In a post today on Not An MBA, the boys evaluated the business side of coworking.

And to be completely honest, I’m a little bothered by the category that we’ve been put into. We seem to be pushed aside in favor of the critically “for profit” models in terms of sustainability.

The irony in this? Between the list of Profit and Not-For Profit coworking ventures, we’re among the few to be turning ANY profit, even if its not a lot.

Before I go any further, please note: Drew and Todd, I’m not mad at you. I still like you guys. You just greased some already turning gears.

Non Profit isn’t a State of Mind

We’ve never claimed to be not-for-profit. We’re very much for profit. But our initial focus, outside of community building, was on break even.

Early on, Geoff and I discussed the benefits of going either way. We decided, together, that operating IndyHall as a for-profit business was absolutely critical.

There’s nothing in the world stopping a coworking community from operating within a profitable coworking space. But I think THAT is where the line is drawn.

This isn’t Chicken and Egg, People.

For the sake of this example, there are two types of coworking: communities, and spaces.

  • You can operate a coworking community without a for-profit coworking space. Jelly is a fine example of that.
  • You can operate a coworking space without a coworking community. You can provide all kinds of nice services and amenities. You can hope and pray and wish. And people will show up. In an ideal situation, they’ll even nest.

But this has been done before and, in my mind, isn’t particularly compelling.

That’s my opinion, but it’s also the opinion of many, as illustrated by the transition away from traditional incubator setups into the Y-Combinator (also see Colorado based TechStars, and Philly local DreamIT Ventures) model where you’re still evaluated as a participant of the space, but along with the space and small business services, you find yourself surrounded by like minded entrepreneurs at similar points in their business experience as one another. And just like “working alone sucks”, “starting a business alone sucks, too”.

You can jam services down people’s throats to attract them like moths to a lightbulb. Who DOESN’T want a swanky office. People will come for the shiny stuff, but you’re going to need some substance to keep them there. That substance? Culture.

So, it’s not Chicken and Egg?

Oh, right. I was making a point. My point was, if you establish a business before establishing the community, you’re pretty much guaranteed to end up imposing on the single most important asset of ANY coworking community.

The culture.

If you’ve created the business without the prior influence of the community of it’s users, you will inevitably be forced to make decisions for the business that are contrary to the members interests. THAT is business.

And culture, imposed upon a community, inevitably crumbles that community. Culture, carefully cultivated and built on top of, is sustainable.

I’m not saying you don’t need business. You do. You absolutely, positively do. If you’re thinking about starting a coworking space and don’t have any business experience, get a business adviser. NOW. I got lucky and got Geoff DiMasi as a partner.

Remember, I’m not saying that a community is the core. I’m saying the culture is. That’s a really big difference from the messages I’ve sent in the past. I’m going to be revisiting this a lot. In part, this is due to some realizations that ‘community’ as a term is getting dumbed down by overuse and overemphasis. Thanks, Kathy Sierra, for joining twitter and sharing this thought at just the right time.

Every coworking space has it’s own culture. Recently, Tara Hunt of Citizen Space (also one of the “not-for-profit” coworking spaces, as appointed by Not An MBA), remarked about how despite the 14+ person waiting list for Citizen Space, when she tried sending the people on the waiting list to any of the other spaces in the vicinity (and rumor has it that San Francisco has a BUNCH very diverse of coworking spaces and communities), the people on their waiting list said, “No, thanks. We don’t just want coworking. We want Citizen Space coworking. We’ll wait.”, or something to that effect.

I recently made my first visit to Citizen Space.

Yes, it’s beautiful.

Yes, it’s in a convenient location.

Most of all, for me, it felt like home. And that had nothing to do with the physical location, which was 3000 miles away from my REAL home. The culture was familiar.

Is Citizen Space for everybody? Of course not. That’s why San Francisco has a number of other coworking options. Is IndyHall for everybody? No way. And that’s why I eagerly await another variant of Philadelphia coworking. Please. Somebody step up. Do it you’re way. I’ll even help. Pick my brain. Anything you want, except a check. Cuz I don’t want you to be answering to me when you’re making plays with my money.

And, of course, I’m not in any kind of financial position to be investing. At least until someone figures out how to convert Whuffie to US Dollars. If you do figure that out, email me please.

Money Changes Everything

When you’ve got large sums of money and salaries on the line, your decision making skills are changed. It’s inevitable. It’s the most common issue I’ve seen with the relatively small contact I’ve had with startup founders.

Product managers do not make good CEOs. I mean, they can be one or the other, but it’s not a good idea for the product manger to BE the CEO. The results are obvious: product roadmap decisions driven by the guy dangling the checking account balance in front of you are not going to be the same as decisions made for the end goal.

What I am trying to get across is order of operations.

One foot before the other. Crawl before you walk. Walk before you run. Put on your pants before your shoes.

Build an unstoppable community to take part in the development of your business.

So Coworking is Profitable?

I’ve never ever gone on record saying coworking can’t be profitable. It can. I hope that someone (and it doesn’t need to be us) proves that it can be CRAZY profitable, just to prove the cynics wrong.

I just hope that doesnt attract the wrong people to the community.

I HAVE gone on record saying that our end-game isn’t to be rich from coworking. The true values are corollary, for the members and the owners. That does NOT mean, however, that they are intangible.

I HAVE gone on record saying that by making profit your number one priority, you’re going to have to work a whole lot harder to adapt your profitability to fit the needs of your community. It’s doable, but it’s challenging.

And I don’t know about you, but I prefer to work smarter and retain my quality of life than work more than I already have for an unknown, anticipated, calculated gain.

Philly’s own Josh Kopelman said at the recent kickoff of DreamIT Ventures first season,

“I’d rather back an entrepreneur who can adapt to change than an entrepreneur who claims he has all of the answers. Because, inevitably, every business plan starts out wrong.

Agile as a Business

Geoff has pointed out our decision to run this as a business is to be able to keep it open, iterate, and improve. We take this process for granted as we both come from agile software development backgrounds. The methodologies of Agile are second nature to us.

Having a strong and committed culture, our (paying) members help drive those iterations forward because it doesn’t just benefit IndyHall (the business).

It benefits IndyHall (the community).