A few weeks ago I partnered with two others and we purchased a 235 square metre space in a converted warehouse in Richmond (pictured). It is almost everything I wanted – great location, exposed brick walls, timber floorboards, high ceilings, and a combination of open space and meeting rooms. There was only one requirement which wasn’t quite met, but I’ll get back to that in a moment.

If you want to see some photos of the space (when it was still occupied by the previous tenant) you can see them at six8bromham.com. That site includes images and video of the layout we are planning. As you will see on the site, the working title for the space is Six8 Bromham, based on the address which is Suite 6, 8 Bromham Place, Richmond.

Since we purchased the property, and in the lead-up to taking possession on 1 September, we have been doing a few things. I have spent time thinking about the structure for the entities involved (which vehicle owns the property, collects fees, owns the furniture, etc). We’ve almost settled on a structure we are happy with.

We also got lucky when we found the previous tenant was looking to update all of their furniture as part of their move to a new office, so we were able to pick-up well over half of the furniture we need for a very reasonable price. Almost all of the furniture included in the gallery images at six8bromham.com is now ours.

One thing that was a big part of my initial vision was a decent games/entertainment area, and even before we finalised the purchase of all of that furniture we had bought a brand new Lord of the Rings Limited Edition pinball machine. That will be the pride and joy of our entertainment area, and will be accompanied by couches and bean bags, a 50 inch plasma, and games consoles. This will play a part in achieving my goal of creating a space that members will want to go to each day even if they don’t have much work to do, and in turn by just being there will hopefully lead to opportunities for work that they wouldn’t have found at home.

So back to the one thing that I mentioned that didn’t quite meet my plans, and that is the overall size of the space. My initial goal was a space of around 400 square metres, with room for up to 40 people on any day, whereas this space is smaller at 235 square metres. In terms of workspaces, we have a small area near the entrance for up to eight people (previously used as a reception area), plus a mezzanine level with desk spaces for about eight to ten. We also have room for a shared table on the mezzanine floor for another four or five people to work for shorter periods, or which could be used as a casual meeting space. Finally, back on the main floor, we have a boardroom with a ten-seat board table, and a smaller meeting room with a table suitable for up to eight.

Why is the size an issue? Without going into too much detail, when looking at the economics of a coworking space the two largest expenses are the cost of the premises (rent or interest) and the cost to run the space (whether measured in dollars or owner’s time). The cost of the premises is linked directly to revenue, in that if you double the size of the space you have the potential to take in twice as many members and double the revenue. However, there is less link between the administration cost and revenue because it doesn’t take, for example, twice as much time to run a space for thirty people as for fifteen.

For these reasons, smaller spaces have greater issues in creating a sustainable business model. Sure, a smaller space is lower risk so far as attracting enough members to fill the space is concerned, and the lower rent or interest means less potential for loss if your member numbers fall short of expectations. However, it means the per person admin cost is almost guaranteed to be higher (or time commitment per member), and you therefore need to charge each member more to break-even, all other things being equal.

So how have we chosen to address this?

Luckily we already have quite a few friends keen on taking a desk. We have decided that (at least initially) we will work on a model that doesn’t involve a lot of administration, so will only include members that we know well and are happy to give 24 hour access and a key, and will not have casuals or drop-ins. We will encourage members to help find new members until we reach break-even, and to keep costs low will ask that everyone help out by taking on a task or two themselves.

Does this fit the “traditional” coworking model? Possibly not, because it is invitation only and doesn’t fit with the ideal of openness that most coworking spaces strive for. Initially this troubled me, until I came to the conclusion that coworking is still a new idea in itself and is succeeding by breaking the rules on what a normal workspace looks like. So creating something which suits us and not feeling bound to follow the models that work for other people is not only acceptable, but absolutely the right thing to do for us.

What about the future? This invitation-only model is just to get us started. We are still very open to making this into something bigger. I am also playing with ideas for a private business club that will be based around our workspace (our “clubhouse”) and will involve social and educational events, an online community, collaboration on new business ventures, knowledge sharing, business idea brainstorming, critiques of each others’ businesses, networking opportunities, etc.

So this is only the start. Please don’t let any of this stop you from getting in touch with me to talk about our plans, or coworking in general. I’m passionate about what we are doing and love to talk about it, share our ideas, and learn from others. I’ve met some great people that first contacted me via this site, several of whom are now involved in the formation of new coworking spaces around Melbourne, and I continue to value the contact I have with them regarding the future of coworking in Melbourne.

Thanks for stopping by and, if you’re reading this, for making it this far through such a long post!

1. I just got back from a trip to the US. It was a social trip, but I did find time to visit Office Nomads in Seattle and spent some time talking to the two founders, Susan and Jacob. I only spent a couple of hours there, but in that short time I could see what a great space they’ve created. Susan and Jacob were extremely welcoming, and we had a great chat about their experiences running a coworking space. If we manage to get a space going down here we’ll be very happy to open the doors to any Office Nomads members that spend time in Melbourne.

2. The property that I have been watching for the last few months is even more uncertain that it was a couple of months ago. I’m told renovations have started, but the owner isn’t talking to potential tenants any more. I’m now a lot more open to alternative spaces as I have my doubts about this one.

3. I’m still looking for one or two people to take a leading role in establishing our space as I feel there is currently too much reliance on me. I have quite a bit of investor capital lined up, but I’m not willing to accept it until we have one or two more passionate people helping run the space and we can be sure that we will still have a functioning business if anything was to happen to me (although I obviously hope we’ll never have to rely on this!).

4. I’m meeting regularly with the main person behind another potential coworking location in inner-suburban Melbourne. They are looking at the north/western suburbs for their location, and you can find them here. We’re talking about ways to work together and don’t see ourselves as being in competition given we are planning to be located on opposite sides of the city and don’t imagine that too many coworkers will want to drive to the other side of the city every day (we’ll leave that to the corporate workers that don’t have a choice!).

Finally, if you’ve been silently following this blog it would be great if you could get in touch and let us know who you are. Whether you think you might like to become actively involved or are just watching us because you might want to become a member, then also please let me know so we have a good idea on the level of demand. As an incentive, I’m looking at options for substantial discounts for founding members (even if not active in helping run the space), but if we do this we will likely only offer those discounts to those who express interest well before we open given how important those early indications are in giving us the confidence to proceed.

That’s it for now!

A number of investors have now committed, and others are currently considering their position. We’re now more than half way to having the capital required to make this happen, with a decent chance of getting over the line in the next couple of weeks. I’m sure I could do it with the investors we have, but I’m taking a conservative approach and raising more capital than we probably need. I’d much rather be returning excess capital to investors in six months than asking for more.

I’ve also met with the owner of the property that we have our eyes on, and that went well. Work on developing the property has been slightly delayed, but is due to start shortly. There is three months work to do, so even if we commit and work starts next week we wouldn’t be looking at moving in until late July at the earliest.

That’s it for now. Thanks to all who have been helping spread the word. I recently put together a powerpoint presentation that is probably an easier way to give someone a quick rundown on our plans than sending them to this site, so if you or someone you know is interested (particularly in membership as we’re getting close to being okay for investors) please let me know and I’ll send you a copy.

If anything on the site doesn’t work then let me know, but please feel free to start sending links to anyone that you know that may be interested in following our progress, becoming a member or even discussing helping to fund the project.