Keith Warner, with Pacific Workplaces (Pac), often mentions that his Cupertino, CA location supports 400 Virtual Office Plans that collectively generated enough revenue to pay the (high) rent for his entire 18,000 square foot flexible office location. This comment attracted a lot of attention and questions from coworking operators who asked how they could also build a healthy virtual office business.



Step 1: Set up a Mail Service Business
A mail plan is the first step for a client to set up a business identity at your location. This means they can use your coworking location address to receive mail, use it on their web site and other marketing collateral.
The motivations can be multifold. Many people working from home do not want to use a home address as their main business address. Some businesses located remotely may want to show geographical coverage of multiple locations. For example, this may be in response to the requirements of cities and counties to work with contractors that have a local presence.
In this case, the minimum you need to do is to receive their mail and store it in a location they can retrieve. Some operators store mail in a file cabinet and rely on the front desk person for the mail client to retrieve their mail during business hours. Others may use mailboxes, which may or may not be available to clients outside of business hours.
What’s good about a new VO mail business is that it happens incrementally – say a couple to a handful of new clients every month, and can be supported without additional resources than those necessary to run the coworking operation. In fact, with the proper organization, a location can support over 100 VO mail clients without additional staff than is necessary to support most standard coworking operations.
You can also list your mail plan on a web site like CloudVO.com and leverage its marketing capabilities without investing a penny in any digital VO advertising. This is a great way to get started. There is no cost to list, only a 25% discount provided on the plans purchased by CloudVO.
Mail service is your first and easiest step to be in the VO business.
Step 2: Provide Phone Answering Services
While a mail plan is the first necessary step for your clients to establish a local business identity, adding a local phone number and live phone answering to that plan helps them project a much stronger image, particularly when it is a remote company that needs to show it operates in your local market.
Does this mean you need to plan for additional staffing resources answering the phone from the front desk? No. It is not best practice to answer your clients’ incoming phone calls from the front desk. In fact, doing so can lead to poor customer service. For example, if a member comes to you with a question while you are on the phone in an involved conversation, who do you put on hold, the person on the phone or your member in the lobby? Either way, the quality of service provided to one will make the other suffer, as one of the two will have to wait. The best practice is for the front desk person to focus on member management, operations, and perhaps providing tours, not answering calls.
If you don’t have the scale to build your own answering center (and most operators don’t), there is an easier, more cost-effective solution to that quandary: outsource your phone answering to the CloudAnswering services of CloudVO. It’s easy, does not involve upfront costs, and provides very good margins.
In this case, your VO member is provided a local phone number of any area code they choose, CloudVO does the installation of the number, sets up their voicemail and call patching, configures your member’s email or text notification of messages and even automatic voice-to-text transcription, if they choose. All of this is done off-site and you are just billed per user (much less than hiring, training and managing your own answering staff).
Step 3: Add Meeting Room Hours
While the opportunity cost of idle meeting rooms can be expensive, the unavailability or difficulty of booking can be equally detrimental. Members must have the ability to book a meeting room easily online, and preferably have a variety of choices to meet their needs.
The ease and availability of booking will impact (positively or negatively) your ability to sell and retain virtual office members even more than private office and coworking members, but those other member types are also a big consideration in the type and number of meeting rooms one provides. Any member that can’t get the room they want, when they want it, just a couple of times in a row, will start to look for alternative space (and probably not even mention to you why they are leaving).
A minimum of 2 meeting rooms and 1 day office is recommended, but keep in mind, any vacant private office should be made available as a temporary day office.
It’s important to constantly monitor the usage to determine whether you need to add additional meeting rooms. Pacific Workplaces has found that once a room is accommodating 100 hours or more of reservations, it starts to feel “full.” In other words, at 100+ hours per month per room, the members will start to have trouble easily booking times they need and you’ll start to get complaints. If you have 3 meeting rooms and you are consistently booking 350 hours per month, it’s time to start looking for a full-time office you can pull out of inventory and convert to your next meeting room.
Eliminating a full-time office and the consistent revenue associated with it may seem unwise at first, but Pac has found that each meeting room typically provides 125-300% of the revenue that same room would generate if it were left as a private office. In fact, each added meeting room can easily support an additional 20-25 VO members (at $200-350 each).
While large boardrooms are nice to accommodate meetings of 14-18 people, you’ll probably find over time there aren’t very many meetings of that size, so that huge beautiful room is mostly wasted. Pac has found most demand to be in the 4-6 seat range, and 30-40% to just be for 1-on-1 meetings.
But keep in mind, if your plans include a number of HOURS in any room, your members will gladly book the 18 seat boardroom for their 1-on-1 meetings – this is why some shared workspaces have switched to a CREDIT system. Workspaces using credits, like Pac, include a number of meeting room credits in their plans, and then assign a number of credits per hour to each room. Day offices are always 1 credit per hour, but members are “charged” 2 or 3, sometimes up to 5 credits per hour for the larger rooms. This new system assigns a proper value to each room and provides incentive for members to book appropriately sized rooms, thus leaving the larger rooms for those that actually need them (and are willing to spend the necessary credits).
Step 4: Market your plans locally and beyond
Include virtual office solutions in all your marketing efforts. It’s even more important than marketing private offices – you’re going to fill up the offices, but you’ll never run out of VO capacity!
Of utmost importance is the optimization of your website for virtual office and VO related terms. Some examples include developing even small paragraphs around these terms:
Virtual office, virtual office space, what is a virtual office, what are virtual office services, how virtual office works, how to setup virtual office, virtual office address, business address, virtual mailbox, digital mailbox. For more impact, you can also add the city to these keywords, such as virtual office in [city], [city] virtual office space, [city] business address, etc.
The ability to sell virtual offices on your website is a must. Have a reputable e-commerce web developer set you up or talk to Yardi KUBE, a shared workspace solution provider and member of the Global Workspace Association. They have a proven online sales module that will work with any website.
Systematically educate all prospects on your virtual office offerings. Whether they email you asking questions, or stop in for a tour, make sure everyone you communicate with knows what a virtual office plan is and why they might need one (down the road if not today).
Sign up with a reputable channel partner such as CloudVO. CloudVO does the national marketing you probably won’t do, and has relationships with enterprise companies looking for touchdown space in multiple cities.
Step 5: Manage your VO business effectively
At first the incremental resources necessary to support a VO business are very small. Having less than 50 mail plans to support does not necessitate more staff. Remember that most users don’t get mail everyday. Some VO clients almost never get mail, but will use only your local address and perhaps a local phone number on their website.
Only when you get over 75 VO clients will you need to give serious thoughts about optimizing your VO operation. By then, you should be generating more than $10k of incremental revenue per month.
Pacific Workplaces averages around 150 VO plans per location, at an average of $140 per month of revenue per plan. That’s more than $20k of total VO revenue per month. The Cupertino location supports over 400 VO plans, enough to pay for the (very expensive) rent of this 18,000 square foot coworking space!
Pacific Workplaces has made the effort to capture the staff time associated with supporting VO clients for a full month, such as answering emails from VO prospects or clients, walking them through options, on-boarding new members, helping them set up their phone system if the plan included phone services, handling their mail after they move in, helping them book a room occasionally, preparing and sending their invoice, chatting with them on any topic when they come by, as well as allocating time spent on general center maintenance tasks to all members (e.g. kitchen duties), etc. That comprehensive effort captured the time spent by the staff, literally second by second, for a full month and re-allocated it to each category of clients and individual plans.
We then converted that data into dollars, considering the fully loaded payroll cost for the time spent supporting VO clients, factoring the opportunity cost of meeting room usage when the VO plan included free hours of meeting rooms, the cost of answering calls (outsourced to CloudVO), the opportunity cost of a mail room that could be converted into office space, and more.
The results are pretty amazing: on average, it costs less than $7 per plan of staff time to support a Mail Plan! The VO business is Pacific Workplaces most profitable line of business!
These numbers may seem low, but they are real. Our perspective is often biased by the occasional heavy user, or that guy that likes to hang around and chat with the staff while picking up his mail. But you have to remind yourself that this guy is an out layer, and the burden he represents is more than offset by the many silent VO clients you never see, you rarely hear from, and for whom you receive mail very rarely.






These slides were part of the Deep Dive on Financial Metrics webinar. For more details, go here.
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