Tracking and measuring is often pegged as a low rung priority among many business owners no matter the industry. However, within the serviced office industry, we stand only to gain from investing time in regularly evaluating key performance indicators for our business centers. Here, I’ll outline three such indicators that will uncover meaningful insights into your business: average revenue per square foot, average expense per square foot, and attrition.
Average Revenue per Square Foot
You ought to know the dollar amount of each service you provide and total revenue generated by each. But, understanding the square footage dedicated to each dollar earned, will help you understand which spaces are more lucrative than others. This knowledge can inform decisions about space conversion to the more lucrative use or price increases for the less lucrative use. Consider the following example.
Meeting Room A and Office A are both 100 sq. ft. Meeting Room A is used on average 40 hours per month at $25/hour. This average is taken based on a year of usage. Office A is under a 12-month license agreement for a single user at $700/month. At first glance, it might seem that the long-term commitment from the single user in Office A would bring in more dollars. Yet, if we look at the revenue per square foot over a year, we see that Meeting Room A is generating $120/sq. ft. and Office A is generating $84/sq. ft. Now, there are other factors to consider before converting Office A to a meeting room, but the difference in revenue generated per square foot is enough to start the conversation.
If you are both the property owner and business center owner, revenue per square foot is also an interesting metric on a larger scale. Compare the revenue generated by your business center to your other tenants. Does the rent they pay outweigh the rent and revenue generated by your serviced office company? Would other tenant’s square footage be more lucrative if converted to more meeting rooms and offices for your center? All very good questions to consider when evaluating the overall performance of your property.
Average Expense per Square Foot
Every business has its expenses, and tracking them helps avoid waste and improve profits. Good commercial real estate property managers will track expenses per square foot diligently and use this information to inform each new budget decision. Those of us in the workspace services industry should adopt this practice but with a more nuanced approach. Commercial real estate property managers track expenses related to maintenance, utilities, and building services (internet, janitorial, security, etc.). These are all great categories to track for business centers as well along with industry-specific costs. For example, internet bandwidth per long-term office user and costs associated with meeting room maintenance, scheduling, and set-up should also be factored in to expense per square foot calculations. Once you’ve fully accounted for all of the big picture and more nuanced expenses, you will be better equipped for your budget decision making.
Customer Attrition is one of those things every business wants to avoid but will inevitably face. The best way to limit customer attrition is to track it and solve the problems that cause it. In an earlier post, we talked about how to effectively onboard customers onto your center’s services. We should have just as much attention to recording when customers leave our center. We should record any feedback they’ve given about why they are leaving. We should also note the length of their stay, date of departure, and revenue generated over the course of their stay. This will help you better forecast attrition and take steps to avoid it in the future.
You can use your accounting software to gather the numerical data needed to track these aspects. The more you know about your business, the better you can manage and duplicate success! Office Suite Strategies specializes in testing and measuring these metrics and others as we manage serviced office centers throughout the country. If you’re looking for a partner that can help your stay on top of your business center’s key performance indicators, please contact us.