In July of 2014, we officially opened the doors of our coworking and learning space in Nashville, welcoming longtime teachers and students into a physical Skillery for the first time, and providing a day-to-day home for entrepreneurs and independent pros who’d become early Skillery members.
Well before opening day — well before we’d signed a lease, or even searched for spaces, really — we scoured the internet for every piece of information we could find from other coworking space owner/operators. We pored over every detail, every piece of data, every story of a decision gone wrong; we visited spaces in our city, and spaces in other cities. We joined a local alliance of coworking spaces long before we ever had a space to ally with anyone.
What we learned in those early days has greatly influenced the way we run our space, and we’re extremely grateful to the people who opened their doors (and books) to us, giving us a peek behind the curtain. As we celebrate the one year anniversary of our space, we want to take our turn to share, and offer a look into what we’ve learned, from the data we collected to the conclusions we drew from that data.
There are lessons in here for those who are running a coworking space, or those who plan to. But there are also some more universal experiences — insights and thought fodder for entrepreneurs of any kind.
Lessons from year 1 at The Skillery
Lesson one: You can sell it before you’ve got it.
We opened our doors on July 1, 2014 with 26 “Early Adopter” members, who paid $9,471 ahead of time to secure membership at a discounted rate for their initial three, six or 12 months of membership. We also had three invited guests join us as Lifetime Members for an additional $10,000 of pre-launch revenue. Most of this cash was spent on furniture. All of it (and more) was spent before opening day.
Appealing to early adopters was a critical move. It gave us the cash we needed to give members somewhere to sit, but it also populated our space in those early days, when no one was coming in the door. Those first supporters were also eager to see us succeed, so they tolerated some of our early trip-ups (say, neglecting to get toilet paper on day one), and helped us find surer footing.
LESSON TWO: CHANGE IS INEVITABLE (AND BEING OPEN TO CHANGE IS SMART).
When The Skillery launched in the fall of 2011, classes were our business model. We have always believed (and still believe) in an “ethos of education,” and we continue to plan class programming around our love of teaching and learning. But classes are, very intentionally, not our leading effort anymore. We’ve throttled back our class programming during the last year, for a few reasons:
Nashville has gotten noisier.
There is more happening across the city, and it takes more effort (and, sometimes, more money) to get our class schedule in front of the proper audience. Rather than expend more energy to compete with the noise, we’ve decided to focus our efforts elsewhere.
We have gotten busier.
With the opening of our coworking space in 2014 (and the birth of a couple of children), the bandwidth of our staff has become more limited. We’ve had to accept that we can’t do it all, and that’s OK.
Class revenue is tiny.
Our best classes sell 20-30 tickets, and at least 50 percent of our revenue is passed on to the teacher. Other classes don’t sell a single ticket, but still require our time and effort to coordinate and promote. It’s not a revenue stream that makes sense.
We’ve chosen narrow and deep over broad and shallow.
Our class schedule has always been diverse and eclectic. We’ve offered hundreds of classes on topics ranging from social media marketing to how to make a house out of recycled tires. While we’ve enjoyed offering a fun and varied list of topics, focusing on a narrower spectrum of classes has allowed us to improve the quality of our offerings. We offer fewer classes and they are better tailored to our audience (like last fall’s Etsy Seller Boot Camp), and, consequently, we sell a higher percentage of tickets now than ever before.
Even though we’ve paid teachers over $20,000 to offer classes and workshops in our new space, class and workshop revenue has become a marginal part of our bottom line. Not a marginal part of what we do, but a marginal part of how we pay the bills. A marketing opportunity, and a chance to connect with something that we find important. But it’s not keeping the lights on. That informed and necessitated a change in our focus, as a business.
revenue: classes vs. coworking
Education is still important to us. We just do it in different ways.
We’ve graduated 44 aspiring entrepreneurs from our CO.STARTERS business development program, and over 550 people have registered for almost 30 sessions of our free Office Hours series with local entrepreneurs. This month, we’re launching our first ever Introduction to Entrepreneurship workshop, making business education more affordable and more accessible to even more aspiring entrepreneurs.
We’ll continue to offer educational programming, because it inspires us, and we believe it provides value to our community. But if we doggedly relied on it to pay the bills even with all the data we’ve collected proving it won’t, we wouldn’t be able to serve our community for much longer.
LESSON THREE: EXPERIMENTING IS KEY.
We had a lot of initial assumptions about the best ways to let folks try out our space. Along the way, we’ve experimented with those and all sorts of other methods, from giving away free day passes to Coffee and Coworking events to hosting a variety of meet-ups. Those experiments gave us concrete feedback, and a solid answer.
What works best, we found, with regards to giving our visitors an accurate sense of the space while giving us the greatest chance to evaluate (and, potentially, bring on board) a potential member, is our Week-Long Trial.
We charge $50 for a Week-Long Trial, and that money is applied to the first invoice for anyone who chooses to stay on as a member. Here’s why it works:
It's a good deal.
A full week of coworking for $50? That’s a steal.
Inexpensive is better than free.
Placing a price tag on a week of coworking — even just a nominal amount like $50 — conveys that what we’re offering has value. Which it does.
It’s the most accurate representation of what we offer.
Visit on any one day, and you may see a space that’s particularly quiet, or particularly busy. But visit over the course of an entire week, and you’re likely to see the ebb and flow of our space as it really is. You’re also more likely to meet our terrific members, who are, after all, the heart of what we do. Visiting for a week is a better representation of what The Skillery is, and we believe The Skillery sells itself.
It’s low risk.
For visitors who pass on membership, they’re out $50. No big deal. For visitors who decide to join us, we give them a $50 credit on their first invoice. It’s a low-risk and no-commitment (and, potentially, no-cost) way of evaluating our space.
Though we’ve given away plenty of free day passes, as perks, gifts and door prizes to visitors, they very rarely convert to membership. Simply put, paid trial memberships convert best. And that wasn’t necessarily what we expected. Without continually experimenting and tweaking, we wouldn’t be learning what does (and doesn’t) work for The Skillery and its members.
Lesson FOUR: competition IS community.
In the last 12 months, we’ve seen the opening (or impending opening) of several “competing” coworking spaces in town, like Deavor, Refinery Nashville, Weld and InDo Nashville. But we don’t see these spaces as competition. We see them as other community-minded organizations run by like-minded entrepreneurs. They’re terrific spaces run by... colleagues. Allies. Friends. Here are a few things we’ve learned from them:
A rising tide lifts all boats.
Most people in Nashville have no idea what coworking is. The existence of multiple spaces is helping to raise awareness of what coworking is, and how coworking works, which is beneficial for all of us.
Competition can bail you out.
Recently, when internet service was interrupted in our Germantown neighborhood, we called on our friends at Deavor (they’re closest to us, geographically) and they graciously offered to house our members for the day. (Service was restored before we could mobilize a migration to their space.) Of course, we would always offer the same aid in return. That’s not competition. That’s cooperation.
Together, more is possible.
Several of the spaces in town have formed the Nashville Coworking Alliance, a joint effort to share best practices amongst ourselves, and promote coworking within Nashville.
Competition leads to better customers.
When we give a tour of our space, we’re sure to mention other spaces in Nashville. We talk about similarities and differences, encourage our visitors to visit other spaces, and, regularly, lose business to those spaces. And that’s OK with us. It ensures that the people who do choose The Skillery as their base of operations are comfortable doing so, and sure of their decision. Our space isn’t the right fit for everyone, but it’s absolutely the best fit for our members, and that’s what matters most.
Lesson FIVE: Even with great growth, you’ll likely lose money. The key is to plan for it.
Things at The Skillery are great, and we’re overwhelmingly proud of that. But here’s the hard truth: We’re not yet cash flow positive.
Cash flow has been an issue since day one. Because our Early Adopter Memberships were prepaid, we had no additional monthly revenue from those 26 members for at least three months. (Some of them prepaid for a year, and didn’t owe us a penny for the first 12 months.)
Twelve months and lots of growth later, that issue remains. As we’ve brought on staff and continued to build out our space, our expenses have crept north along with — faster than, really — our revenue. We are still losing money on a monthly basis.
revenue and expenses
But growth has come. Our membership numbers are up, and continue to climb. We’ve seen consistent month-to-month growth, and Full-Time Memberships — our most profitable membership level — are up four fold from when we opened our doors.
Lesson SIX: Always have cash in the bank.
Cash flow may still keep us up at night, but we are extremely optimistic about our future. We’re gonna make it. And here’s why:
We started with some money in the bank.
Not a lot, mind you. But enough to get us through some lean months, which we knew we’d have. This is a critical mistake that many business owners make: not starting with enough cash on hand. Spend your money on furniture, and you won’t have enough to pay the bills. Sacrifice the quality of what you’re building to cover costs, and you won’t grow. Build a careful cash foundation, and you can build with a little room to breathe.
Expenses will plateau.
Everyone hemorrhages money to get things going — it’s part of launching a new business. But there comes a point where your “out” stabilizes, and, ideally, your “in” keeps growing. It’s a matter of setting yourself up to keep pace in the interim.
We still have plenty of room for growth.
Come by The Skillery on any given day, and you can find a place to sit. We have a huge space, with lots of room to grow. We believe we could triple our current membership numbers without feeling crunched for space, and without incurring a significant increase in overhead. We built our home to grow with us, but planned our baby steps to help us sustain while we court that growth.
We’re confident in our model, and we expect to break even by the middle of year two — which is fast, by any startup standards. But we’d be leagues behind without the lessons we learned from other spaces and other entrepreneurs. So we hope that some of these experiences might encourage, inspire and inform other aspiring or beginning entrepreneurs.
If you could use a little more help as you build your business, stop by — our space has a lot to offer, from classes to camaraderie. And be sure to leave us a note in the comments or connect with us online @theskillery. We're always happy to hear from other aspiring entrepreneurs.
EDIT: We've received a number of questions about the "license fee" that's listed as part of our revenue, so we thought we'd take some time to explain it in detail. The "license fee" revenue is comprised of one, two or all three of the following things:
- A coffee shop just opened in our building. Before they opened, I invited them to operate a pop-up coffee shop our of our kitchenette. This gave them nine months of operational experience before they moved into their own space. My deal with them was that they pay us a monthly stipend to cover utilities (which shows up in the license fee) and they had to give our members free coffee. They moved out a few months ago, leaving us without their licensing fee, and, more importantly, without their coffee. =)
- I invited a local writers collective to call The Skillery home. They hold their classes in our space, and their two directors are full-time members. We also list their writing classes on the /classes page of our website. This is a slightly unique arrangement from a typical membership, so we consider them "licensees" and they pay us a monthly fee to call The Skillery their home.
- We invited a local company to occupy the 1,700 square foot section in the rear of our space. They use it for client work 5-10 days per month. When not in use, the space is still available to our members. We consider this company a "roommate". This is a good situation for us for a few reasons:
- First and foremost, we like these people. We have known them for a long time, and are glad to see them in our space on a daily basis.
- We like the work they do. They teach design thinking, prototyping, empathy, storytelling, and other skills that we feel are a good fit for our members and our community.
- They furnished the space that they license from us, which saved us capital expenses in the early days. That meant that we didn't have to pay to furnish almost 1/3 of our space.
- Their space is stocked with whiteboards, flexible furniture, and tons of post-it notes. Our members love the resources back there.
- Their license fee pays half of our rent.
These arrangements are unique. They are more than memberships. They are possible for us because our space is big enough to accommodate them, but, more importantly, because the people involved understand that they are part of a shared space. A community. They are good roommates, tenants, licensees, members and friends. These relationships work. Nonetheless, the agreements are month-to-month, and we're constantly reevaluating whether they're a good fit. Happy to answer other questions!
DOWNLOAD THIS BLOG POST, WITH EVEN MORE INSIGHTS
We put this blog post and other insights into a 12-page PDF that contains lessons, charts, graphs and data for those who are running a coworking space, or those who plan to. Download it below, and tell us what you think.