In 2015, as we rounded the corner of our first year of running a coworking space, we shared what we’ve learned — the good, the bad, the inspiring and the terrifying. We did so in part to offer a little insight to people who might be considering opening a space, and aspiring entrepreneurs of other stripes. We also did it to capture a somewhat tumultuous but ultimately exciting beginning for The Skillery, and to mark a milestone we were proud of.
Starting and running a business is fantastically difficult work. It’s also fantastically rewarding. We learned a lot of lessons in that first year — some of them especially hard won. With The Skillery’s guiding principle of transparency, we hope our hard-fought battles can maybe help other entrepreneurs trim the turmoil a little, and to offer the people who are part of our community a sense of fully being welcomed into, and invited to feel invested in, what The Skillery is.
At the end of our second year, we’re chewing on some new lessons, and some new milestones. We’re feeling more confident and more nervous, day to day, which is sometimes how it goes. But one thing remains the same: We’re incredibly proud of the community that’s grown up around The Skillery, and with everything we have, we’ll continue to dedicate energy to supporting them, and other entrepreneurs/independent professionals, both in our home of Nashville and beyond.
So, here you go: What we’ve taken from year two of running a coworking space, invigorating, frustrating and everything in between.
We predicted we’d make turn the corner on profitability in the first half of 2016, and we did.
We’ve had three consecutive month of profitability — the first time that’s happened since we eliminated classes and workshops as part of our revenue model. It tells us that some of the hard (sometimes disappointing) choices we’ve made have been smart ones, business-wise, and that sometimes accepting and initiating big changes are the only way to move forward.
Revenue and Expenses
Year two was less emotional, with less worrying.
In year one, we spend a lot of time fretting. For a lot of us, it’s just part of early entrepreneurship, unfortunately. Year two, though, we’ve got a little bit of sophomore calm. We’ve developed more general confidence, maybe in part because we’re not living and dying by every check. When members leave — and no matter how hard you try to make your place the best it can be, that’s gonna happen — we no longer feel like it’s a weepy breakup. When members come on board… well, we’re still overwhelmingly delighted. But it no longer feels like a stay from the Governor. The highs are lower, and the lows are higher, and we’re more than OK with that. Running a business is hard enough with the emotional rollercoaster that’s inherent in early entrepreneurship.
Per-member revenue is up, and expenses are flat.
We’ve added numerous optional membership add-ons — like semi-private workstations and a tab with our neighbors/friends at Steadfast Coffee — and we’ve baked others into our full-time membership (24/7 access), which allowed us to raise rates early in year two. All of that has led to a higher per-member revenue of $276 per member, per month, in year two, up from $155 in year one. At the same time, per-member expenditures, on our side, stayed mostly consistent from year one to year two. That’s part of what helped us cross the border into profitability. Again, we listened to what members told us was preferable, we consulted the data to see what was making and what was costing us money, and we adjusted. It worked.
Per Member Revenue and Expenses
Looking... not as up
Membership is down, revenue is flat, and we have no idea why.
It’s not for lack of trying, but we still don’t have a firm handle on why people don’t come in the door, or why they don’t choose to do a weeklong trial, or why they don’t choose to become members. Sometimes they tell us. Sometimes they just walk away. But we’ve noticed a definite shift in the second half of year two. Membership is down, energy is low, and inquiries are more scarce than they used to be. Some theories:
Competition is up. More new spaces have opened in Nashville in year two — Circle at Razor and Tie, Industrious Nashville — and more are on the way. Some of our competitors have deeper pockets for fancier furniture, bigger perks and louder marketing campaigns. We’re small, and self-funded, and we just can’t compete there. Surely it’s eating some business.
Elimination of classes and workshops means we’re bringing fewer new people in our doors on a regular basis, and we’re less visible in the public than we used to be. We have fewer events to talk about, so we’re a little quieter. The overlap between workshop students and coworking members was minimal, by our count, but we do think having awesome and talented Nashville teachers here showing people how to do really cool stuff had an effect on our being more front-of-mind around town. Along with classes just being something we loved doing, that busy presence was something we were sad to lose.
Number of Coworking Members, Total
Weeklong trials don’t convert like they used to.
After a few months of testing out weeklong trial memberships at The Skillery, we felt confident that they were the best way to convince a new member to come on board. Not in any arm-twisting way — it was just that, with a full week of immersion, people got a sense of whether we were a good fit for their work-style and lifestyle. If the vibe jibed, they joined. Oddly, those trial memberships don’t seem to convert the way that they used to. Is it us? Again, there’s the competition thing — are people comparing more options and being pickier with their selection of a coworking space? Does our offering need a refresh? We’re not sure yet, and it’s a big part of what we’re digging into and experimenting with now. We’re asking, listening, tweaking and listening again.
We’re running as lean as we can.
After two years with the doors open at our coworking space, we have a pretty good handle on our expenses. In a normal month, we need to clear about $16,000. Sometimes it’s higher (almost $5k higher in March 2016, mostly due to taxes and some investments in furniture), and sometimes it’s lower (though rarely — it was below $15K for only one month in year two). But there’s really nowhere else to trim. We can’t turn off the air conditioning, or cut our staff, and we’re not willing to sacrifice the steady perks or regular surprises we offer to our members. So if times get tight, we’ll have our backs to a pretty unforgiving wall. It’s something we’re aware of, and planning for.
Monthly Operating Expenses
There’s a market need in private offices, and our space isn’t set up to fill it.
Coworking on the whole is trending in a direction we don’t (and at the moment, can’t) serve. We get inquiries for small, private offices every day. It makes sense, as Nashville real estate booms, and commercial leases for small teams are hard to find and wildly expensive. As spaces like Industrious Nashville and Center 615 fill and expand, we struggle with the constraint of having no such offices to offer. Moving forward, will our mostly shared space still be desirable and relevant? We had to make a few assumptions, based on the climate when we launched, and at the time, testing/experimenting told us that open coworking was the most conducive to a vibrant and happy coworking environment. Will the pendulum swing back that way? This is our biggest question mark right now, and, in a certain sense, our biggest hurdle.
Our bandwidth continues to shrink.
You can see, in the financial breakdowns we’ve shared, that staff salaries figure in there. But our margins are thin, and no one on Team Skillery is driving a fleet of Lexuses (Lexi?). We’re mostly part-time, by necessity, so we’re juggling as best we can, while trying to do the best we can by The Skillery. In year two, the juggle’s gotten even more complicated. Two of us have toddlers (selfish and demanding, those types), and although we’re making headway, The Skillery still isn’t bringing in enough cash to take other things off our plates. If membership topped out and financials bloomed, maybe we could toss aside the juggle for a total focus on The Skillery. If we could all devote all our time and energy to tweaking and improving The Skillery, maybe membership would top out. It’s a tough thing to wrap your head around, and maybe the most frustrating part of being independent entrepreneurs with no financial cushion.
How we’re focusing, as we move into year three...
We’re gonna keep experimenting.
Our biggest wins have come as we’ve experimented, tested and implemented. Semi-private workstations, add-ons like the Coffee + Coworking membership, turning our Introduction to Entrepreneurship workshop into a study-at-home Starter Kit — we explored, listened, and moved ahead. We’ll do more of that, more often. We may shift our membership model on the whole to focus more on private workstations (which have proven popular), and away from shared space (which is still popular, but less so). Year three may look very different at The Skillery. It all depends on what our members ask for, respond to and support.
We’ll look for opportunities.
In the last year, we’ve received a number of inquiries from parties interested in partnering with The Skillery, merging with The Skillery, purchasing some of our intellectual assets, or purchasing a portion (or all) of The Skillery. Our theory is that coworking has gotten popular, and some folks are interested in getting in the game without trudging through that first-few-years uncertainty. There’s absolutely nothing wrong with that approach, and we’ve listened to each inquiry with an open mind. We’ll continue to listen to, and look for, opportunities that make sense for our community and for our business.
Keep moving forward, with excitement and pride.
Our business turns five this fall — before we had a physical space, The Skillery focused entirely on facilitating classes and workshops around Nashville, taught by local professionals and entrepreneurs. Five years is kinda The Big Milestone; as few as one in 10 new businesses make it to that mark, so we’re fiercely proud of still being alive. But we’re also well aware that we’ll need to keep evolving in order to stay relevant and profitable.
The Skillery started as a simple dream, fueled by a desire to help inspire people in our community. That’s been true whether we were inviting people to develop a passion for bookbinding, or welcoming members to launch/grow their business inside our walls. We’ve shifted and morphed, and we’ve asked the people who like us to follow along. Thankfully, many have. We’re appreciative of that in a way that we can’t really convey.
As we move forward — and, inevitably, shift and change again — we hope we’ll make our current friends and supporters happy, and invite new friends and supporters into our mix. Beyond everything, though, we hope to get to continue shaping The Skillery, and sharing what we learn as we go.
Wanna know more about what we do and how we do it? You’re always welcome to visit our Germantown Nashville coworking space, join our social media crew/mailing list, and/or drop us a line. If you’d like to try out joining our real-world community for a week, we still think trial memberships are the ideal test drive (and if you end up staying, they’re free).
Regardless, thanks for reading, and for being a part of The Skillery’s still-growing story.