Today we continue on from our previous article, where we discussed the Deskmag Coworking Trend Survey 2023 - there are several interconnected sections that make it challenging to discuss them separately. These sections encompass high real estate or rent prices, financial constraints, elevated energy prices, limited workspace availability, and inflation.
Before diving into the specifics, allow me to highlight and simplify the main issue: The problem lies not in the fact that your costs are increasing, but rather that they are rising beyond what you believe (or have proven) you can raise your rates.
Inflation et al.
The lack of available working space for expansion is either related to the increase in the price of buying or renting space (a low availability rate in local real estate will usually lead to higher prices). However, this effect is mostly observed in urban areas, particularly in city centres. The impact of these cost increases is much smaller in urban periphery, suburban and especially rural environments. The choice of our business model will significantly impact our strategy, opportunities, pace, and options. Nevertheless, I strongly encourage you to consider exploring the management model (unless you choose a buyout). While it may result in a lower profit margin, it compensates by minimising risks through a substantial decrease in capital expenditure (CAPEX). Moreover, this approach enables faster growth, as we have previously discussed.
It's worth noting that in the USA, 40% of flexible workspaces operate under this model, whereas in other markets like Spain, they represent only 1% of operations. If it sounds too "fancy" I remind you that some traditional coworking operators have been operating with a variable rent for more than a decade, which is a very very simplified form of a management agreement. There are other operators who have negotiated agreements where the landlord assumes some of the costs associated with setting up the space, such as installing heating and air conditioning systems. This arrangement makes sense both in terms of cost and the fact that the installed infrastructure remains an asset even after you vacate the premises.
Rising Energy Costs
To address the escalating energy costs, particularly in the EU, there are several approaches to consider.
Firstly, exploring the feasibility of installing solar panels is a viable option. Advancements in solar panel technology have made it more lucrative in terms of performance and cost compared to five years ago. However, it's important to acknowledge that factors such as orientation, latitude, and the amount of sunlight received (as well as the timing of sunlight) will significantly influence the installation cost and return on investment.
Another avenue worth exploring is the pricing of various energy service providers in your area. While I understand that this may not be possible in certain territories, if you have the ability to choose, especially in a deregulated market, it's essential to evaluate different options. Some countries even have energy brokers who can assist you by negotiating with various electricity companies and switching your electricity supply annually to secure the best possible price. Additionally, there are emerging options that offer price guarantees per kilowatt-hour for up to three years. Regarding the impact of inflation on consumables, it is advisable to periodically review your consumption, ideally once or twice a year. Look for more cost-effective alternatives and consider eliminating unnecessary items to mitigate the effects of rising prices.
Lack of qualified personnel
The reasons why you find it difficult to get qualified staff may be derived from the financial situation: you cannot pay competitive salaries for the skills you require from your staff, or simply you may be facing difficulty in finding someone with the right skill set within the local talent pool. It is crucial to analyse the tasks that need to be performed and evaluate how they are distributed among your team. Often, tasks are assigned on an as-needed basis or based on the current workloads, without considering whether the distribution is logical or efficient. Why do we do this? To try to prevent your staff's Job Description from being a fusion of James Bond and Jane Goodall.
Talk to your staff to find out what is most difficult for them and analyse it all together, understanding the challenges your staff face will help you not only to hire more easily, but also to prevent your staff from leaving prematurely. For example, if an event manager typically starts at 9:00 AM, it becomes challenging for them to adhere to their schedule after late-night events caused by increased workload (Plus, it may be illegal in some countries due to required rest periods between work days). One potential solution is to temporarily adjust the event manager's start time to a later hour when they have had a late-night event the previous day. However, this approach may not provide a long-term solution to the problem at hand.
Talk to your staff, understand their challenges, rationalise tasks, and schedules and identify the key activities and people to make your business work. Maybe re-reading this post could be helpful. If you are looking for staff for your coworking space in 2023, consider individuals with experience in the hotel industry. However, if your space is closer to a creative hub, or a hybrid space, it may be more difficult to find the skills you need. It is crucial to consistently "feed" your staff/s with ongoing challenges and growth opportunities. This approach is valuable for all personnel but requires extra attention for creative profiles.
- Talk to your staff to understand the challenges in their day-to-day.
- Take a step back and analyse the tasks and how they are distributed not only in terms of areas but also in terms of soft skills.
- Review your staff's schedules.
- Redistribute tasks, and adjust schedules if possible, to optimise them.
- Find out what drives your staff on a personal level to try to find challenges for them. With this, we can reduce the potential burnout of our staff and keep them for longer in the company, although you have to be aware that if your space is not growing it can be complex to do so.
If the cost of living increases and rates remain stagnant, you will eventually lose staff, leading to hiring difficulties. If you need to hire staff, consider tapping into the hotel industry and hotel schools as they can provide service-minded individuals. Offering better hours and a stimulating environment can be enticing for many candidates, making it easier to attract and retain talent.
Lack of Community
A strong community is a valuable intangible that is challenging to replicate, especially in workspaces focused on freelancers. It plays a crucial role in member retention, delivering on the promise of providing "more than just a workspace." If your space has enough critical mass but the community isn't flourishing, it could be due to a lack of conducive spaces or insufficient design to foster meaningful interactions and moments of connection. In the Nexudus blog, we have talked many times about how to create a community and we invite you to take a look here and here.
The main concerns for coworking space managers in 2023 according to Deskmag are the attraction of new members or users, the economic aspects such as real estate prices, inflation or financial constraints, the lack of qualified people and the lack of community. There is no magic recipe to solve everything, and in fact, it is more of a marathon than a sprint. Stopping work one morning every six months to review the project, services and approach is a practice worth considering. Listen to your team and members (and to the people that decided not to become a member) and understand what works in your space and what needs to change: leave your ego out of the equation. Analyse the aspects that have the most potential impact on your space and have the least complexity to implement (either financially or operationally) and start with them (and do it today!).
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