The Challenges of own Office Space – Why opt coworking?
The Challenges of Running your own Office Space – Why you should opt for coworking?
There are many challenges one has to face while managing their own office space. Coworking or Flexible workspaces allow people to rent office spaces on a per seat basis and hit the ground running. While it varies from each entity to another a high-grade & good-quality Co-working space provides members with access to High-Speed Internet, Printers, Conference Rooms, Cafeteria, Recreation Zones & Facilities, Concierge Facilities, etc. The value proposition lies in the fact that along with cost savings, it spares the people working out of these arrangements a lot of their valuable bandwidth.
Brief History of Coworking:
A Berlin company called C-base in 1995 was the first to introduce the world to Co-working. It was a non-profit organisation, its goal was to help advance knowledge & skill sets in technology across software, hardware & communication networks. They were the first to launch hackerspaces that helped bring like-minded people into one place. As they evolved they went on to provide free public access Wifi and also held jam sessions. Since then, many co-working spaces have mushroomed all across the globe.
There were 7,800 Co-working spaces worldwide in 2015, and the number was projected to rise to 37,000 by 2018 as per some reports Latest Data reviles that there were around 510,000 people working out of Co-working spaces in 2015, compared to 295,000 in 2014 – an astounding 73 % increase year-on-year. The largest number of co-working spaces (by the number of members) is in Asia. The worldwide Growth rate is around 36%.
Coworking vs Independent office:
The growing numbers of both the spaces and consumers validates the fact that this trend is here to stay. Some may think that an Independent Office will be more cost effective, but this is a fallacy that needs correction. There are a many hidden costs involved in owing an Independent Office. To illustrate the same, let us take an example of BHIVE Workspace – the average cost per seat in HSR Layout S6 is INR 8000/Month. For a typical startup or SME with a team size of 10 the cost works out to Rs. 80,000.
The typical argument from some Facility managers is that for the same team size, they could rent a 500 Sqft property for around Rs 30,000 in the same neighbourhood (conservative estimate @ Rs. 60 / sqft in a tony area like HSR). Per employee cost will work out to Rs 3000. While getting a 500 sqft is ideal and the best case scenario, there is usually a 10% probability that Startups or Small Enterprises will find such office spaces. In reality, the minimum size that most Small Enterprises / Startups settle for is around 1000 sqft. (that too after a lot of hunting and compromising on the location i.e more interior). So the cost of rental amount in a month is in high probability around Rs. 6000 per employee. The next typical costs that should be considered include:
- Fit-out Costs – Including HVACs, Furniture, Electrical & Plumbing for a 500/1000 sqft space. Assuming a 36 month payback period will be around Rs. 1200 per month per employee as a very conservative estimate (i.e an Upfront investment of Rs. 4,32,000 on Interiors & Fittings)
- Internet – Say around Rs. 5000 per month for a dedicated Broadband Line along with a standby Broadband connection at a minimum of Rs. 3000 (BHIVE provides a more reliable & costlier dedicated Lease Line along with a standby Broadband Line). Per employee cost will be Rs. 800 per month for Internet charges
- Electricity – Including HVAC, Lighting & Charging, UPS – Power Backup will work out to around Rs. 13500 for a 500 sqft property. The per employee cost would be Rs. 1350 per month (For a 1000 sqft property the cost will spike upto Rs. 2000 per month)
- Beverage Costs – Unlimited Tea / Coffee would work out to around Rs. 750 per employee per month (Calculated at Rs. 10 per cup and each employee consuming 3 cups a day for 25 days a month)
- Housekeeping – For a part time housekeeping staff, the minimum salary in this area would be Rs. 4000 per month. Housekeeping equipment for the office space would roughly work out to around Rs. 2000 per month. Housekeeping cost would translate to around Rs. 600 per employee (For a 1000 sqft property the cost will be around Rs. 900 per month)
- Other Utilities – Water and Gas Cylinder Charges per month would work out to around Rs. 7000 per month, so Rs. 700 per month per employee.
- Security – Some startups may say that this is an optional cost and is not mandatory. Nevertheless for the companies that do need a Security personnel, the typical average monthly salary on a conservative low estimate will be around Rs. 16000, working out to Rs. 1600 per employee per month.
It’s fair to say that the figures so arrived at, are extremely conservative and may work out to be more expensive in reality. The Table below helps document the aforementioned costs on a per employee per seat basis in both a Best-Case (500 sqft space) and the Most Probable (1000 sqft space).
|Cost Tabulated per employee per month||Best Case – 500 Sqft Scenario||Most Probable – 1000 Sqft Scenario|
|Fit Out Costs||1200||1200|
|Water & Utilities||700||700|
|Total Including Security||10200||14250|
So in addition to paying more per month, a Startup or SME has to keep around Rs. 7-10 Lakhs as an upfront investment even before things start. Unlike the experience, co-working has to offer. It’s quite clear from the detailed calculation breakup above that even if a Startup or SME’s want to work out of their own space, the price advantage is not there. Added to that instead of focusing on their core business functions and devoting maximum attention to their company’s success, from time to time, they have to worry about facility management issues like: –
- Water & Power supply,
- Internet down times,
- Wear and tear of Fit-Outs & Equipment,
- Housekeeping & Security Staffs performance/availability,
- Stacking of Water Cans, Beverages & other Housekeeping equipment
Compared to this, Co-working spaces remove all the hassles and are also economically more prudent. It’s little wonder that Co-working is fast becoming the choice of many new age Startups and Small-Medium Enterprises. Even teams as big as 50 members can be found working out of Co-working spaces.
But, Still Why Co-work ?
As stated above, for a bare minimum no frills set up, the startup or SME will end up shelling much more than a Co-working space. In addition, it is safe to say that in an Independent Office they will have to make do with a very small pantry area, small or no conference rooms, no recreation zone, no cafeteria, no garden area, no events area, etc. Also the employees in such a set-up are restricted to mingling amongst their own brood and have limited exposure to employees in other companies – kinda pigeonholed if you will.
Contrast this with Co-working spaces from BHIVE Workspace where people have access to plenty of Conference Rooms; Pantries for every level; huge Cafeteria Zones; Recreational Zones to unwind with games like Table Tennis & Foosball; Garden Areas; Concierge Facility; TV & Projectors; Writeable Laminates on Desks; Pedestal Cabinets for storage; Printers & paper shredders; etc.
Most important is the diverse and vibrant community that startups or SMEs have access to. Food, Technology, Product, Consulting Startups all work and contribute to each other’s development. The camaraderie and brotherly feeling one gets is hard to replicate in an Independent Office.
Additionally BHIVE Workspace is unique in community engagement & education in the fact that it has hosted close to 450 events in its short existential span – sessions held include Fireside chats from VC Investors; Founders of Funded Startups; Workshops on Digital Marketing & Growth Hacking; IP Protection; etc. to name just a few. Members who work out of the BHIVE Co-working spaces have free access to all the events and have immensely benefitted from participating in the events. The employees working out of a Co-working space are more enthusiastic and pumped to come to work as compared to an Independent office.
According to a worldwide survey, close to 70% of members working out of a Co-working space across the globe, are very happy with the arrangement and have no intention of leaving in the near future. Co-working has one additional benefit, flexibility to ramp up or down based on the requirement.
A startup faces immense volatility for the first 3 years. Instead of making vague projections on headcount and then struggling with the logistical challenge of accommodating additional members or having a bigger space than is needed smart Startups can make use of the immense flexibility that Co-working offers. Need 10 seats in one month and 15 the next, subject to availability most Startups can easily play around with their seating requirements.
To sum it up almost all benefits seem to add up in favour of Co-working. The benefits are across all segments: –
- Logistical / Facility Management;
- Community Engagement & Employee motivation;
- Flexibility of Ramping up & down;
However despite all these reasons some Startups or SMEs still may want to work out of an Independent space. This maybe because they may want privacy and a more secluded workspace. That is a call that the Founders and Managers have to take. Given the immense benefits, however, the Co-working space holds a lot of promise and has attracted the attention of even behemoths like Microsoft, which recently shifted some of their staff from an Independent office to a Co-working space in New York. Co-working is indeed a segment to watch out for as the interest in this domain has just begun to ratchet up.