Small Business

Why Every Startup Should Consider a Coworking Space

Coworking spaces are often a cheaper alternative than renting a traditional office for smaller startups.

Harvard Business Review reports that those who work in a coworking space work at a higher level than those who don't. What started out as a niche effort in the ‘90s to facilitate collaborative work through computers has now transformed into a mainstream, new way of working. Coworking spaces have grown immensely more popular over recent years, and every entrepreneur should consider one as an office space.

What is a coworking space?

Coworking spaces are simply office spaces that are shared with others, including freelancers and businesses. Coworking spaces offer a number of benefits to their tenants, including reduced rent and being a part of an entrepreneurial community. Coworking spaces tend to differentiate from similar concepts like executive suites, incubators and accelerators by focusing on the social aspect of the communities. Typically, coworking spaces will facilitate social interactions and try to position their communities as something similar to longer-term brainstorming sessions.

Coworking spaces are usually paid for through a membership model. On average, desks at a coworking space can cost anywhere from $460 to $1,000 per month depending on the location and vendor. There are also usually several tiers of memberships, and each tier will grant incremental benefits like more private space, access to larger conference rooms. A benefit of the membership model is that it is much more flexible than, say, a binding lease agreement. Base memberships will typically include basic things like 24-hour building access, high speed internet, daily cleaning, IT support, front desk services and office supplies.

Prominent startups like Uber and Indiegogo used coworking spaces, as have more established companies like IBM and Salesforce at certain times.

When to consider joining a coworking space

Obtaining and maintaining an office space can get extremely expensive and is often a luxury that most entrepreneurs or startups can't afford—think back to the origins of Google and Apple, which were both started in garages. On top of rent or mortgage payments, office spaces also come with the costs of utilities, cleaning and more. Those who don't want to deal with such costs often turn to alternative options such as coworking spaces. Also, office leases usually come with binding multiyear agreements. It's tough for a startup to commit to a several-year lease for a single space when they know they'll likely outgrow it within that time.

If you're in a position where you no longer want to work out of coffee shops or even your own home, but also don't want to deal with all of the aforementioned costs, you'll likely consider a coworking space. Additionally, coworking spaces should only really be considered if you feel that your business is one that can take advantage of the collaborative environment that these spaces tend to foster. If, instead, you think such an environment would be distracting and you'd consider a coworking space only to save money, consider an executive suite or shared office instead, which can offer the benefits of reduced costs without having as much of an emphasis on the social aspects.

ProsCons
Nominally cheaper than leasing or buying a spaceThe cheapest membership plans are often quite bareboned
Flexible, short leasesExpensive compared to renting or buying when comparing actual square footage
Entrepreneurial communityWorking spaces can often get noisy
Minimal starting costsConfined to limited locations
Easy to scale as number of employees grow (just pay for more space)Very limited ability to customize space to your liking

How to best take advantage of a coworking space

Before you consider a coworking space, consider whether you'll really need one. For example, ask yourself if your business can still properly grow from your home. Does it make more sense for your business to pay for a commercial lease or mortgage as your business grows? Will you and your employees benefit from the collaborative environment coworking spaces are known for? Be sure that a coworking space is the best option for you and your business.

If you've decided that a coworking space is indeed the best option, you'll now need to find the best actual space for your needs. Here are a few things you should keep in mind as you shop around:

  • Location: One downside to coworking spaces is that they're more limited than commercial buildings. However, most coworking spaces are placed near major transit hubs and should be easily accessible.
  • The space: Be sure you understand exactly what you're getting with your membership. For example, WeWork's entry level membership only guarantees an open workspace. It won't be dedicated, and seats are given on a firstcome, first-served basis.
  • Amenities included: Will you and your employees have access to conference rooms, a well-stocked pantry and more? Having said that, don't pick a space just because they give higher grade coffee than others.
  • The community: How active is the community, and is it filled with members who you'd want to network with or work with? For example, an entrepreneur who wants to heavily focus on funding might want to work at a coworking space that they know houses a lot of growth equity firms.
  • Internet: Does the coworking space offer dependable and consistent WiFi?

Once you've selected a space and are consistently working there, you'll need to be absolutely sure that you take advantage of the unique benefits given by a coworking space community only when you need to. In other words, it's easy to get distracted and you don't want to waste valuable time by getting sucked into the social aspect of these spaces. It's a common and costly issue.

Coworking spaces, like many other things, are far common in larger cities than others. San Francisco, for example, has over 40 coworking spaces. Depending on your location, you'll likely find a coworking space that is right for varying businesses based on pricing, niche needs and more.

  • WeWork is a global coworking space that offers flexible coworking spaces for almost all budgets.
  • Regus is one of the largest coworking chains in the world and also offers a wide range of plans with flexible terms.
  • Impact Hub is a unique chain that strives to take advantage of the global network its created with all of its locations.
  • Industrious has multiple locations across the U.S. and differentiates itself with aesthetically pleasing offices.
  • Venture X offers locations in cities that may not offer a large variety of coworking spaces.

FAQ

What is a coworking space?

Coworking spaces are simply office spaces that are often shared with other individuals or businesses.

Why do coworking spaces work?

Coworking spaces could be effective due to a number of reasons like flexibility, the ability to socialize and leverage others' thoughts and ideas, and the community and support coworking spaces provide.

What is a hot desk?

A hot desk setup is when multiple individuals use a single workstation or desk during different time periods.

Is coworking cheaper than renting or buying an office space?

If you took a multiyear lease or mortgage and compared that to the monthly costs of a coworking membership, you'll likely be paying more per square foot. However, coworking spaces offer lower startup costs that don’t require a down payment.

Justin Song

Justin is a Sr. Research Analyst at ValuePenguin, focusing on small business lending. He was a corporate strategy associate at IBM.