Maybe you have read business articles about the exploding billion dollar shared workspace industry, often called Coworking or Collaborative Space. Perhaps you have seen local articles or YouTube videos featuring churches innovative attempts to ride the wave. After all, churches are some of the largest owners of unused space during the workweek. It may seem logical to bring in extra income by converting that unused space to a coworking space.
As former executive pastors who are a part of the coworking industry, we see that churches can play a significant role in these spaces. You will want to think carefully before making that decision. There are many issues that are outside the scope of what most churches are aware of. Do your homework and understand what is involved. Here are ten items to guide you in your assessment.
1. Your Location May Present a Challenge
Not every location fits for a collaborative-coworking space. Every shared workspace arrangement is 100% local market driven. Are you considering a collaborative or coworking space? You may picture a room of hipsters, millennials, and GenXers working on laptops on wood plank, high tables. If your church is not in a trendy neighborhood that lots of millennials or hipsters call home, coworking will probably fail.
Are you thinking of executive suites? Picture older, small business men and women who need a single office but not a large space. If you try to put executive suites in an old warehouse surrounded by pallet decor and loud venues, it will probably fail.
Many churches are in neither market. Many older churches, the ones with empty weekday space, are in residential districts. Is there any market there? Perhaps. Before you decide to move toward shared workspace, you need to do market research. You will need to know the options and study your local market.
2. Not Every Space Makes Money
If you look at many coworking spaces, they look like Starbucks on a work day. In fact, most coworkers look a lot like Starbucks’ customers. This begs the question: Why would a coworker pay money to work at your church’s shared workspace when they can work at Starbucks for free? Many independent, shared-space operators who have tried to attract this type of customer have failed financially. This is certainly true if the operator must cover a lease payment.
If you own the space, it helps the economics. Do not count on a lot of profitability when your customer is a sole proprietor in the “early-career-startup-phase.” This sounds great but it is hard for them to pay the bills. They go back to Starbucks! This is not an unsolvable problem but it requires a determination of who in your market will pay. You must determine what services they will pay for.
3. Cost of Build Out
Most pastors are shocked at the price per square foot that our firm pays to build out a CoCreate Exchange space. For most churches it is a higher rate than any building project they have undertaken. Why is the cost of build out so high?
The trend in the shared workspace industry is that coworking with the Starbucks model is out. Why pay for something you can get for free? What people will pay for is an office with privacy. People like the community of Starbucks but they will pay for productivity. That requires a space they can call their own.
Whether you go high-end or economy, building out private offices is expensive. If you do it right and you have the market to match your build out, you can be profitable. If you miss the needs of your market, a potential customer will drive a few miles to a competitor who has what they need.
4. 24/7 Access
There are certain services every shared workspace must offer to be competitive. The biggest challenge for churches is 24/7 access. This is a must for shared workspaces. Business people, especially small-business people and entrepreneurs, don’t work 8 to 5 jobs. Their job is their lifestyle. They work whenever work demands it. That means their workspace must accommodate their needs.
This will present security concerns for your church. You can address these concerns with technology but this is another expense. This may also present problems with worship times and other church activities. The best solution is to have a totally segregated space. If you are planning to share the space with church activities on weekends, you might be able to share some of the common areas. Private offices must remain private and accessible.
“I couldn’t hear you, it’s too noisy here!” One of our first investments was in a church space. The church, as a part of the deal, required the operator to build out the church offices within the shared workspace business. What the operator did not know was that the church staff brought their kids to work. Trying to work when kids are running up and down the halls, or playing with noisy toys, is impossible. The church staff was offended when they were told their kids could not be in the shared workspace. Customers left because of the noise. This was not the only reason the project folded but it was one of them.
The shared workspace customer values community but not at the expense of productivity. If you put your shared space in the same building as your Mother’s Day Out, you are going to lose business. It’s not that business people don’t love kids—they may have three at home. That is why they have an external office!
There are lots of ways to solve noise issues through space design and sound-proofing. Thinking about noise issues at the design phase is critical.
Unless your church is located in a mass-transit corridor, every shared space must have adequate parking. The minimum required parking spaces for churches is different from office buildings. In most cities, those who work in your space will drive their own cars.
Churches, especially older ones, don’t have enough parking spaces to meet code for business parking. This is not an unsolvable problem but it may require you to rent parking spaces from a nearby landowner or come up with a creative alternative.
7. Separate Business Structure
Churches are probably the most protected class of institutions in the United States. Your church is exempt from paying taxes on its donations. It may be exempt from certain business requirements like the Americans with Disability Act (ADA) and certain employment regulations. If you start a standard shared workspace business in your church, the chances are high it would be considered unrelated to your ministry-religious exemption by the IRS.
You most likely will have to pay Unrelated Business Income Tax (UBIT) on any profit. To avoid issues with your church’s tax exemption, the shared workspace may need to be under its own for-profit business structure, such as a C-Corporation or Limited Liability Company. Solving this problem is up to your CPA and lawyer. Get good counsel on tax and legal issues.
8. ADA Considerations
Many churches are not ADA compliant. Federal law does not apply for certain church areas, despite being considered “public.” Many state laws, however, apply full access provisions to common areas. If your shared workspace business is located on church property it most likely needs to be ADA compliant.
A permit for a new office buildout will require ADA compliance. Without it the new business would be in violation and you may be fined or sued. Add a knowledgeable architect to the team to help your church work through these issues.
9. Employment and Management Considerations
To offer a level of competitive business services to your members, your site will require on-site staffing. As a for-profit business, this employment relationship may be different than what you have with your church staff. Some employment decisions you make for a religious organization could be discriminatory for employees of the unrelated, public-shared, workspace business. You will need to consult your lawyer.
Management issues bring a host of questions:
- Who will train and supervise these employees?
- Is there someone on staff that is qualified to run a shared-workspace business?
- What about overseeing sales and marketing of a business that relies on sales, not donations?
- What if a customer complains or cannot get into the space to get a briefcase the night before a 6:00 AM business flight?
- Where will the “buck stops here questions” land for this new company… with the pastor, executive pastor, the church governing board or someone else?
Each of these business issues may require you to have insurance coverage that is different from a church or religious organization. Many churches are covered with policies that exclude for-profit business activities or any public sale activities that are not under the religious or ministry banner.
Your lawyer and a good insurance agent can help determine what the new risks might be and help you get good coverage. That insurance may cost you more per square foot than what you are currently buying.
Why would a church consider adding shared workspace or coworking on their property? Resolving each of the issues comes with a price. At this point, you may be thinking It is too much cost and hassle than what it’s worth. In a sense this is true, but only if you see the shared workspace or coworking as a trendy way to make extra cash to help support the ministries of your church.
What if you considered the shared workspace itself as a ministry of the church?
Done correctly, a shared workspace business can be much more than just an opportunity to turn a profit. A shared workspace business can become a sustainable foundation for Redemptive Business Ministry. The business becomes a way to train Christian business people in the why, how and what of doing business God’s way. A shared workspace business can be a gateway for the local community to interact with your church community before a Sunday morning. Work related values can be taught and influenced. Your facility can be used to incubate and mentor redemptive entrepreneurs who are part of your church.
Not every church is right for a shared workspace business. If your church can use it to grow, influence and ultimately redeem a business culture, you have something that can be both practically and financially relevant to your church and to the business people within your reach.