TeemGenie recently moved into a new office. While it was a day of new beginnings and celebration, I was personally more relieved that the months of conducting recce and negotiating had come to an end. Anyone who has been part of the process to acquire a new office space knows how tiring it can get. You want to do right by your team by exploring all options and alternatives before honing in on the best one. For me the biggest question that needed to be answered in these past few months was this: should I rent an office space or look for a co-working option for my team? 

I am familiar with both business models and their value propositions, yet identifying the most suitable option proved to be quite challenging. As a key decision-maker, I understand the need to consider even the most trivial details before investing in a suitable workplace for my team. Hence, I want to highlight some of the significant learnings and takeaways from my experience which may prove helpful to you in the all-important pursuit of the best working environment. 

The Challenge Of The Unknown

If the pandemic has shown business managers one thing it is that future planning is paramount. Although it is impossible to predict future trends and disruptions, you need to consider the future of your workforce while selecting a workspace. The two broad options available today are either to lease your own commercial space or opt for a co-working model. The critical question is, how do you go about choosing the most suitable alternative without knowing the future of your workforce? 

That’s where capacity planning becomes a double-edged sword. As a startup, your team’s requirements may be minimal: laptops, reliable Wi-Fi, a small meeting room and of course, a coffee machine. You may look at your current team and chart out a decent growth prediction, based on which you decide that a co-working space is the aptest choice. However, you grow faster than expected. While everyone looks at it as a metric of success, whatever you have planned in terms of a workspace quickly becomes inadequate. You consume the allocated budget for the co-working space much earlier than the 1-year lock-in. You find yourself paying for more seats than your capacity planning schedule had assumed you would need. The worst part is that you then have to get into the entire thing all over again. Sounds like a Sisyphean task, right? 

On the other hand, you realize that there comes a time when even a small business might need a permanent commercial workspace. You decide to go in for a long-term property lease, such as an office space with a lock-in period of 3 years. This gives you the peace of mind to expand your small team without any barriers. However, you run the risk of underutilizing the resources you are paying for. 

Most commercial leases have a 3-year lock-in period at minimum as it allows the lessor to recover the cost of interiors and amenities. Your team, say of 10 individuals, may not be able to justify that kind of expense. Also, take into account the maintenance charges, sizeable down payments and potential property enhancement costs – office spaces come with considerable overhead costs. 

As someone who has worked with several startups and small businesses, I understand that either scenario can be devastating in the long run. After all, no one likes to move from one office to another every few years. Hence, the dilemma of “co-working vs office space” is one that needs to be addressed with caution. In my case, it quickly became clear that a co-working space was the ideal solution. 

Here’s Why I Chose The Co-working Option

I imagine that most of you have heard of the popular “plug-and-play” model. It allows users to install and use applications or software without any manual configuration. In the real estate world, it refers to commercial spaces that come with readymade facilities in terms of building infrastructure, electricity, network connectivity, property licenses, clearances, etc. required to operate a business. Well, the co-working model is the plug-and-play for modern businesses! 

Think of the many SaaS (Software-as-a-Service) deployments you use on a daily basis – Trello, Slack, Microsoft Office or Google Drive. You get instant functionality as the minutiae is already taken care of by the vendor. Co-working spaces are the same; they come with the prerequisites such as desks, private offices, meeting rooms, Wi-Fi connectivity, printers and more. This means that co-working spaces can provide startups and smaller organizations more value than leasing an office space. 

This also made sense for TeemGenie as we are a smaller team with roughly 15 full-time employees. Here are some of my primary reasons for choosing a co-working space over a commercial office:

Agility And Flexibility

The major factor driving the rising demand for co-working spaces is the flexibility they offer. You may have noticed that the coworking culture is gaining ground even in Tier-ll cities. It is a desirable option because of its flexible financing options with low or no deposit schemes, affordable seat prices, short lease terms, and variable seating. Hot desks, or non-fixed desks, that any individual in the co-working space can use are a plus when inviting clients or collaborators for in-person discussions. 

There is another reason why startups are recently moving their employees away from traditional office spaces and towards co-working spaces. Given the influx of remote workers and hybrid work culture, you can hire exceptional talent from outside the region without having to pay for their accommodation in your workspace on a daily basis. You only pay for the space you use!

No Waiting Time

Another advantage of using a co-working space is that there is virtually no waiting time. Remember how I mentioned it is the new plug-and-play model? When you find a co-working space that appeals to you, and can meet the demands of your team, you can start working right away. You don’t have to worry about setting up amenities, furnishing the space, etc. like you would with traditional offices. There is no loss of business continuity even if you move from one co-working space to another. 

Capacity Planning For Your Workforce

I have stressed this aspect earlier, yet it bears emphasis – co-working spaces are a boon for capacity planning. Depending on how your team evolves, you have the options to scale (up or down) in a co-working space. Your team may riff off each other over regular Skype calls, in which case you may need a conference room only a few times a year – in an office space, you do not have that option. Yet, if you do need all your stakeholders in one physical space (say, for a critical project launch), a co-working model allows you to book a meeting room for a few hours whenever required. 

Besides, as you onboard more people, you can combine or separate areas to better suit your new workspace concept. Modular co-working spaces often provide moveable furniture, huddle pods, and acoustic screens for this reason. Co-working spaces uphold their promise to deliver agile and adaptable workspaces, helping the working environment align with your vision for capacity planning.    

Shorter Lock-In Period

Most commercial office leases come with a lock-in period of between three to nine years, making it difficult for early-stage startups and smaller teams to move out of the space without suffering monetary loss. If you need to vacate your office space before the lease is up (due to unavoidable reasons such as cost-cutting), you may have to forfeit the hefty security deposit and disburse the remainder of the payment for your lease. 

In comparison, the lock-in period for most co-working spaces varies between one and three years. This prevents you from being locked into a long-term lease for your working space. It gives you more leeway to make adjustments to develop your evolving workforce and the environment they operate in. In a nutshell, by opting for a co-working space, I have the flexibility to move to a bigger workspace when needed, cut back on the frequency that I use the space or even switch entirely to remote working without incurring financial losses.

The Cost Factor

The acquisition of a new workspace, much like any other business decision, is driven by financial considerations. I believe that smaller teams, under 20 individuals, will find the co-working model more cost-effective, if you take into consideration the fact that you’re not paying for any space or desk that’s not required at the moment. On the face of it, you’d find the effective cost per desk for a co-working space slightly higher than that of a traditional office space. However, since you’re renting out, you’d probably rent a bigger space than your current team size. So, you would effectively end up paying more. 

For instance, in the case of TeemGenie based in Pune, the average monthly cost for a co-working space in the city’s central business district (CBD) areas is between INR 10,000 to 15,000 per desk. If I were to rent out an entire space, the cost would have hovered between INR 8,000 to 12,000.  My current team size is 20 but I would have rented out a space that could accommodate a team of 50. So, my cost for co-working would have gone upto INR 3,00,000 while that for renting would have been INR 6,00,000. 

That’s why I felt that co-working is a better option for a fast-growing startup since you are not sure what your team size would be a few months down the road and you’d probably end up spending more just so you can prepare for the team expansion you plan ahead. 

My Learning From The Experience 

My chief takeaway for you is that co-working spaces are all about provisioning cost-effective and flexible workspaces. If you can deliver what your clients need and monetize suitably while maintaining operations from a co-working space, you do not need to commit to a long-term commercial lease. My recommendation to startups and early-stage entrepreneurial organizations is to opt for co-working spaces as you scale. That’s what I did – and we now have an amazing, well-set office in the Hive, and I did not have to worry at all about what colour chairs I should find or what should be the desk size – it was all set for my team to get going with from day one!