How WeWork Became WeBroke (and My New Coworking Space)
I considered calling this article “Why I’m Starting a Coworking Space While WeWork Publicly Falls Apart.”
After all, the timing seems a bit crazy. The most well-known (notice I didn’t say largest) coworking company in the world is in the midst of massive layoffs after canceling an IPO, which led to Softbank paying the CEO more than a billion dollars to resign. Woah.
Bloomberg did a phenomenal job of capturing the dramatic story in their 13-minute summary:
And yet, in the midst of all that noise, I’m opening a new coworking space in my town.
What gives? Have I lost my mind? If the big guys can’t figure it out, what makes me think I can?
Where WeWork Went Wrong
The WeWork saga is a cautionary tale for any business owner, and there are key lessons to learn from it, but coworking wasn’t the problem for Adam Neumann—finance was.
That’s right, despite the fact that WeWork has become a multi-billion dollar conglomerate with more than 500 global locations all over the world, they have yet to yield a profit. In fact, WeWork lost $690 million in the first half of 2019 alone!
WeWork followed the ranks of startups like Uber and Lyft, who seem determined to spend more money than they earn in the never-ending pursuit of the ever-elusive “market share.”
In its current design, WeWork will crumble without a steady stream of new investment money. The pressure to “hustle harder” to please investors reportedly turned Adam Neumann into a volatile CEO.
Ultimately, the lack of profitability is why the restructured board and new Co-CEOs are laying off nearly 5,000 employees and selling businesses (including Meetup) they’d previously acquired.
It’s not really surprising that America’s biggest enterprises of the last decade are built upon a mountain of debt. That’s consistent with the new American culture of finance, isn’t it?
The average U.S. adult has $29,800 in personal debt (excluding their mortgage) and the US Government itself has more than $23 trillion in national debt.
Next year, 2020, is set to be the first year that the US deficit surpasses $1 trillion.
The Common Sense Alternative
In the midst of all the hubris of business “growth” that is solely focused on revenue without regard for profit margin or accumulating debt, Profit First is a common-sense approach to business finance.
WeWork’s biggest competitor, International Workplace Group, has been quietly growing internationally without all the headlines and buzzy brand attention.
Instead, they’ve taken care of business fundamentals, expanding to more than 2.5 million members in almost 3,300 locations worldwide to generate $3.2 billion last year—with a 4.2% after-tax profit margin.
Proximity Space has focused instead on powering the infrastructure behind independently owned coworking spaces, which are rapidly spreading in rural and suburban areas.
The future is bright for businesses in any industry that focus on building a healthy business, which consistently generates profit.
Behind My New Coworking Space
I’m making a bet on coworking and on the town I live in by opening a new coworking space in Columbia, TN.
I’ve watched the town flourish over the last five years, in a welcoming community that was recently named one of the top small towns in America by Southern Living.
We have one coworking space in town that’s focused on artists and creatives, along with another on-demand office space that is primarily used for meetings.
We don’t have a coworking space designed to be a professional workspace for entrepreneurs, and we don’t have a coworking space in the center of downtown Columbia, on the square. If we did, I would already be a paying member, but instead, I’m creating one myself.
I’ve designed the business to break-even at 10 full-time members, and follow Profit First guidelines to generate healthy profit at 15, 20, or 25 full-time members.
The current location will max out at 30 full-time members, in which case I’ll have a vibrant workspace that generates a steady stream of profit to pay myself or reinvest in the business (perhaps buying, instead of leasing, a commercial space).
We’re in the midst of the buildout, and I have a wishlist of upgrades I want to make to the space that we’re putting on hold until we get the space open, so it can pay for itself. Still, we’re upgrading the flooring, lights, ceiling tiles, wall paint, and furniture right now.
Typically, I deal with mostly digital business, so this is a fun way for me to test offline marketing by joining the local Chamber of Commerce and hosting a grand-opening event.
I’ll continue to report back on progress with the new business here on the blog, and document stories that would be helpful to your business endeavors elsewhere, as an entrepreneur.
Question: What would you like to know about my coworking space, as a business? I’m an open book!