deep dive on financial metrics - cloudvo virtual offices ......virtual office subscriptions 3,868...
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12/6/19 1
Deep Dive on Financial Metrics
GWAJune 19, 2019
Copyright CloudVO 2019
Goal
• Optimize the P&L (Profit & Loss)• Identify Occupancy & Revenue metrics• Break down Lines of Business• Manage the Expense Side• Dig Deeper with Operational metrics
12/6/19 2Copyright CloudVO 2019
What a Healthy P&L looks like
• Breaks down revenue and expenses in a logical and consistent way
• Is structured to understand profit centers across various Lines of Business
• Breaks out owner’s compensation or management fee
• Easy for a potential acquirer to understand• Easy for the owner to analyze: Drives to
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Middle of the road PAC center with ~14k Sq FT, 46 Private Offices, 172 VO Clients, 6 meeting rooms, 14 coworking seats
Monthly Profit & Losses (2018 average)Monthly
$% of
Revenue Gross Income
Private Office Subscriptions 47,117 49.3% 46 private offices - Monthly Rent from Members
Virtual Office Subscriptions 23,406 24.5% 39% of which is Meeting Room Subscription Revenue
Coworking Subscriptions 2,620 2.7% 14 coworking seats only - More Amenity than revenue center
Meeting Room (Walk-in only) 4,322 4.5% Most Meeting Room Rev embedded in VO Plans & Service Packages
Service Packages 14,385 15.0% Vast majority of Private Office Members have a fixed service package
Itemized Service 1,389 1.5% Very little itemized services = no nickling & diming
Other Fees 2,401 2.5% Mostly set up & closing fees, vending machine + some variable charges
Total Income 95,640 100.0% = Gross Revenue
Case Study: PAC center with 15k RSF, 59 Private Offices, 172 VO Clients, 6 Meeting Rooms, 14 Coworking Seats
P&L of a Healthy Pac LocationBreaking Down Revenue
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P&L of a Healthy Pac LocationAnalyzing Revenue Data
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Monthly Profit & Losses (2018 average)Monthly
$% of
Revenue Gross Income
Private Office Subscriptions 47,117 49.3%Virtual Office Subscriptions 23,406 24.5%Coworking Subscriptions 2,620 2.7%Meeting Room (Walk-in only) 4,322 4.5%Service Packages 14,385 15.0%Itemized Service 1,389 1.5%Other Fees 2,401 2.5%
Total Income 95,640 100.0%
FT Rent49%
CWK 3%
VO28%
WH3%
Services17%
Breakdown of Revenue by Client Type
• Unlike FT office subscriptions, the demand for VO and for Services is counter cyclical and remains strong in down cycles
• Use your Financial System capabilities to track separate LOBs or Client Types (e.g. Dimensions in Intacct, Classes in Quickbooks, Tags in Zoho, etc.)
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Revenue & Occupancy MetricsKeys:• Be consistent over time• Understand what you did that drives changes
Example of Metrics:• FT Office occupancy %• Coworking Seat utilization
(# of coworking members / # of coworking seats)• Revenue per SF or per workstation (FT & CWK)• Meeting Room utilization (# business hours booked)
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PAC-wide OccupancyFull Time Offices Only
• Be consistent in defining occupancy• Beware industry comparisons that are not apple-to-apple
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What is a Healthy Occupancy?
Bad Ideas:– 100% occupancy with low rates?– High rates but a 50% occupancy?
Better Idea:– Optimize equation with two variables:
• Membership fee (aka rent)• Occupancy
– Understand what causes changes
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Pac-wide Revenue per *SF
• Raise prices as occupancy increase• Get more aggressive with incentives as occupancy drops
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Monthly Profit & Losses (2018 average)Monthly
$% of
Revenue Gross Income
Private Office Subscription Revenue 43,117 45.9% 46 private offices - Monthly Rent from Members
Virtual Office Revenue 26,406 28.1% 39% of which is Meeting Room Subscription Revenue
Coworking Revenue 2,620 2.8% 14 coworking seats only - More Amenity than revenue center
Meeting Room (Walk-in only) 4,322 4.6% Most Meeting Room Rev embedded in VO Plans & Service Packages
Service Packages 14,385 15.3% Vast majority of Private Office Members have a fixed service package
Itemized Service 1,089 1.2% Very little itemized services = no nickling & diming
Other Fees 2,001 2.1% Mostly set up & closing fees, vending machine + some variable charges
Total Income 93,940 100.0% = Gross Revenue
Cost of Sales (Rent & building related charges)Rent 42,968 45.7% Full Service Rent - common in Northern California
Operating Expenses 2,244 2.4% Share of Building CAM expenses
Total Cost of Sales 45,212 48.1% 40% to 50% is reasonable for Full Service, more in expensive cities
Gross Profit 48,728 51.9%
P&L of a Healthy Pac LocationRent Expense
• Rent and building related expenses is the highest expense item on the P&L• Signing a good lease is paramount to the success of the operation
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P&L of a Healthy Pac LocationOperating Expenses
Operating ExpensesBank Fees 1,727 1.8% Mostly Credit Card fees
IT 1,308 1.4% Includes: Routers, servers, laptops, support
Marketing & SalesMarketing 2,018 2.1% Includes PPC (majority), SEO, web site maintenance, referral fees
Referrals 137 0.1% e.g. Web Broker fees
Total Marketing & Sales 2,155 2.3%Meets & Center Community Events 464 0.5%Misc Office Expenses 3,309 3.5% Coffee, paper, ink cartriges, etc.
Payroll & Contract Expenses 9,962 10.4% Community Manger + Coordinator + Finance and IT support allocation
Professional Fees (CPA, Legal) 104 0.1%Rentals & Service Contracts 2,428 2.5% FF&E lease - Can be zero if purchased upfront
Property & other local Taxes 724 0.8% Property taxes & other local taxes
TelecomTelephone Line Charges 1,145 1.2%Internet Connection 1,629 1.7% 500 Meg fiber connection
Call Center Services 2,147 2.2% Outsourced phone answering or on-premise answering staff
Other telecom (Cell, Cable, etc...) 340 0.4%Total Telecom 5,260 5.5%Other 1,424 1.5% Insurance, Postage, shipping, Travel, meals
Total Operating Expenses 28,865 30.2%
% of Rev$ monthly
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P&L of a Healthy Pac LocationPutting It All Together
Total Gross Income 95,640 100.0% = Gross Revenue
Total Cost of Sales (Rent & Blding charges) 45,212 47.3% 40% to 50% is reasonable for Full Service, more in expensive cities
Gross Profit 50,428 52.7%
Total Operating Expenses 28,865 30.2%
Total Net Operating Income 21,563 23.4% ~EBITDA
Non-Operating Expenses (income)Management Fees or Owner Comp'tion 6,100 6.4% Owner compensation > replacement wage, if owner is also manager
Depreciation & Amortization 2,485 2.6%Interest Expense (Income) 49 0.1%
Total Non Operating Expense (Income) 8,634 9.0%
Net Income 12,929 13.5% Reported Net Income
By moving Management Fee, “Excess” owner compensation, capital charges and non-cash charges below the operating line, the P&L is “buyer-friendly”
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A Can-do-better P&LA 9 KRSF Coworking Place PAC acquired in 2017 (was losing money then) and on pace to recovery in 2018
Monthly Profit & Losses (2018 average)Monthly
$% of
Revenue Gross Income
Private Office Subscriptions 42,904 73.3% 26 private offices - Monthly Rent from Members
Virtual Office Subscriptions 3,868 6.6% New in 2018
Coworking Subscriptions 8,766 15.0% 62 coworking seats
Meeting Room (Walk-in only) 2,223 3.8%Service Packages 16 0.0% Training + resistance to change issues
Itemized Service 63 0.1%Other Fees 721 1.2% Mostly set up & closing fees, vending machine + some variable charges
Total Gross Income 58,561 100.0% = Gross Revenue
Cost of Sales (Rent & building related charges)Rent 15,661 26.7% Full Service Rent
Operating Expenses 8,984 15.3% Share of Building CAM expenses
Total Cost of Sales (Rent & Blding charges) 24,645 42.1% 40% to 50% is reasonable for Full Service, more in expensive cities
Gross Profit 33,916 57.9%
A Coworking Location P&L
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Operating ExpensesBank Fees 1,664 2.8% Mostly Credit Card fees - High
IT 878 1.5% Includes: Routers, servers, laptops, support
Marketing & SalesMarketing 1,596 2.7% Includes PPC (majority), SEO, web site maintenance, referral fees
Referrals 8 0.0% e.g. Web Broker fees
Total Marketing & Sales 1,604 2.7%Meets & Center Community Events 1,007 1.7% Higher in this evennt-rich community
Misc Office Expenses 2,890 4.9% Coffee, paper, ink cartriges, etc.
Payroll & Contract Expenses 12,198 20.8% HIGH - Community Manger + Coordinator + Finance/IT support allocation
Professional Fees (CPA, Legal) 100 0.2%Rentals & Service Contracts 1,016 1.7% FF&E lease - Can be zero if purchased upfront
Property & other local Taxes 428 0.7% Property taxes & other local taxes
TelecomTelephone Line Charges 159 0.3%Internet Connection 1,068 1.8% 500 Meg fiber connection
Call Center Services 80 0.1% Outsourced phone answering or on-premise answering staff
Other telecom (Cell, Cable, etc...) 64 0.1%Total Telecom 1,371 2.3%Other 434 0.7% Insurance, Postage, shipping, Travel, meals
Total Operating Expenses 23,590 40.3%
Total Net Operating Income 10,326 17.6% ~ Adjusted EBITDA
A Coworking Location P&L
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A Coworking Location P&LPutting It All Together
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Monthly Profit & Losses (2018 average)Monthly
$% of
Revenue Total Gross Income 58,561 100.0% = Gross Revenue
Total Cost of Sales (Rent & Blding charges) 24,645 42.1% 40% to 50% is reasonable for Full Service, more in expensive cities
Gross Profit 33,916 57.9%
Total Operating Expenses 23,590 40.3%
Total Net Operating Income 10,326 17.6% ~ Adjusted EBITDA
Non-Operating Expenses (income)Management Fees or Owner Comp'tion 4,700 8.0% Owner compensation > replacement wage, if owner is also manager
Depreciation & Amortization 833 1.4%Interest Expense (Income) 0 0.0%
Total Non Operating Expense (Income) 5,533 9.4%
Net Income 4,793 8.2% Reported Net Income
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Digging Deeper
• What are the key performance indicators?• Benchmark yourself against others• Benchmark against yourself• Identify best practices
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Service Packages For Full Time Office Members
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Breakdown Service Packages –Pac-wide
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Kickstarter 27%
Standard47%
Full Support15%
Itemized 11%
Breakdown of Service RevenueTotal Portfolio - January 2019
$149/user
$249/user
$349/user
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Service Revenue (Package + Itemized) per Rented Office
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1.2
1.0
0.70.6
1.0
1.7
1.0 1.1
1.3 1.3 1.31.4 1.5
1.2
$373
$257
$194 $186 $188
$359
$329 $341 $359
$386 $416
$388 $398
$324
$-
$50
$100
$150
$200
$250
$300
$350
$400
$450
0.0
0.5
1.0
1.5
2.0
2.5
Oakland
San M
ateo
GreenhavenWatt
Reno
Sacramento
Bakersfield
San Jo
se
Walnut Creek
Palo Alto
Pleasant Hill
San Fr
ancisco
Cupertino
Pac-wide
# of
Ser
vice
pac
kage
s
Service Revenue (Package + Itemized) Revenue per Rented Office -January 2019
# of Packages per Office Service Revenue per Rented Office
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Virtual Offices Break Down by Location
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12/6/19 COMPANY CONFIDENTIAL - Do Not Copy21
Active VO Plans By Type San Mateo
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Staff Resources Needed to Support the PAC VO Business (per plan)
Average time spent on each category during the course of a month was converted into $$ assuming a fully loaded payroll cost of $30/hour
Bev, $0.02
Billing, $1.52
Copier, $0.05
Customer Support, $2.42
IT, $0.14
Mail, $1.55
Marketing, $0.14
Member Relation, $0.50
Onboarding, $0.28 Phone, $0.14
Staff Support Cost of VO PlansTotal $6.75 per Plan per month
How Profitable is the VO Business?
23
Pacific Workplaces
% of Center Footprint
% of Total Revenue
VO & Meeting Room Services 6.5% 30%
- Overall a 70% Margin- Phone Answering 69% Margin- Mail Services: 86% Margin- Meeting Room bundles: 65%*
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* Phone Answering Cost based on outsourced cost from CloudAnswering and Meeting room cost based on the opportunity cost of converting a day office into a permanent office and revenue from a 20-credit bundle – support staff cost also allocated based on time spent
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Coworking Seats Capacity
0.8
2.3
0.0
0.5
1.0
1.5
2.0
2.5
Members Per Seat Members Per Seat
Excluding FT Including FT
# of Member Access Rights Per Day Per Seat(62 seats total)
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Coworking 3-Day Passes Utilization
Unused Days56%
1 Day Pass23%
2 Day Passes14%
3 Day Passes7%
Monthly Use of Day Passes by 3-Day Pass Subscribers (20 plans, 60 Days eligible)
33.7
13.6
8.34.4
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Unused Days 1 Day Pass 2 Day Passes 3 Day Passes
60 Eligible Days
# D
ay
pa
sse
s u
sed
pe
r m
on
th
3-Day Passes Average Monthly UsageSanta Cruz - July 2018-March 2019 (20 Passes monthly average)
• 56% of Eligible Day Passes are not used on any given month• Only 7% of Subscribers use their 3-days on any month• 14% of Subscribers use 2 of their 3 days• 23% use only 1 dayPrice accordingly!
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Metrics For Coworking Events
2129
20.511
131010
3332
2711.5
183
70
0 10 20 30 40 50 60 70 80
Bitcoin and crypto currencyHappy Hour - F irst Friday Art
Happy Hour (general)Javascript
Lunch and Learn - Public SpeakingMonterey Bay StartUp
Monterey Bay StartUp: Creating the Perfect Pitch workshopsNextTalk
Oreo Cookie DayPi Day
PyLadiesSponosored Happy Hours
WebdevelopersWomen in Tech Panel Discussion
Attendance Per EventSanta Cruz - March 2019 - 18 events
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member35%
outside host, Michael Neeley
6%outside houst- CSUMB12%
staff41%
staff and outside host (SBDC)
6%
Who Runs The EventsSanta Cruz - March 2019 : 18 Events
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Metrics For Coworking Events
Inward16044%
Outward20256%
Inward VS Outward EventsTotal Attendance - March 2019
On average:- 16-18 events per month- 361 attendees per month- $762 monthly budget or $2.1 per participant- 9.5 hours of preparation by Community Manager/coordinatorIt’s how we build strong communities!
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What Have We Done With That?
• Converted some open coworking spaces into more profitable Private Offices
• Converted Window Private offices to open coworking, as an amenity
• Increased VO prices and then back-tracked• Better understood price elasticity of our various Lines
Of Businesses• Identified best practices and opportunities for training• Presented ourselves more credibly to investors/buyers
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Thank You