Many more people are operating as independent contractors and freelancers, and the demand for shared office space has reached an all-time high. One of the key strengths relating to operating a co-working space business is that they are typically able to acquire large-scale leases with the intent to subdivide them among a number of different entrepreneurs and small business owners. These businesses typically generate very high gross margins from a relatively low capital risk program. It should be immediately noted that most co-working space businesses are typically funded with either a working capital line of credit or funding from a private investor. Given that there are very few tangible assets associated with this business, these businesses are generally started with funding from private investment sources. The startup costs associated with this type of business typically range anywhere from $100,000 to $200,000 depending on how much office space is going to be acquired at the onset of operations. These companies typically generate gross margins of 80% to 90% on each dollar of revenue generated. It is important to note that one of the ways that these businesses are able to remain profitable by coupling a number of business services into the co-working space operations.
For weaknesses, these businesses can have somewhat high operating cost given that large underlying rental expenses are carried on a month-to-month basis. Additionally, during times of economic recession – the revenues of these companies are highly subject to fluctuation. However, as more people become unemployed and turn to freelance work – the revenues can remain stable especially in major metropolitan areas.
For opportunities, most co-working space companies readily expand by simply acquiring additional large office spaces that they lease with the intent to provide them to independent entrepreneurs and freelancers. This is really the only way that these businesses expand moving forward. Of course, one of the other methods of growth is to acquiring existing co-working space companies that already have an established market presence. Another way that revenues can grow is by establishing additional services that benefit smaller business owners, freelancers, and independent entrepreneurs.
For threats, competition is the biggest issue with most co-working space businesses. In every major metropolitan area there are number of companies operate in a similar capacity. Again, the other risk is that there is a significant amount of economic fluctuation as it relates to the operations of these businesses. As such, an entrepreneur that enters this field eats you keep a very close watch on the underlying expenses – especially as it relates to marketing – when bringing these businesses to profitability.