Building a successful coworking brand is hard. It’s a business that has the physical limitations of real estate, the unpredictability of high-velocity business, and the complexity of a hospitality company.
It can serve a wide range of customers – from individual freelancers to the largest enterprises in the world. It’s also a complicated community-building exercise of creating an environment where all these different customers can work together.
On top of that complexity, 2024 is the 4th year since the perfect storm. Which unleashed unprecedented office utilization challenges, raging inflation, super-high interest rates, and a completely unpredictable business climate.
Yet, the best coworking brands are thriving! They have done a lot of things right. We studied hundreds of coworking and flex space businesses and we found the top 7 traits of the most successful brands. The ones with the highest occupancy rates, the best retention rates, growth, and profitability.
Let’s dive in.
The best coworking brands have an extremely well-defined Ideal Customer Profile (ICP) down to the smallest detail. For example, some are going after VC-funded, seed-stage tech startups with 3-20 employees. Others are focusing on mid-age, successful solopreneurs working in the creative industries.
The ideal customer profile defines the firmographic, environmental, and behavioral attributes of your most valuable potential customers. It is developed through both qualitative and quantitative analyses! You can read more about it and follow a well-established framework by Gartner here.
The ICP aligns marketing, sales, service, and executive teams to the highest-value customers. It also creates a focus on scalable and repeatable strategies and tactics to engage and convert top accounts. It drives target account list creation, segmentation, organizational structure, and other key activities!
It’s essential to have a very clear ICP in coworking because as mentioned above, potentially everyone can be your customer – from a freelancer to a multinational corporation.
You don’t want to waste time on the wrong customers instead of chasing more of the right customers. Having more of your best customers (and less of your worst) will help with retention, occupancy rates, growth, profitability, product offering, and everything in between!
You can start building your ICP by:
Knowing your best customer (ICP) will allow you to further polish and perfect your best product. We discuss creating an ideal customer profile in our extensive guide on SEO for coworking spaces.
The best and most successful coworking space companies we have evaluated have a product that stands out. They are famous for that one specific product! Having that one great product helps them also sell a lot more of their other products.
For example, some spaces are offering the best event spaces in town. That helps them to sell a lot more desks and offices as a result of that. Others are offering the best day passes in the city.
As a result, they can sell easier their offices and meeting spaces. Or some have an outstanding design and character of their buildings. Others have an incredible community.
Of course, your killer product can also be offering all services at the best price.
Your Ideal customer profile (ICP) should be able to easily connect your brand to your hero product or feature of your space! Everything gets so much easier after that.
The most successful coworking spaces win their local markets, first! They usually saturate their small town or city well before expanding to other cities, states, or countries.
Almost all great brands started by winning their local markets – opening 3-5 or more locations in a city and completely dominating it before they move on.
The power law applies very well here – the dominating brands in a local market get the majority of the opportunities.
Researching our customer base clearly shows that having more locations in a city is increasing the lead flow exponentially.
In difficult times, like 2024, the best strategy is to focus! Focus on your core market and win it!
It’s no secret that the Central Business District as well as the Financial Districts are struggling the most in the post-pandemic world. Also, it’s no secret that the Suburban spaces are doing very well lately!
These are both very good reasons to expand in small towns. However, the main reason is that you will inevitably have less competition in the early days but also, you will be closer to where people live.
All research out there is pointing out that the main reason for people to work from home is not that they don’t like the office in general. Or that they like working from home so much.
The problem is that people hate the commute. People hate spending hours in their cars.
So, if your coworking space is near your ideal customer profile’s home – you have a win and a much better chance to convert them to customers.
2024 will be the year of small-town and suburban locations.
I know it sounds easier than it is. However, in 2024, you just have to be profitable. The best brands out there are profitable. Some of the best-performing coworking space operators are generating a 20% EBITDA margin on an individual location basis.
This is a very healthy margin for a hospitality business. It’s hard. It’s very hard but it’s doable.
Coworking can be profitable!
The biggest cost as well as the most important element of a coworking space remains the physical location. This will remain true in 2024.
There are many details to consider when signing a new contract with a landlord. Our research points out that the best brands are very good at negotiating great deals with their landlords. They usually align the incentives well and turn their landlord into a strong partner. Some of the important elements of the contract include:
2023 was the worst year for funding any type of business. Next year should be a little better. Hopefully, it will be.
There are different funding paths for coworking operating companies.
When securing funding, the most important element is always to have a very good alignment between your business and the investor!
Building a thriving coworking business doesn’t have to be hard. You just need to be well-educated and plan for success.
The good news is that at OfficeRnD we have the right tools and resources to support you along the way:
Wishing you a very successful, less stressful, and incredible new year!
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