Co-Working Space in Hong Kong - Case Study Example

Co-working space in Hong Kong By Student’s name Course Instructor Date Co-Working Space in Hong Kong Among the business ideas of the twenty-first century, co-working is a brand new ideology that brings together professionals with the different expertise to share office space. Often the people involved in coworking are professionals who have found themselves working at home, in remote isolation, independent corporations or just have the interest alongside other professionals. Co working does not bring together a similar set of skills but incorporates people from various organizations, with different skills and allows them to share office space. Many freelancers can escape the distractions of working at home by embracing co-working (Foertsch 2013). In co-working, a group of people may come together to acquire office space or an operator may acquire and adequately furnish office space the can recruit members to join. The business is projected to start making profits after two years of operation and therefore requires a lot of sacrifice in the beginning stages. The sustenance of the office space can be acquired from the money paid by the joining members but also can come from the operator's indirect sources of income. Research indicates that it is difficult for the operator to sustain the space without a secondary means of income. An operator should start by first building a coworking community before finding space. This can be done by looking for interested parties or taking part of an existing community and launching their co-working space in line with an event that attracts their target set of professionals. A collaborative spirit is key in establishing a functional space and a lasting co-working community (Rief et al. 2016). The major aspects that define coworking are that it is informal, social and collaborative unlike the normal business models such as business incubators and executive suites. These do not focus on profit but on building a community of professionals with a collaborative spirit. There are unlimited advantages of coworking spaces. First of all, co-working spaces go easy on contracts and are not legally binding as commercial spaces. An individual's time of working in the space is flexible from daily to weekly, monthly and yearly membership. The spaces themselves are flexible too and chance according to the size and the needs of the community working on it. Co-working spaces lessen the cumbersomeness of seeking valuable resources, advice, and connections to start new businesses and projects. This is because a wide range of professionals works within close proximity of each other. This is where people get hired or referred to the desired careers and also people boost their networking skills and professional connections (Chalwa, 2013). Assisted Serendipity is one of the most valuable benefits of co-working whereby people interact and informally and willingly exchange expert advice. Many ask how coworking is a money making venture? Coworking though primarily focused on community brings in income. Most of these enterprises make money exclusively from renting out desks. These form a large portion of their revenue. Apart from desk rentals, other primary sources of revenue include the fees paid for membership, fixed phone lines, fees for private office settings and merchandise support services. Other sources include the provision of snacks and beverages, renting of meeting spaces and conference places and hosting of events, especially corporate events such as seminars. As the community grows so does the profits raise. This is crucial as one needs it carefully select the members of the community: What jobs do they do? It should be noted that it is through the enhanced operation of their professions that the revenue through desk rentals is raised (Foertsch, 2011). Every start-up requires funding. The significance of funding to a start-up business is great. In the entrepreneurial world, it is said that a startup without funding is like a small boat in a large mass of water. So, why is funding important to a start-up business? Primarily, funding is important in helping a business achieve its financial goals. If the finances arrive in good time, it is easier to begin all tasks that require money so as to enable timely achievement of the overall goals of the organization. There is competition in every market. Even for the current start-up business, they face stiff competition, therefore, placing the pressure on the enterprises to meet the highest standard required by the market. So as to comply with the highest standards in the market and also to have an assurance of growth, all start-ups need financial aid (Valecha, 2016). Financial aid also helps to stabilize the start-up enterprises. It is usually a loss when the growth of a company is hindered by market factors and other influences that can easily be removed from the picture using money. A start-up needs financing as back-up to counter these hindrances. Finance is needed for the continual growth of the company. Its absence may cause companies to have stagnated growth or take longer to achieve the set goals. All start up businesses needs funding so as to meet the marketing budget. As much as one may start the enterprise on their own, for it to survive, it needs external funding. External funding is key to meet the marketing budget. Marketing places the product in the eyes of the customer and offers more information about the company, benefits and the product. Many start-ups rely on marketing to build their customer case hence the significant role of funding (Ready 2011, p.5). External funding is important because of the visibility aspect. If investors with big names in the market support small start-up businesses, they can gain more visibility and speed in the market compared to if they start up and continue on their own. This visibility brings the small companies in the path of opportunities and good market forces. Some start-ups may be able to build their brand even before they make their product. Funding places the less personal risk on the founders of the start-ups. It is difficult to run a business wholly using personal accounts as it is not known how much will be spent before the business gains ground. External funding removes this burden and even gives the founders of start-up business the eagerness to take risks since the financial weight is shouldered by others. It is always recommendable to have another source of fundings that you sustain yourself too and not get drained by a new business. Loans and credit are among the first options considered when seeking funds. These are very reliable as one can get the required amount of money to start a co-working space immediately but there is a condition tied to it: One must have a good credit history and assets to be put at stake as collateral. For very new start-up co-working businesses, this may not be the most favorable option. This is because most co-working stations are projected to register profits after a period of two years. It will be difficult to get an institution willing got grant you the liberty of two years grace period before paying up the loan. Also, the loan may be the best option in starting up the co-working space but not sustaining it. The co-working space shall register a lot of bills at the end of the month that have to be paid so that space can remain functional or else clients will pull out and elsewhere a loan has to be repaid. Striking a balance is hard. Another creative and effective source of funds is offering equality or services for start-up help. The intending operator may offer their skills or free office space to clients in exchange for funding. One may offer legal and accounting services to other professionals so that they may assist with funding. This technique is effective since it strengthens the relationship between the members of the coworking community. It builds a team spirit whereby professionals do not only work together and exchange ideas, but also they assist each other in rainy days. This technique may also present its setbacks. Some clients may look at the operator as lacking credibility if they cannot make the business stand on its own. This may be a repelling factor to obtaining and establishing a co-working community. Business incubators and accelerators are common in the 21st century (Burns, 1949). Their main aim is to give body to the bare skeleton of ideas presented by aspiring individuals. This can be a good window of opportunity for upcoming coworking start-up operators. These organizations offer a vast variety of reliable and free resources for start-ups. These resources range from office facilities to consulting services and sometimes monetarily benefits. This is probably the most effective source of funding as one is provided a wide variety of options not only funding but other necessary resources for the enterprise to survive. There exist professional investors who primarily seek to channel resources into good business ideas supported by a workable and accurate business plan. For co-working startup operators, there is need to develop a thorough business plan to attract this type of funding. Also one should have developed a strong co-working community since a good business plan is supported y a good team. One should have good professionals at hand as members of their community since they translate into good profits. Such are the qualities that shall attract funding from these venture-capital investors. A good example of venture-capital investors are the Accel Partners. In this digital edge, the internet is a beneficial tool for funding if maximized properly. To get funding, operators can start online campaigns for crowd funding (Ries, 2011). Apparently, this technique has been legalized thereby allowing anyone to contribute towards the funding process. There are many online sites to help achieve this such as Kickstarter. Both the operators and the willing Samaritans make pledges. The operator may place rewards for any help offered such as customized mugs and T-shirts whereas the wiling individuals may make donations, or pledge product delivery so as to qualify for rewards. Bootstrapping is very much possible in the event of starting a co-working operation space. Bootstrapping entails using the one’s available resources and savings to fund the business (Zwilling, 2010). One may also pitch the request for funds to both family and friends. Online fundraiser campaigns are an additional bonus to bootstrapping. All the gathered resources put together can help jumpstart a co-working space operation. This is very effective as there is no limit to the help one gets. Families are prone to give continual support and may be the backbone on which the start-up shall survive before it starts making profits. The success of bootstrapping is also heavily dependent on the location of the business. Some have had big breakthroughs for establishing their enterprises in places with low costs of living and in fast absorbing markets such as Hong Kong, Vietnam, and Chile. It should be noted that in the co working business, considerations should be made over how much is needed to start, open and run the space. As aforementioned, it is easier to operate a co-working space after one has set up the co-working community. How is it so? One can utilize the community to their advantage when starting and opening the space. The community's members are open to be consulted on what they would and would not like. For instance: some members may prefer to have a coffee machine instead of a soft drink machine thus one may save the costs of spending on the other less preferred machine. One should invest in finding professionals who are interested in working close to each other and are willing to pay for it. After these considerations, one can determine the source of funding most suitable for them. After finding the correct professionals and setting up a good community, the operation gets easier. The operator may now offer skills and service in exchange for rewards. These services may include free computer servicing and account management. The operator also needs to invest in finding and furnishing the office space itself. Family members who own enterprises may offer advice or help with regard to this. Depending on the nature of the co-working community, the operator may know how to furnish the space and what else to include in it. All these needs are drafted into a budget from which it can be determined how much is needed for the project. The operator may also ascertain according to the size of the community and the established source of funding what space and equipment to purchase. For instance, with a community of 20 people who broadly include writers, designers, and marketers, one may need to create a large office space. Such a space must be with full internet access, tables for designers and desks for writers, notice boards for the marketers, refreshment stands, and water dispensers, phone communications for the office space, electricity, cleaning services, management software, receptionists and other office supplies. All these culminate to the general cost of the budget. The most effective methods to source for funding are: applying for a bank loan, getting assistance from friends, offering equity and services in exchange for help, getting the assistance of a business incubator or accelerator and also finding a venture-capital investor. In the first 12 months, the co-working space will be generating the following demands: cleaning and maintenance of the space, office supplies, electricity, rent and taxes, electricity bills, water bills, beverages and refreshments and sanitation provisions (Hillman 2012). The most crucial demands appear at the beginning when one intends to open their doors to co-working. The space for the business and the furnishings like desks, chairs, computers and a wireless router are very key. Other necessities such electricity and the internet should be factored in too. Miscellaneous items may include cleaning supplies, trash bins, and refreshments. Thus all expenses considered someone needs to have a substantial amount of money to run the business for the first months. This can be represented in a cash flow projection diagram that majorly shows two key elements, which are: receivables and payables (Mills, 2011). Receivables are the finances received from members and can be expected in the next month of the year or otherwise depending on the lease signed by the members. Payables are the incoming bills incurred as the business continues its activities. Depending on the set business plan, the co-working space should get its funding in good time for proper execution of the business plan. There may be hindrances, opportunities, and concerns revolving around the timely acquisition of the funds required. Overspending and costs that eat away at the bottom line could throw your expenses out of control. These could make a coworking operator not to have a steady financial chart. There is emergency spending that may topple the financial plans, and some events aimed at bringing more money may backfire at times making one not to meet the financial plan in time. In order to avoid such occurrences, one should create a purchasing policy and system that is based on value addition. Buy products and equipment at competitive prices and from vendors who offer value for your money, for instance: give guarantees. Price negotiations, bargaining, and contracts are necessary to avoid overspending and sticking within the budget. There should be policies to monitor and regulate the purchase, receiving, reporting and ordering of equipment. Keeping track of spending especially online purchases makes one notice the trends in their cash flow and expenditure so as to make corrections where necessary. It is crippling for a co-working operation to run out of cash unexpectedly. Market forces may fluctuate rapidly and make operators come to a disadvantage when prices slump. This may cause panic, impulse spending and unwise decisions that may cost the company. For this reason, one needs a financial adviser or to be conversant with the trends in the market so as to be able to check these slumps in the market and act wisely. One also needs to keep checking their financial records so as to be able to check the financial trends and be able to predict slumps in the market and adequately prepare for them. If it so happens that a co-working enterprise is heavily dependent on the dues paid by the members an operator may face some constraints when the members regularly deliver late payments (Pandita 2017). Among the receivables, the payments made by members form a good portion of it. Also, these payments are channeled into meeting the predicted budget. In order to get the payments made in a timely manner; one should, first of all, check the members in the co-working community. The enhanced operations of the members determine what profits are brought in and how well they can meet their payments. There should be policies formulated and instituted to avoid delayed payments. Some may place fines for those who pay late and set deadlines for payments. These should be drafted in the leasing agreements so as to avoid unpleasant confrontations. There should also be incentives to encourage the members to submit early payments or timely payments and the policies for running and operating in the co-working space should also enhance the convenience for members to pay. In order to meet the financial target, one has to advertise value to the concerned market. Avoiding free offers is the way to go. This is done by placing a price tag to items. Instead of offering free space to the new professionals, place a relatively low price.it would be comfortable for them and also the charging of the service is an indication that value is offered at that place (Dudley 2015). Giving credit benefits is an incentive and also an indicator of value. For instance: giving newly registered members a certain amount of credit encourages them and others to be part of the community. The small charges should help to add up to the budget whereas the new members shall feel obliged to make timely payments. This shall help one to meet the funding requirements needed. A SWOT analysis is needed to assist in getting the right funding option so as to meet the financial target comfortably. A SWOT analysis contains the strengths, weaknesses, opportunities and threats for a business. In co-working the strength lies in the uniqueness of the business: it is a combination of various professionals. Another strong point is the unique selling points that include the events held by co-working enterprises and desk renting. The product is the space, but as space grows by virtue of increased membership, the profits grow too. It is a business that expands gradually though slowly but has an unlimited number of participants. The number of people who can join the enterprise is unlimited and does not rely on any specifications as co-working spaces combine many professionals. The co-working business is among the few which you can start without your own capital. This is evident in the sense that one can encourage the members to pay upfront through incentives and use these funds to start the business. The analysis if carried can help one narrow down on this technique. The weaknesses of the project may lie in the aspect of slumping market prices, late payments by the members, delicate position of the co-working community if it is deemed weak by late payment of bills or unsatisfactory provisions of the co-working space. A co-working space is difficult to operate when the owner does not have another source of income since they take time to start registering significant profits. This may affect the running of the business. If the owner pays bills late regularly and provides sub-standard services in an effort to minimize costs, it may lose credibility causing members to drop out. Putting these factors into consideration, one may opt to seek venture-capital investors as they provide a continuous flow of cash. One may also go for the bank loans since they offer a large sum of money at once. Techniques such as getting help from family and friends, bootstrapping and crowd fundraising may prove unreliable in the event of these weaknesses since they do not assure a continuous flow of cash. Opportunities are the external forces that tend to push towards the future. In co-working, there are opportunities majorly in funding and the operations of the space. Professionals working in a co-working space may use their combined skills and knowledge to help money raising events within their premises. The owners of co-working enterprises may seek investors so as to build their brand. By associating with the big names in the market, start-up co-working enterprises may gain the fame and visibility from that of the investing company. Coworking operations are also liable to the best negotiations. For instance, it is possible to have members pay before using the services. This is good as one may start a business without draining their accounts. Following this analysis, one may opt to choose crowd fundraising or offering services and equity for monetarily help. Other opportunities may present themselves by the composition of the co-working community. For instance; if one successfully manages to have a coworking community before opening a co-working space, they may find help within the co working community. A real estate agent may help the operator to secure a better place than they would have done on their own. A financial manager would advise accordingly on market trends, sources for finance and financial policies. This proves to be more advantageous than opening a space before building a working community. In conclusion, co-working enterprise is a booming business opportunity oriented towards new and digital models of business. It is easy to open and has the potential to flourish only of one puts in the demanded sacrifices: patience since it has been noted to yield a substantial profit after two years, funding since all businesses need money and integrity to run the company to growth. The most effective methods of starting a co-working operation, according to the analysis are: offering equity and service in exchange for monetary value, looking for venture-capital investors, asking for funding from family and friends and also crowd fundraising on the internet. The business makes its revenue from desk rentals, the hiring of private office space, events held within the premises and also renting of seminar and conference space among others. It is recommendable for those who would like to venture into co-working to establish a strong co-working community first before opening the workspace as it comes with more advantages such as cutting costs and assured serendipity. It is also another source of funding. Reference list Foertsch, C 2011, ‘How Profitable are Coworking Spaces?’ Deskmag.com, viewed 23 March, 2017, http://www.deskmag.com/en/how-profitable-are-coworking-spaces-177 Chawla, R 2013, ‘What’s the Top Benefit of Co-working Spaces?’ Entrepreneur, viewed 23 March 2017, https://www.entrepreneur.com/article/230446 Valecha, J 2016, ‘Know the importance of fundraising and funding for startups,’ Entrepreneur India, viewed on 23 March 2017, https://www.entrepreneur.com/article/278450 Ready, K 2011, Startup: An Insider’s guide to Launching and Running a Business, Apress Media LLC, New York. Zwilling, M 2010, ‘Top 10 Sources of Funding For Start-ups,’ Forbes Magazine, viewed 23 March 2017, https://www.forbes.com/2010/02/12/funding-for-startups-entrepreneurs-finance-zwilling.html Startup, 2015, ‘Main Sources of Finance for New Business 2015,’ Irish Examiner, viewed 23 March 2017 http://www.irishexaminer.com/business/smallbusiness/startup-2015-main-sources-of-finance-for-new-business-356772.html Dudley, M., 2015, ‘Lessons from our First Year Running a Co working Space.’ The Skillery, viewed on 24 March 2017, http://www.theskillery.com/blog/2015/7/8/lessons-from-our-first-year-of-running-a-coworking-space Pandita, S 2017, ‘10 Financial Problems Faced By Startups and Their Possible Remedies,’ KnowStartUp.com, viewed on 24 March, 2017, http://knowstartup.com/2017/02/10-financial-problem-faced-by-startups-and-their-possible-remedies/ Hillman, A 2012, How Much Does It Cost To Start A Co working Space, viewed on 24 March, 2017, https://dangerouslyawesome.com/2012/01/how-much-does-it-cost-to-start-a-coworking-space/ Mills, J 2011, ‘Creating a Cash Flow Projection,’ Wells Fargo Works, viewed on 24 March 2017, https://wellsfargoworks.com/run/cash-flow-projection Foertsch P.A 2013, Workplace Innovation Today, The Co working Center, NAIOP Research Foundation, Rief et al. 2016, Harnessing the potential of Co working, Fraunhoer IAO, viewed on 24 March 2017, http://eu.haworth.com/docs/default-source/white-papers/harnessing-the-potential-of-coworking-81444.pdf?sfvrsn=6 Burns, P 1949, Entrepreneurship and Small Businesses, Palgrave Macmillan, UK. Ries,E 2011, The Lean Startup: How constant Innovation Creates Radically Successful Businesses, Portfolio Penguin, UK Cash Flow Projections MONTH JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Operating use, beginnings 0 0 25000 27000 18000 18000 6000 15000 0 0 27000 40000 Sources: Personal accounts 10000 12000 15000 30000 15000 35000 35000 10000 0 30000 0 0 friends and family 15000 13000 0 0 15000 0 15000 15000 0 0 10000 0 receivable collections 45000 50000 40000 40000 45000 45000 40000 40000 55000 50000 50000 45000 total cash 70000 75000 80000 97000 93000 98000 96000 80000 55000 80000 87000 85000 uses:rent 5000 5000 5000 5000 5000 5000 5000 8000 8000 8000 8000 8000 electricity 3000 3000 3000 3000 3000 3000 3000 5000 5000 5000 5000 5000 furniture and equiment 20000 10000 10000 7000 5000 5000 5000 6000 5000 0 2000 1000 compensation of owner 10000 12000 15000 30000 15000 35000 35000 10000 0 30000 0 0 line of credit payment 2000 8000 6000 2000 8000 -3000 3000 5000 5000 5000 5000 2000 fixed asset purchase 1000 0 3000 3000 5000 1000 1000 8000 0 2000 2000 0 payroll and payroll taxes 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 Estimated income taxes 5000 4000 4000 4000 4000 0 0 4000 4000 4000 4000 4000 office supplies 10000 15000 20000 15000 10000 10000 10000 12000 10000 5000 2000 3000 long term principal payments 0 0 0 5000 3000 7000 2000 5000 6000 4000 2000 0 others 0 0 0 0 12000 12000 12000 12000 12000 12000 12000 12000 total cash 70000 62000 53000 79000 75000 92000 81000 80000 60000 53000 47000 40000 excess 0 13000 27000 18000 18000 6000 15000 0 -5000 27000 40000 45000 Read More