One of the biggest mistakes I see coworking space founders make all the time is thinking they can make it all happen way faster than is realistic.
The reason Alex Hillman advocates for building your community before your space is simple: you don’t want to blow your money on an empty space. A space that isn’t generating profit becomes a liability instead of an asset.
However, most founders find themselves unable to withhold from signing that lease. Even if you wait and build a small community that’s ready to move in when the space is ready, there’s still a significant amount of risk that you’ll create a money pit.
There are two ways to remedy this.
First, cultivate an operations mindset.
Second, build a runway. A runway is the amount time you have before you run out of money. In other words it’s the amount of time you’re giving yourself to be cashflow positive. Your runway is more important than any part of your business in my opinion because it gives you time and peace of mind with which to figure out the other parts.
There are two ways to affect your runway and they are very simple to understand. Either have more money invested in the project or reduce expenses (including salaries) to decrease your burn rate.
In an ideal world you’ll do both, but let’s talk about the common pitfalls that happen from poor runway planning.
Seth Godin’s analysis of the MVP (minimum viable product) is at once simple and brilliant. It’s incredibly self-explanatory. He says, “the product needs to be both minimal and viable.”
The mistake most founders make here is they focus entirely on the minimal, but don’t make the space, amenities, or community good enough to be viable. Yes, it might be a coworking space, but it might not be a coworking space that anybody in your city, with their values and their particular problems, would actually like to buy.
#2 Over-focusing on Marketing and Sales
When you, as a founder, realize you’re in a crunch with only 3 months to be profitable, you put pressure on your Community Manager or salespeople to get more butts in seats. Though you may not be intending it, you pressure them into compromising their integrity and authenticity, which is also the integrity and authenticity of your brand. They start making deals that generate dollars at the expense of brand quality and community cohesion. This is the beginning of the end of your coworking space. As you start compromising long-term growth for quick wins, you start functioning more as an event rental venue or a generic office space.
Have a very long runway, at least one year, but closer to two.
Focus on community, space, and staff quality to create value for members.
If times get tough, cut the fluff. Do more work yourself, reduce salaries, and reduce staff. Better yet, don’t allocate more staff than you need in the beginning because it can be an incredibly emotionally difficult choice to lay people off or cut their salaries.
The point here is to invest and budget in a way that times don’t get tough.