I can already hear the grinding of teeth from some of you, followed by a “I’m a non profit / association / social entrepreneur.” It applies to you too, so keep on reading.
When you decide to open a coworking space there are many different reasons why you may want to do it, but no matter the reason you need profit to be sustainable over time and to fulfill your vision. Without making more money than you spend you will come to a point where either you will run out of financial resources or you will burn out. Neither of these is desirable, don’t you think?
This was the core of my workshop at the Coworking Europe Conference in Paris and the files attached to this post are part of that workshop. There was a team recording a video. If I ever manage to get my hands on it I will share it with you all. The presentation was first given at the Coworking Spain Conference last spring.
What is guerrilla financing?
Guerrilla financing is just a way to refer to the quick and dirty way of figuring out if you can arrive to profit with your space. The easiest way to do it is to take a piece of paper, add up the expenses and greatest realistic revenue you could get for a month. If it is positive, good, if not, bad.
The good thing about using a spreadsheet is that it does all the calculations for you and you just have to update a number to see the impact in the coming months. It is a great insight and understanding tool, but don’t get carried away: you need to make educated guesses for your hypothesis that are as close to reality as possible.
The legal entity you take is not important either here, although it is really important to consider as a business and to understand how you take decisions, what happens with the money if you ever make any, who does what, etc.
Neither are advanced financial concepts like the time value of money, amortization, depreciation, etc. This is a rough estimate, and as such you should take into account that if the profit is too thin it is probably not even there.
Your goal is to make at least enough money to pay your expenses and yourself. If you are a rich heir and just want to burn your money for the greatest good of humanity, no problem, but you still need to figure out how long will it last.
To know when your company starts being sustainable you have to look at the break even point: it means that you are making more money than you spend. Hurray! The real profit comes afterwards, when you make up for your initial investment. If you have investors, they will be looking at profit and they will probably want you to reach it fast.
You know you want it, you know you need it. If you are a non-profit the only difference with a company is that you don’t distribute it to the investors, but you still need it to pay your offices, materials, furniture, workers, etc. So yes, you should also get some profit. If you make a lot of it you can just spend it doing good.
How do I use the guerrilla financing spreadsheet?
You should use it as a thinking tool. It will help you understand the importance of your different sources of revenue and expenses. Wherever you put your accent it will have an impact on the economics, administration, personality and dynamics of your space.
If you really are in the coworking business, the core of your revenue will be the member fees of your coworking space. Events only work financially for a few spaces, but for most they are just a way to activate their local communities and to help themselves with the marketing. Sponsoring with the current economic situation will be really tough, and you will probably get it in kind not in money. I have no real clue about services, but they do look like a hell of a lot of work for little revenue/value (they are not the same.)
The main expenses are going to be rental, people and utilities. If you run into difficulties with expenses, try to work around them either with cash or alternative solutions (like sharing the income with your landlord or getting the first year free.) You can pretty much forget about taxes, it is a luxury to consider once you have profit!
The spreadsheet includes more notes on the practical use of it. Don’t fear making changes: you can always make a copy or download it again.
I want them files!
The compressed file contains:
- my guerrilla financing spreadsheet to play around with,
- the global coworking survey presentation by Deskmag where you can find some interesting averages,
- and a professional financial modeling spreadsheet and case study kindly shared with you all by Olivier Witmeur, the director of Solvay Entrepreneurs.
I want something more professional
Good for you! Get professional help. You can just reach out to a professional or you can get help form one of the many institutions and organizations that exist around the world to help entrepreneurs. Look for them in your city, region, university… everywhere! They will not only give you the template to use, but also with mentoring to use it right, and they can also help with the next steps and the financing.
I want to learn more
You are lucky. I’ve written the Coworking Handbook, a guide for coworking space owners and managers to help you and your associates create and run a successful coworking space. if you want a shorter reading, check out Why Profit is Good for Coworking Spaces.