How to Start a Coworking Space

Coworking spaces are becoming more popular with remote workers, entrepreneurs, and companies that want to downsize their spaces to reduce costs. With coworking spaces, people or companies rent a portion of an office space, sometimes by the hour or day, and sometimes by month.

As of 2022, there were more than 6000 coworking spaces in the United States, and that number is growing due to the increasing number of remote workers. It could be a great time to start your own coworking space to get in on the $250 billion commercial rental industry and make an excellent passive income. 

But before you start, you’ll need to understand the business. Fortunately, this step-by-step guide has you covered with all the information you need to start a lucrative coworking space.

Step 1: Decide if the Business Is Right for You

Pros and cons

Coworking space industry trends

Industry size and growth

Coworking spaces are part of the commercial leasing industry. 

• Industry size and past growth – The U.S. commercial leasing industry is worth $254.2 billion in 2023 after growing .4% annually for the last five years.((https://www.ibisworld.com/united-states/market-research-reports/commercial-leasing-industry/))
• Growth forecast – The U.S. commercial leasing industry is expected to decline modestly in 2023.
• Number of businesses – In 2023, 363,372 commercial leasing businesses are operating in the U.S.
• Number of people employed – In 2023, the U.S. commercial leasing industry employs 519,286 people. 

Trends and challenges

Trends

• Many coworking spaces are targeting niche markets, such as coworking spaces for women or for the LGBTQ community.
• Coworking spaces are offering more amenities, such as onsite childcare, cafes, and fitness facilities.

Challenges

• The rise in popularity of coworking spaces is making the industry more competitive.
• Security, both online and offline, is a challenge that coworking spaces have to overcome.

How much does it cost to start a coworking business?

Startup costs for a coworking space range from $27,000 to $46,000. Costs include a large space rental, and the preparation of the space with desks, other furniture, and technology. 

You’ll need a handful of items to successfully launch your coworking space business, including: 

• Room dividers
• Desks, conference tables, chairs, other furniture
• Whiteboards
• Printers and copiers
• Router
• Power strips
• Screens

How much can you earn from a coworking space business?

The prices you charge for coworking spaces may be daily or monthly, and they vary by area. They’ll also vary by the amount of space used. These calculations will assume that you’ll charge an average of $400 per month per person, which is around the U.S. average. They will also assume that you’ll pay $3,000 per month in rent and utilities. 

In your first year or two, you might have 10 monthly clients, bringing in $48,000 in revenue. This would mean $12,000 in profit, after your monthly costs. 

As you gain traction, you might fill your space to capacity with 20 monthly clients. With annual revenue of $96,000, you’d make a tidy profit of $60,000.

What barriers to entry are there?

There are a few barriers to entry for a coworking space. Your biggest challenges will be:

• Funding the startup costs
• Breaking into an increasingly competitive market

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Step 2: Hone Your Idea

Now that you know what’s involved in starting a coworking space, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.

Analyze your competitors 

Research coworking spaces  in your area to examine their services, price points, and customer reviews.

• Make a list of coworking spaces that offer similar services. 
• Review your competitors’ services – their features, pricing, and quality – and marketing strategies
• Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
• Identify your competitors’ strengths and weaknesses. 

This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.

Why? Identify an opportunity

You’re looking for a market gap to fill. For instance, maybe the local market is missing a coworking space with private offices, or with meeting rooms. 

You might consider targeting a niche, such as coworking space for startup founders or for remote workers.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your services

In addition to charging for space, you could add a café or childcare to your space to bring in additional revenue. You could also rent your space during the off hours for special events. 

How much should you charge for coworking space?

Your prices will depend on market prices in your area, but also on your rent and overhead costs.

Once you know your costs, use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Identify your target market

Your target market will depend on your niche, if you choose one, but in any case, you’re most likely to find your target customers on LinkedIn.

Choose a coworking space location

Choosing the right location for your coworking space business is crucial and involves considering several factors:

1. Market demand: The first step is to determine if there’s a demand for coworking spaces in the area you’re considering. You can do this by researching existing coworking spaces and checking their occupancy rates. Is the market already saturated, or is there room for another player? You can also look at indicators such as the number of startups, freelancers, remote workers, or small businesses in the area.
2. Location accessibility: Consider the ease of reaching the location. Is it near public transportation? Is there available parking for those who drive? Coworking spaces thrive in easily accessible locations.
3. Surrounding amenities: Potential clients often consider the availability of nearby services. Things like restaurants, cafes, fitness centers, and shopping centers add appeal to your coworking space.
4. Safety: The safety of the location is crucial. Potential clients will consider the safety of the area when deciding whether or not to use your coworking space.
5. Affordability: The cost of renting or buying property varies widely from place to place. Make sure you can afford the cost, keeping in mind that it can take some time for a new coworking space to become profitable.
6. Competition: Look at the number and quality of competing coworking spaces in the area. Can you offer something they don’t, or serve a segment of the market they’re neglecting?
7. Demographics: Consider the demographics of the area. A coworking space in a neighborhood with a lot of young professionals or creatives might do better than one in a primarily residential neighborhood with families.
8. Size and Layout: The building you choose should have enough space to accommodate a reasonable number of people while also allowing for different workspace configurations (private offices, open desks, meeting rooms, etc.)
9. Future Growth: Does the area have potential for future growth? It’s beneficial to start a coworking space in an area that’s expected to grow or gentrify.

After considering all these factors, you should be able to narrow down your options and choose the right location for your coworking space. Remember, each coworking space is unique and will have its own specific requirements, so what works for one might not work for another. The key is to thoroughly understand your target market and find a location that suits their needs and preferences.

You can rent a large space that can be segmented into working spaces. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

Design your coworking space

Designing a coworking space involves several factors including functionality, aesthetics, and comfort. Here are some steps and considerations to guide you:

1. Understand Your Target Market: Understanding who your customers are will guide your design decisions. Are your users primarily freelancers, small businesses, corporate teams, artists, or students? Each group may have different needs. For instance, corporate teams may need private offices and conference rooms, while artists may need open spaces with lots of natural light.
2. Plan Your Space: Start with a floor plan. Divide your space into different areas according to their purpose: open coworking areas, private offices, meeting rooms, lounge areas, kitchen or cafe, etc. Make sure to include necessary facilities like restrooms and storage areas.
3. Design for Functionality: Your design should support the work that people do in your space. This includes:
   • Workstations: You’ll need a mix of workspaces like hot desks, dedicated desks, and private offices. Ensure there are ample power outlets, good lighting, and a comfortable chair and desk for each person.
   • Meeting Rooms: These should be equipped with video conferencing tools, whiteboards, comfortable seating, and perhaps even technology for presentations.
   • Quiet Zones: Some members might need a quiet place to concentrate or make phone calls. Consider creating designated quiet zones.
4. Design for Comfort: A comfortable workspace can improve productivity. This includes:
   • Ergonomics: Choose comfortable, ergonomic furniture. The wellbeing of your members should be a priority.
   • Lighting: Natural light is best, but if that’s not possible, choose warm, indirect lighting to reduce eye strain. Consider the use of light dimmers to adjust the lighting as needed.
   • Temperature Control: Make sure you have a good HVAC system to maintain a comfortable temperature.
5. Design for Aesthetics: A well-designed space can boost mood and productivity. Choose a pleasing color palette and include elements such as plants and artwork.
6. Incorporate Community Spaces: Coworking is not just about work but also about community. Include areas for relaxation and socialization, like lounges, game rooms, or a cafe.
7. Technology Infrastructure: Your space must be equipped with fast, reliable internet. Consider also providing printing and scanning facilities.
8. Safety and Accessibility: Design your space to be accessible and safe for all. This may include wheelchair accessibility, clear emergency exit paths, and perhaps even a security system.
9. Sustainability: Consider environmentally friendly design options, like energy-efficient lighting and appliances, recycling facilities, and sustainable materials.

Step 3: Brainstorm a Coworking Space Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “coworking” or “shared office space”, boosts SEO
• Name should allow for expansion, for ex: “Infinite Spaces” over “Artisan’s Atelier”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation. 

Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward. 

Step 4: Create a Coworking Space Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: Provide a brief summary of your business plan, highlighting the key aspects such as location, target audience, and unique selling points.
• Business Overview: Give an overview of your coworking space business, including its location, size, facilities, and the types of professionals or businesses it aims to attract.
• Product and Services: Detail the services you will offer in your coworking space, such as desk rentals, meeting rooms, amenities (coffee, internet, printing), and any additional services like networking events or workshops.
• Market Analysis: Analyze the market for coworking spaces in your area, including demand, trends, and the profile of potential customers (e.g., freelancers, startups, remote workers).
• Competitive Analysis: Identify and assess your competitors in the coworking industry, highlighting what sets your space apart, whether it’s pricing, location, amenities, or community-building efforts.
• Sales and Marketing: Explain your strategies for attracting customers, including online and offline marketing, partnerships with local businesses, and community engagement.
• Management Team: Introduce the key members of your team and their roles in managing and operating the coworking space.
• Operations Plan: Describe the day-to-day operations of your coworking space, covering topics like membership management, maintenance, security, and customer support.
• Financial Plan: Present financial projections, including revenue forecasts, pricing strategies, operating costs, and funding requirements, to demonstrate the financial viability of your business.
• Appendix: Include any supplementary materials, such as floor plans, lease agreements, marketing materials, or testimonials from potential customers, to support your business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to coworking spaces. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your coworking space will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts. Here’s how to form an LLC.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation. Read how to start a corporation here.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Form Your LLC

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Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
• Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a coworking space business. You might also try crowdfunding if you have an innovative concept.  

Step 8: Apply for Coworking Space Business Licenses and Permits

Starting a coworking space business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your coworking space business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as Archie, officernd, or cobot, to manage your bookings, invoicing, and payments.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Create a website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. 

Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Book Now”. This can sharply increase purchases.  

Marketing

Here are some powerful marketing strategies for your future business:

1. Community Events: Host regular events and workshops within your coworking space to foster a sense of community, providing value beyond office facilities and encouraging collaboration among members.
2. Referral Programs: Implement a referral program that rewards existing members for bringing in new clients, leveraging the power of word-of-mouth marketing.
3. Flexible Memberships: Offer flexible membership plans to cater to diverse needs, such as part-time memberships, day passes, or custom packages, ensuring you appeal to a broader audience.
4. Social Media Engagement: Leverage social media platforms actively to showcase your space, share success stories of your members, and engage with your target audience to build an online community.
5. Partnerships with Local Businesses: Establish partnerships with local businesses to provide exclusive discounts or services for your members, creating added value and strengthening ties within the community.
6. Trial Memberships: Introduce trial memberships or free trial days to allow potential clients to experience your coworking space firsthand before committing, increasing the likelihood of conversion.
7. Unique Amenities: Differentiate your space by offering unique amenities such as themed meeting rooms, wellness areas, or recreational spaces, making your coworking space stand out in the market.
8. Testimonials and Case Studies: Showcase success stories and testimonials from satisfied clients, highlighting the positive impact your coworking space has had on their businesses, building credibility and trust.
9. Local SEO: Optimize your online presence with localized SEO strategies to ensure that your coworking space is easily discoverable by individuals searching for office spaces in your specific location.
10. Member Spotlights: Regularly feature member spotlights on your website, newsletter, or social media channels to showcase the diverse range of professionals and businesses thriving in your coworking community.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your coworking space meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your coworking space business could be: 

• Luxury coworking space that gives you the feel of a traditional office
• Network with other entrepreneurs at our coworking space for startup founders
• Working remotely? Get out of the house and engage with other remote workers

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a coworking space business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in coworking spaces for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in coworking spaces. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

You will likely need workers to fill various roles. Potential positions for a coworking space business include:

• Community Manager – take care of client needs
• Marketing Lead – create and implement marketing strategies
• General Manager – accounting, scheduling

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Coworking Space – Start Making Money!

Coworking spaces may very well be the way of the future, so now could be the perfect time to start your own. It’s a source of passive income and a way to bring your local business community together. You could even expand and open coworking spaces around the country.

Now that you understand the business, you’re ready to find your space and be on your way to entrepreneurial success!