Thanks for your comments, Will. Reason #3 is exactly why I'm considering the switch. The reason I'm thinking about changing our cost structure isn't really a cash flow issue, as most people that join our space do so at our highest rate, and stick around for 7 - 8 months, which is actually really good for where we're located - it needs to be much better though. As a space focused primarily on supporting the (slow) growing Delaware startup community, we're very happy to provide people with a safe place to get on their feet. Even better, the majority of the startups that have come out of The coIN Loft found co-founders at our events or working next to them in the space. We're certainly building up a great story.
The other side: Delaware has always been starved for independent talent, which is obviously bad for a coworking space. We have a deep history as a corporate state, so most people that come here to build a career are doing it at legacy companies, in the banking, pharma and law related industries. With Delaware being such a small state the lines of competitiveness have been thoroughly entrenched for many years - way before The coIN Loft came around. There are a few non-profit professional organizations (chambers of commerce, rotary groups, networking groups) and economic development groups (sba & its affiliates) that rule over the entrepreneurial community here. These places aren't communities - they're bragging rights - so you're a nobody as a professional if you don't join their circles. Despite all of our PR and marketing efforts, we've struggled to compete with these groups. We consistently hear that the month-to-month membership fee is a deterrent. The other groups, specifically the Chambers of Commerce, who we're in direct competition with, charge a annual fee, plus fees for every event. For the penny wise entrepreneur, they're looking at either $300 per year for the Chamber or $2400 per year for us. It doesn't take much to see why they'd be slow to choose us. We've tracked the average time it took a person to join us and found that of the 80 people that have joined, over 50% thought about it for more than 5 months before pulling the trigger. They also let us know that the monthly payments were an issue. I don't think we need to be as cheap as $300 per year, nor do I think people are expecting that. I just think we need to disassociate monthly financial requirements as a barrier to entry. The main reason is that our target audience (creatives & developers within the first year (hopefully first couple of months) of their startup) aren't cash flow positive yet. The money they're using to pay us is also coming out of the reserves they have to live on until they're financially stable. I think a fee structure like the one you (Will) use at Locus would certainly be a good way for us to be thinking about annual memberships. On Apr 23, 5:09 am, "Will Bennis, Locus Workspace" <wmben...@locusworkspace.com> wrote: > Our standard prices are based on a 6 month membership commitment. For > any membership less than six months, we charge 20% more. If you pay > for your entire 6 month membership up front, we give a 15% discount on > the standard price. If you pay for an entire year up front, we give a > 25% discount. We used to also charge less for a year-long commitment > (without needing to pay it up front), but stopped just for the sake of > keeping things simpler (and there's still an argument for simplifying > it more). > > We provide discounts for both long-term commitments and for paying up > front for several reasons: > > 1) Cash flow. This only applies to the long-term memberships where the > people pay up front. It's nice to have the money now as we're a young > business and need the money to pay bills. As the space grows in the > future, that lost future income is not so crucial. > > 2) For better and for worse, financial gain: People who sign a long- > term contract are much more likely to stick with the space than those > who don't. Even if they don't stick with using the space, most of them > keep paying according to their contract, playing a big role in my > ability to keep prices as low as they are and stay in business. The > incentive for paying for it all up front adds to this, since that > group always pays for the entire term of the contract, while some > small percentage of members who commit long-term but don't pay it all > up front don't ever end up paying. > > 3) I prefer longer-term members for the sake of the community, and so > giving an incentive for a longer commitment seems to make sense. > > 4) Paperwork and associated time: I need to spend a great deal less > time on paperwork and organization on members who renew every year > than I do on members who renew every month. > > 5) It allows us to charge lower prices (for longer term commitments) > than we would otherwise be able to charge, making the space more > accessible to a lot of people who wouldn't otherwise be able to afford > it. This is important to me since part of my motive for creating this > kind of business was to help graduate students and people venturing > into freelancing for the first time, people who often can't afford a > lot for a workspace, and only with something like this (along with a > strong incentive for hotdesking over anchor desking) can I keep the > prices low enough. > > 6) Fair pricing: We reward contracts that make the space more > economically sustainable. To me it's a no-brainer that a 12 month > commitment adds more net income to the space (per month) than a one > month commitment (on average). If a long-term commitment is more > valuable to the space owner and more costly to the members, why charge > the same for each type of commitment? > > There are some down sides, too, of course: Primarily related to # 2 & > #6: The business model creates incentives for me as a business owner > that I don't want: as with a gym model, the hope that people who > commit long-term don't end up using the space as much as they'd > planned when they signed up so that I can get more members per desk. > That's directly contrary to my main mission of helping people do their > work-related best. Also, if members are unhappy after they'd worked > here for a while, it's a shame if they feel locked in to something > they don't want. And it's bad for me to have someone locked into a > long-term contract who may be detracting from the quality of the > space. It makes it a LOT easier to tell a member that they're not the > right kind of person for the space if their contract expires at the > end of the month than if it expires in 8 months. > > I get around most of the downsides, or try to get around them, by > reminding myself of the mixed motives as much as I can, keeping them > explicit so the wrong reasons (given my own reasons for doing this) > don't start to guide my actions or thinking. I don't push the long- > term memberships and I'll let people out of it with reasonable > penalties if they have a good reason for wanting to get out of the > contract or if they're detracting from the quality of the space. > > Overall, it has worked great, IMO, and it's something I have found > almost zero reason to consider changing so far. I often wonder why so > many coworking spaces seem committed to charging the same for month-to- > month memberships as it seems to me to make so little sense from a > cost/profit perspective, and I don't see the difference in pricing as > contrary to coworking values. The members like the option (I couldn't > offer those lower prices if it wasn't tied to the longer-term > commitment), and it add cash flow and revenue that makes coworking > more economically sustainable. > > Will > > On Apr 22, 11:34 pm, Tom Brandt <twbra...@gmail.com> wrote: > > > > > > > > > I'm curious why you are considering this? > > > On Sun, Apr 22, 2012 at 8:23 AM, Wes <wesley.garnet...@gmail.com> wrote: > > > We've been flirting with the idea of switching to, or at least > > > including, an annual membership model at The coIN Loft. I did a quick > > > search and didn't see any discussions about it here. Has anyone tried > > > it before? > > > > -- > > > You received this message because you are subscribed to the Google Groups > > > "Coworking" group. > > > To post to this group, send email to coworking@googlegroups.com. > > > To unsubscribe from this group, send email to > > > coworking+unsubscr...@googlegroups.com. > > > For more options, visit this group at > > >http://groups.google.com/group/coworking?hl=en. > > > -- > > twb > > member, Workantile <http://workantile.com/> > > @twbrandt -- You received this message because you are subscribed to the Google Groups "Coworking" group. To post to this group, send email to coworking@googlegroups.com. To unsubscribe from this group, send email to coworking+unsubscr...@googlegroups.com. For more options, visit this group at http://groups.google.com/group/coworking?hl=en.
