Deep Dive on Financial Metrics - CloudVO Virtual Offices ......Virtual Office Subscriptions 3,868...

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

action12/6/19 3Copyright CloudVO 2019

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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


P&L of a Healthy Pac LocationAnalyzing Revenue Data

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$% of


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.)


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)

• ...12/6/19 6Copyright CloudVO 2019

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PAC-wide OccupancyFull Time Offices Only

• Be consistent in defining occupancy• Beware industry comparisons that are not apple-to-apple


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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$% of


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



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”


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


$% of


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



A Coworking Location P&L


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 Net Operating Income 10,326 17.6% ~ Adjusted EBITDA

A Coworking Location P&L


A Coworking Location P&LPutting It All Together

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$% of

Revenue Total Gross Income 58,561 100.0% = Gross Revenue




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


Digging Deeper

• What are the key performance indicators?• Benchmark yourself against others• Benchmark against yourself• Identify best practices


Service Packages For Full Time Office Members

12/6/19 COMPANY CONFIDENTIAL - Do Not Copy 17

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


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


12/6/19 COMPANY CONFIDENTIAL - Do Not Copy21

Active VO Plans By Type San Mateo


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%*


* 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)


25

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


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


Thank You

[email protected]

Deep Dive on Financial Metrics - CloudVO Virtual Offices ......Virtual Office Subscriptions 3,868...

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