Measure What Matters in Coworking: KPIs, Benchmarks and Industry Standards

We recently hosted an amazing panel at the FlexWorld 2024 with Anna Levine, CCO at Industrious, Alexandra Livesey, COO at Clockwise, Mihail Kyosev, Product and Data Director at OfficeRnD, and myself, Miro Miroslavov, CEO at OfficeRnD.

We discussed one of the most important topics in our industry about Measuring What Matters in Coworking: KPIs, Benchmarks, and Industry Standards. You can listen to the entire panel here or read the summary below!

Let’s zoom into the top Coworking KPIs that some of the most successful flex space operators look at Monthly, Weekly, and Daily.

Coworking Budget, Financials, and Profitability

All businesses, including coworking spaces, should start the year with a well-thought-out budget. Usually, the budgeting process should begin as early as September of the previous year and dedicate enough time to iterate and create a compelling forecast and expense plan into a holistic budget.

Based on the budget, we derive multiple goals for all teams, including KPIs such as Revenue Forecast, Profitability, Growth, Rule of 40, Retention & Renewals, Expansion, Bookings, and more.

You can start the budgeting process using a combination of internal and external data and benchmark points:

• Alex from Clockwise shared that the team is looking at their data and creating a budget based on a lot of research and insights from their operations.
• Anna from Industrious expanded that they are looking at some of the strongest public companies such as Delta, Coca-Cola, and Disney for profitability and growth benchmarks. When you are building a generational company, you should look for references from other generational companies and their KPIs which are publicly available.
• You can also look at the public filings of WeWork and IWG for more specific benchmark data for our industry.

Ultimately, the more data you have – internal, external, and market data, the better and the more accurate the budget will be.

Once the budget is set a good practice is to look at it monthly and create the so-called Budget vs. Actuals (BvA) file. This way, you can spot deviations early on and course correct if needed.

Furthermore, a common practice is to do a proper mid-year Budget Review where you should examine all aspects of the budget and eventually, change the budget if you have to. Many coworking spaces fail because of neglecting this step.

Coworking Occupancy Rates and Average Revenue per Member

Another key performance indicator for running a coworking and flex space is the occupancy rate and its flavors, such as Revenue Occupancy. Your occupancy rate is essentially a predecessor to your profitability. Typically, an occupancy rate that is above 80% is strong with more than 90% being great. Here’s how we calculate occupancy:

Occupancy (Static Desk Occupancy) is the Percentage of available permanent (a.k.a assignable, like dedicated or private office) desks being sold (occupied) during a specified period.

Occupancy is calculated by dividing the number of partially or fully occupied permanent desks for the period by all available permanent desks for the period.

On the other hand, Revenue Occupancy (Cash/Economic Occupancy) is the Percentage of desk revenue (all rental revenue on a monthly basis, like dedicated and private office desks) from the target desk revenue for all desks at full price.

Revenue Occupancy is calculated by dividing the Desk Revenue for the specific period by the Target Desk Revenue for the same period.

Usually, Revenue Occupancy is the preferred KPI as it takes discounts into account. It’s easy to fill in a space if you undersell it or offer it for free.

This leads us to another very important metric that you should look at every month which is the Average Revenue per Member (ARPM).

ARMP calculates the average revenue generated per member within a specific period. It helps in assessing the value each member brings to the coworking space and understanding revenue generation trends.

For example, if you have 100 active members and generate a total of $59,500 per month, your ARPM will be $595. Alternative KPIs to ARPM are RevPAD (Revenue per Available Desk) and RevPOD (Revenue per Occupied Desk).

We should look at all Occupancy and Efficiency metrics at least once a month.

Sales Pipeline and Bookings

Furthermore, we should be looking carefully at the Sales & Marketing traction every week. The first metric to track is the Sales Pipeline generation – which is the sum of all deals being opened within the respective week.

Then, we can expand this section and zoom into the marketing funnel – starting from the very top, like Website traffic, then Marketing Qualified Leads (MQLs) – which is a term used to define that a person has expressed interest in your space, for example, signed for a tour.

Next is bookings or the number of deals closed. There are different flavors that you can track, such as the number of new memberships sold or the number of desks sold. Bookings usually refer to the sum of all closed deals with their respective monetary values.

You should look at your entire Pipeline every week with a monthly deep dive. Furthermore, you should also try to forecast your month every week. That’s an essential part of the monthly budget review process as usually, you should have bookings assumptions built into your budget.

Member Satisfaction and Retention

Arguably, the most important key performance indicators for running a coworking space are actually around member retention.

You should start by measuring Member Satisfaction first. A good way to do this is using a simple Member Net Promoter Score (mNPS) form.

NPS score measures member loyalty by looking at their likelihood of recommending your coworking space. Your NPS score is measured with a single-question survey (“How likely is it to recommend our space to a friend?”) and reported with a number ranging from -100 to +100, where a higher score is desirable.

NPS is a leading indicator of Churn. Members who are unlikely to recommend your space are more likely to leave.

Members are grouped into Promoters (10 or 9), Passives (8 or 7), and Detractors (6 – 0).

For example, if you have 100 members, 50 of them fill in the NPS survey, 30 of them are Promoters, 10 are Passives and 10 are Detractors, your NPS = (60% – 20%) * 100 = 40!

Member retention rate measures the percentage of members who renew their memberships or contracts with the coworking space. It indicates satisfaction levels, the attractiveness of the space, and the company’s ability to retain customers.

NPS is a leading indicator, while Retention, for example, is a lagging indicator. This means that high NPS leads to better Retention and vice versа.

Other popular variations of retention metrics are Churn Rate, Average Length of Stay (LoS), etc. Some of the best coworking and flex spaces, for example, have a very high average length of stay, such as 30+ months.

Staying on top of your data is key to creating a long-term successful business. Measuring what matters will help you understand your business, know your levers, and be able to drive better outcomes for you and your community.

In Conclusion

Understanding and measuring the right KPIs is crucial for the success of coworking spaces. By focusing on key metrics such as budgeting, occupancy rates, revenue per member, sales pipeline, member satisfaction, and retention, coworking operators can make informed decisions that drive growth and profitability. Implementing these practices ensures a thorough understanding of business performance, allowing for timely adjustments and strategic planning.

For more insights about the flex space industry, watch all session recordings from FlexWorld Series 2024 here.