Own business: business plan for a coworking center

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Coworking is a new phenomenon in the Russian business environment, which relies on labor market trends. It is expected that by 2020 the share of specialists working remotely will grow to 20%. 

1. COWORKING PROJECT SUMMARY

The goal of the project is to open a coworking center for the implementation of a range of services in the field of coworking (organization of the work of various specialists in one area, which is a “joint office”). This coworking center positions itself as a unique creative space that brings together people of creative professions and inspires them to work.

The target audience of the coworking center consists of various groups, which include freelancers, start-up entrepreneurs, the self-employed population, as well as people striving for self-development.

For the implementation of the coworking project, a commercial space of 160 sq.m is rented in the central part of the city.

Business idea Co-working centers are a new phenomenon in the Russian business environment. The first such institution opened in Russia in 2008. To date, there are about 300 coworking centers registered throughout the country, 1/3 of them are located in Moscow. For other large cities, this niche is freer and opens up many prospects.

Coworking as a business idea is a relatively long-term investment that will not pay off immediately. The payback period for coworking centers is 1-2 years, which may scare away some entrepreneurs. Another problem is the requirement for a significant amount of upfront costs. This type of business is more suitable for those investors who are focused on the implementation of a long-term project that takes into account the trends of the modern economy. The main advantage of a coworking center as a business area is its focus on economic trends. Every year, the number of specialists working in the remote employment system is increasing. It is expected that in Russia by 2020 the share of specialists working remotely will grow to 20%. Therefore, the opening of coworking centers now will allow us to occupy a free and promising niche,

The initial investment is 1,020,000 rubles. Investment costs are directed to the renovation of the premises, the purchase of furniture and equipment, advertising and the formation of working capital, which will cover the losses of the initial periods. The main part of the required investments falls on the purchase of furniture and equipment -44.1%. Own funds will be used to implement the project.

The financial calculations of the business plan cover the five-year period of the project’s operation. According to calculations, the initial investment will pay off after fifteen months of work. Net profit upon reaching the planned sales volume will be 86,000 rubles / month. The planned sales volume is expected to be achieved in the 4th month of operation.

Table 1. Key performance indicators of the project

Payback period (PP), monthsfifteen
Discounted payback period (DPP), monthsfifteen
Net present value (NPV), rub.241 495
Return on investment ratio (ARR), %8.36
Internal rate of return (IRR), %7.36

2. DESCRIPTION OF THE INDUSTRY AND COMPANY

The development of the economy and entrepreneurship is very dynamic. The changes affect all organizational business processes, which contributes to the expansion of the range of outsourcing and freelancing. Modern business is adapting to new requirements and needs of subjects of economic relations. Individuals and professional groups are looking for alternative workspace arrangements. Familiar offices, on which significant amounts are spent on rent, are being replaced by so-called co-working centers – a place where you can work, hold business meetings, use Wi-Fi and relax.

In recent years, co-working centers have been gaining popularity as there is a trend for professionals to work remotely. Photographers, designers, IT-specialists, writers, lawyers – representatives of completely different professions come to the conclusion that using co-working centers is much more convenient and cheaper than renting expensive offices in the city center.

The idea of ​​co-working centers appeared in the USA in 2005, but for Russia it is relatively new. The first co-working center in Russia was opened in Chelyabinsk in 2008. To date, about 300 coworking centers have been registered in Russia, of which more than 100 are located in Moscow. However, it is too early to talk about market saturation.

This format has taken root well in many countries, but in Russia it is still at the initial stage of its development and has not acquired such a scale as in some states. The reason for this lies in the specifics of the domestic economy: firstly, remote employment of specialists in Russia does not exceed 5% of the total number of active economically employed population (for comparison, in the USA 45% of employees work remotely or have such an opportunity); secondly, tenants are reluctant to rent out space intended for coworking centers, as they consider this business to be rather unstable. Despite this, positive business trends allow us to talk about coworking centers as a promising direction, because:

  • the percentage of remote employment in Russia is growing every year. According to J’son & Partners Consulting, by 2020 the share of remote employees in Russia will grow to 20%, which will save employers more than 1 trillion rubles.
  • large Russian companies are already showing a trend towards remote work. For example, VimpelCom plans to close 70% of its offices by the end of 2017 and transfer employees to remote employment. Small and medium enterprises also support this trend. According to a survey conducted by Bitrix 24, 27% of companies plan to transfer more than half of their staff to remote work.
  • 67% of applicants show a desire to work remotely. And the number of vacancies offering such work is about 35% of the total share of ads.
  • the desire of small and medium-sized businesses to save on renting office space during the crisis.

In Rostov-on-Don, there are currently 5 sites that provide coworking center services. For a large city with a population of more than 1 million people, this is not enough, so the creation of a convenient workspace in the format of a co-working center is seen as a promising direction.

Thus, we can talk about the investment attractiveness of this business. The opening of the coworking center will allow taking into account the trends of the modern economy and entrepreneurship and occupying a free niche in anticipation of the development of this direction.

3. DESCRIPTION OF GOODS AND SERVICES

The term “coworking” can be translated literally as “working together”. Therefore, coworking is a form of self-organization, a community of people united in one space to do some work. At their core, co-working spaces are “communal offices” and provide spaces for work, business meetings and various events. In such a space, you can rent a permanent workplace or periodically visit the institution as needed. It is this variability that determines the main advantage of coworking centers. In addition, coworking centers are very convenient, as they are equipped with everything necessary for organizing comfortable work. Here you can rent a whole workplace with a table, a personal locker for things, use free wi-fi, drink coffee. Co-working centers are especially popular with intellectual workers and representatives of creative professions. In the space of a coworking center, you can meet entrepreneurs, freelancers, small companies that do not find it profitable to rent a separate office, and creative teams that have come together to develop one common project.

At its core, coworking centers are similar to anti-cafes, with the only difference being that anti-cafes are designed for relaxation, while co-working centers are for work. However, the principle is the same: the visitor is provided with a universal space for use with payment for the time spent in it.

Coworking centers have the following advantages:

  • savings on renting a room;
  • variability of use: in the center you can rent one workplace for a certain period, or periodically visit the center, using a free place;
  • the centers are suitable both for organizing individual work and for holding various meetings, seminars, video conferences and other events. For this, various zones are provided in the centers;
  • business environment contributes to increased productivity;
  • coworking centers can become a platform for useful business acquaintances;
  • the centers are equipped with everything necessary for work: office equipment, Wi-Fi, etc.

However, the following disadvantages of coworking centers should be considered:

  • the open layout of the “communal office” is not suitable for people who are used to working in silence and solitude;
  • Not every specialist is ready to pay the daily rent of a workplace.

Thus, when implementing the business idea of ​​a coworking center, it is necessary to clearly understand which categories of specialists will be interested in this proposal.

The coworking center project involves making a profit from the rental of workplaces by various specialists. In addition to the main source of income, coworking also earns by renting conference rooms and training rooms, conducting training courses, master classes, and so on.  

In accordance with the list of services offered by the coworking center, the organization of the space itself, the required area, and billing are determined. Some co-working centers are created with a specific theme – for example, it can be a space that brings together creative people, industry employees or aspiring entrepreneurs. Such thematic co-working centers allow bringing together specialists from the same field of activity, which is regarded by visitors as an additional advantage. It is much easier to manage such thematic co-working centers, since there is a clear idea of ​​the target audience and the requirements that it makes.

This project involves the creation of a co-working center, which is a creative space. The center positions itself as a place where creative professionals can interact with each other or get inspiration for work. This concept involves the creation of three functional areas: isolated workplaces that allow you to work in solitude and silence; a common hall where negotiations will be held, meetings will be held; as well as a separate hall for seminars, trainings and so on. Various trainings, creative evenings, exhibitions of creative works, etc. will be held on the basis of the coworking center. Thus, the mission of this coworking center is to create a creative space aimed at developing the creative potential of its visitors.

In connection with a certain concept, an approximate list of coworking center services has been established:

  • permanent or one-time rental of a workplace (the cost includes the use of office equipment, free Internet, the use of a coffee machine and a cooler);
  • rent of a hall for seminars (the price includes the use of equipment for presentations);
  • hall rent for exhibitions, concerts, recitals, etc.;
  • organization of free seminars, workshops or themed evenings by the center itself. This service is aimed at attracting visitors.

It is important to understand that in order to effectively run a coworking center business, it is necessary to create an active community on its basis, which constantly participates in various events and organizes them itself.

4. SALES AND MARKETING 

The target audience of coworking can be divided into three large groups:

  • freelancers form the basis of coworking center users. These include IT-specialists, copywriters, translators, copywriters, designers and other professionals working remotely. Mostly this group includes representatives of intellectual labor;
  • start-up entrepreneurs – some of them do not need a permanent office, while the other part does not have the opportunity to rent an expensive office on a permanent basis;
  • self-employed population – usually this group includes representatives of creative professions (photographers, writers, coaches, etc.).

You can also single out people who strive for self-development and attend various events in coworking centers.

Thus, the audience of coworking centers is quite diverse and numerous.

Due to the fact that the format of co-working centers is quite specific, a certain set of advertising methods should be used to promote them. Coworking centers need advertising, since the very concept of workspaces is relatively new for Russia, and marketers are faced with the primary task of telling potential consumers about all the advantages of coworking centers.

The following advertising methods are suitable for promoting coworking centers:

  • promotion on the Internet using the site and groups in social networks;
  • distribution of print advertising in places where the potential target audience is concentrated: exhibitions, conferences, business trainings, office centers, etc.;
  • organizing educational and recreational activities for visitors;
  • provision of content: photo reports, live broadcasts, video lectures, useful information;
  • creation of a comfortable working space and recreation area;
  • partnership with local media.

The location of coworking centers can also be attributed to advertising methods. The most convenient option is to locate the premises in the city center, where business activity is usually concentrated. This will attract more visitors.

This project assumes active promotion of the coworking center, which implies a certain advertising budget. The planned list of promotional activities and the costs of their implementation are presented in Table 2. In accordance with the calculations, it is planned to spend 75 thousand rubles on the promotion of the coworking center.

Table 2. Advertising budget of a coworking center

EVENTDESCRIPTIONCOSTS, RUB.
Create your own websiteShould reflect the main advantages of the coworking center, visit rates, photographs of the working space, photo reports of events held, contacts and address, list of services, program of planned events40 000
Distribution of print advertisingTo do this, it is supposed to create promotional material (flyers / booklets) and distribute it in places where the target audience is concentrated. Costs include the cost of creating and printing flyers, as well as wages for promoters. The option of distributing flyers with a discount coupon is possible15,000
Event MarketingIt can be a special program to celebrate the opening of a coworking center or a free master class.20 000
        Total: 75 000

An active marketing strategy allows you to recoup the cost of a coworking center in a few months, although it usually takes about 1 year. On average, the prices for using coworking space are:

  • one-time visit: 300-500 rubles.
  • cost of a subscriber for a month: 5000-15000 rubles.
  • the cost of renting a conference room: 5000-10000 rubles.

Based on the average prices for the main services of coworking centers, we calculate the planned income. To do this, we determine the average number of visitors per day – 20 people and the average bill of 400 rubles: 20 * 400 * 30 \u003d 240,000 (rubles). The number of monthly subscriptions sold is 10, with an average cost of 8,000 rubles: 10 * 8,000 = 80,000 (rubles).

The number of events held per month: 20, the average cost of renting a hall is 8,000 rubles: 20 * 8,000 = 160,000 (rubles).

Thus, the estimated monthly income of the coworking center is 480,000 rubles.

5. PRODUCTION PLAN

Opening a coworking center and organizing its activities involves the following steps:

1) Choice of location and premises. When choosing a location for a coworking center, preference should be given to the city center. Firstly, it is here that the main part of business processes is concentrated; secondly, it is equally convenient for all customers to get there; thirdly, such accommodation is prestigious, which is important for those clients who plan to hold various business meetings and negotiations on the basis of the coworking center.

When choosing a location, you should pay attention to the presence of a convenient transport interchange, parking for cars, as well as the landscape outside the windows – it has been found that visitors to coworking centers pay attention to the view from the window.

There are also certain requirements for the coworking space itself. Zoning a coworking center involves the use of a large area. The minimum area for a coworking center is 100 sq.m. This project assumes the lease of an area of ​​160 sq.m. in the central part of the city. The rental price is 110,000 rubles / month.

2) Decoration of the premises. Proper zoning and design of space is one of the key parameters for the success of coworking. If comfortable conditions can be arranged, visitors will be willing to return and pay for special conditions that cannot be achieved in other places. In other words, the coworking center should become a unique space that can attract visitors. Comfortable furniture, interesting interior, proper zoning – all these are elements that create a special atmosphere. Creative people especially appreciate the aesthetics of the environment, so in this project it is planned to use the services of a designer to create an attractive interior. The cost of designer services and renovation of the premises will amount to 300,000 rubles.

3) Purchase of furniture and equipment.  Coworking provides a comfortable working space. Therefore, you should carefully consider the content of the coworking center. Table 3 provides an approximate list of the necessary equipment, based on the organization of a coworking space for 30 workplaces and a conference room with a capacity of up to 100 people. In accordance with the calculations, the total cost of equipping the coworking center will be 450,000 rubles.

Table 3. Coworking center furniture and equipment costs

ITEM OF EXPENSESCOSTS, RUB.
Furniture
Work furniture (tables, chairs, armchairs, lockers)250 000
Leisure furniture and other (sofas, pouffes, hammocks, hangers)50,000
Technics
Office equipment (modem, computers, scanner, printer, screen projector, plasma panel, magnetic whiteboard with markers)100,000
Kitchen appliances (cooler, coffee machine, toaster, microwave oven)30,000
Other20 000
Total:450 000

It is important to understand that the more complete and multifunctional the equipment is, the more time the client will spend within the walls of the coworking center.

4) Recruitment. A standard co-working center does not require numerous staff. The main position is an administrator. His responsibilities include: monitor the health of the equipment and order in the room, control the stock of consumables, sell subscriptions to visitors, inform customers about promotions, tariffs, planned events, maintain an account on a social network. It is recommended to invite girls to the position of administrator, as they usually inspire more trust among visitors. For a small coworking center, 2 administrators working in shifts will be enough. In addition, the services of an accountant, a cleaner and an IT specialist who will maintain the site may be required.

In this project, it is assumed that the entrepreneur himself keeps accounting records, the IT specialist is not included in the main staff, working under an outsourcing agreement.  

6. ORGANIZATIONAL PLAN

The initial stage of opening a coworking center is registering a business with government agencies and completing all the necessary documentation.

To conduct commercial activities, an LLC is registered with a simplified taxation system (“income minus expenses” at a rate of 15%). Type of activity according to OKVED-2:

  • 68.20.2 Renting and management of own or leased non-residential immovable property
  • 77.33 Renting and leasing of office machinery and equipment, including computers
  • 77.2 Hire and lease of items for personal use and household purposes.

The working hours of the coworking center are daily, from 9:00 to 21:00. Based on this, the staffing table is formed. Since the establishment is open 7 days a week and 12 hours a day, a shift work schedule should be arranged for key staff.

In this project, the entrepreneur acts as a manager and accountant. He is responsible for recruitment, marketing policy development, personnel supervision and accounting. Thus, the total wage fund is 109,200 rubles.

Table 4. Staffing and payroll

POSITIONSALARY, RUB.QUANTITY, PERS.FOT, RUB.
Administrative
oneDirector20 000one20 000
Trade
2Administrator (shift schedule)27 000254 000
Auxiliary
3Cleaning woman10,000one10,000
Total:84 000
Social Security contributions:25 200
Total with deductions:109 200

7. FINANCIAL PLAN FOR COWORKING

The financial plan takes into account all income and expenses of the project, the planning horizon is 5 years.

To launch the project, it is necessary to calculate the amount of initial investment. To do this, you need to determine the cost of acquiring furniture and equipment, advertising promotion on the market and the formation of working capital, which will cover the losses of the initial periods.

The initial investment for the coworking center is 1,020,000 rubles. The main part of the required investments falls on the purchase of furniture and equipment – 44.1%, the share of expenses for rent and repair of premises is 40.1%%, for advertising – 7.4%. The remaining items of expenditure account for 8.4% of the total investment. The project is financed by equity. The main investment cost items are shown in Table 5.  

Table 5. Investment costs

NAMEAMOUNT, RUB.
The property
oneRent of commercial space for the 1st month110 000
2Premises renovation300 000
Equipment
3Furniture and equipment450 000
Intangible assets
4Launch advertising campaign75 000
5Business registration, preparation of permits15,000
working capital
6working capital70 000
Total:1 020 000

Variable costs consist of the cost of consumables (paper and ink for office equipment, public water and beverages, etc.). To simplify financial calculations, variable costs are calculated based on the amount of the average check and a fixed markup of 300%.

Fixed expenses consist of rent, utilities and internet, payroll, advertising and depreciation. The amount of depreciation is determined by the straight-line method, based on the useful life of fixed assets in 5 years.

Table 6. Fixed costs

NAMEAMOUNT PER MONTH, RUB.
oneRent110 000
2Advertising (including site maintenance)15,000
3Utility payments and the Internet10,000
4Depreciation7 500
5payroll with deductions109 200
6Other7000
Total:258 700

Thus, in the business plan, fixed monthly expenses were determined in the amount of 276,700 rubles.

8. PERFORMANCE EVALUATION

The payback period of the project with an initial investment of 1,020,000 rubles is 15 months. Practice shows that the average payback period for coworking centers is 1.5-2 years. According to the analytical site DeskMag, “any co-working space that lasts two years is a plus.” Thus, a payback period of 15 months is quite an optimistic forecast for this line of business. It is possible to achieve such results with the proper organization of business and the effective use of opportunities. All this will ensure a sufficient level of sales.

It is planned to reach the planned sales volume on the 4th month of work. The volume of net profit for the first year of operation will be 879,136 rubles. Profitability of sales in the first year of operation – 15.9%.

The net present value in the business plan is positive and equal to 241,495 rubles, which makes it possible to speak about the investment attractiveness of the project. The return on investment is 8.36%, the internal rate of return exceeds the discount rate and is equal to 7.36%.

9. POSSIBLE RISKS

To assess the risk component of the project, it is necessary to analyze external and internal factors. External factors include threats related to the economic situation in the country, markets. To internal – the effectiveness of the management of the organization.

Internal risks:

  • low attendance of the institution due to the unpreparedness of specialists and entrepreneurs to switch to work in the coworking format. It is possible to solve this problem with the help of a well-thought-out marketing strategy that will make it possible to convey to the target audience all the advantages of coworking centers;
  • a decrease in the reputation of the coworking center itself among the target audience due to errors in management or a decrease in the quality of services. It is possible to reduce the risk with careful selection of personnel and control over the quality of services provided, as well as monitoring visitor feedback;
  • seasonality of coworking sales : during the holidays and holidays, the number of visitors to coworking centers is reduced. In order to mitigate this risk, it is supposed to use alternative ways of extracting benefits. For example, during the holidays it is recommended to use the space of the coworking center as a venue for exhibitions, concerts, theme parties, etc. Another method of attracting visitors can be a loyalty program, promotions and discounts. In the summer, you can adapt the program of the center for students and schoolchildren, providing them with discounts on admission;
  • behavior of coworking residents. Since coworking involves bringing together different people in one space, discipline can be difficult. To work, it is necessary to maintain a certain atmosphere and follow the rules indicated for visitors to the coworking center. This risk is specific, it is quite difficult to deal with it. It is possible to minimize this risk through a competent layout of the workspace, which provides for the presence of isolated workplaces.

External risks of coworking:

  • the presence of stronger and more popular competitors. It is possible to reduce the impact of this risk by creating a unique offer that competitors cannot offer. High quality of services and flexible pricing policy are the main competitive advantages that a coworking center should strive for;
  • increase in the cost of purchasing materials, renting premises. It is possible to level this risk with a competent choice of partners and the inclusion in the contract of all necessary requirements and conditions;
  • a decrease in the cost of renting traditional office space for coworking due to the crisis, which will make coworking less competitive. To avoid this risk, it is necessary to create a multi-directional center and diversify sources of income.

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