and the reasoning behind each decision, you can check out this detailed guide to membership design.

But memberships are just one piece of the puzzle.

We ALSO optimize for potential connections and relationships in the metrics that we track_._

This optimization impacts our desk configuration (as in, the physical layout of the room), the proportion of full time and flex options that we make available, and even memberships that have nothing to do with occupying physical space.

Here are a few figures we keep in view at all times:

Full Time Memberships as a % of Total Memberships

We focus on keeping this ratio below 25%.

Since full time members (dedicated desks, or if you offer them, private offices) tend to be the most territorial. When a sense of ownership over their little slice of the place gets out of whack, we start to feel the stagnation of a more transactional “office rental” mindset from our members instead of our target of a community center mindset.

Keeping this ratio below 25% helps keep this from becoming our prevailing culture.

Full time desks as a % total of total places to work

We aim to make sure that we have more flex desks, casual workspaces, and lounge spaces, available than dedicated desks.

When we run out of dedicated desks, we start a waiting list and encourage people who wish to get a full time desk to join with one of our flex memberships until a dedicated desk becomes available.

Full time membership & desk availability

Not all of our full time members have dedicated desks - some actually prefer to move around and sit with different people, since that’s a big part of why they chose to join Indy Hall vs a place that primarily rents desks and offices.

But the majority of our full time members do choose to “claim” a desk where they can leave their belongings. Since this a 1:1, member:desk, we keep an eye on the number of full time desks that are available at any time.

While keeping the other two ratios in check, we tend to have 0-3 full time spots available at any time. When we have no available full time spots, we run a first-in-first-out waiting list.

The Magic Ratio: Flex membership & desk availability

The instinct is to focus on tracking attendance for billing purposes. But that’s secondary for us.

Primarily, it’s to keep an eye on average availability of flex desks.

Said another way: what are the odds that someone is going to come in and there is NOT a place for them to work?

The closer we are to full utilization of our flex desks, the higher that risk is.

✨ This is the magic number to track, and where your growth potential lies because it’s least bound to your square footage.✨

This ratio is far more straightforward than many of the complicated formulas and ratios that I’ve seen people concoct, and still be wrong. We base all of our figures in reality, rather than starting from predictions.

So when we see that only a few flex desks are available each day, we will put a hold on adding any new members at our 3x/week membership and add anyone who is interested at that level to a waiting list if they don’t want to join at one of the lower levels.

Within a few weeks or months, we will have an idea of our new availability average and start adding new members.

Your milage absolutely may vary depending on your memberships and your community, but we’re able to safely run with 4-5 members per flex desk, and have LOTS of headroom for growth.

To put some of these ideas into hard numbers and how they affect our physical layout, let’s say we had 100 desks (we actually have more than this, but round numbers are easier!)

  • Approximately 50% of our desks are occupied by full time members.
  • The remainder of our desks are for “flex” members, and are available for anyone else…part time members and guests who are visiting to work for the day.
  • To help people visually know which desks are full time vs flex without having to guess based on peoples’ belongings, we simply use two different color desks. The desks themselves are identical otherwise, just one style that has a light wood color top and the other has a dark colored top. In our model, dark tops signal a full time desk, light tops signal a flex desk.
  • We very intentionally MIX the full time and flex desks into clusters of 3-6 desks, almost like little neighborhoods.
    • We’ve experimented with sizes and arrangements and found that tiny 2-desk “clusters” make it too easy for people to sit alone (which means they have a lesser chance of meeting neighbors), but large 7+ desk clusters create that feeling like when you’re at a way-too-big dinner table where its too easy to blend in.
    • Having the two different colors of desks, and therefore the many different kinds of membership levels sitting together, creates an opportunity for some natural flow and change throughout the space. Our full time members don’t end up sitting next to only the same people for months and months at a time. Our flex members are less likely to sit alone, and they’re more likely to sit among full time members who will extend a friendly “hello” and welcome them to that area.

Get your ratio right, or send the wrong message!

When you’re planning/designing a coworking space, you can use these concepts to make sure you’re optimizing for the RIGHT outcomes and baking the kind of community and culture you want right into the business model.

And if you run a space where very few people are interacting with each other, take a look at the model you have and if it’s sending the wrong message!

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Hey, thanks for reading!

Alex Hillman I am always thinking about the intersection of people, relationships, trust and business. I founded Indy Hall in 2006, making us one of oldest fully independent coworking communities in the world. This site is packed with the lessons and examples I’ve learned along the way. You can find me on Twitter, too! 🐦 Say hi.