Hello! Who are you and what business did you start?
Hi there, I am Aditya Verma, Founder & CEO of The Office Pass (TOP) a Neighbourhood Coworking & Managed office company focussed on providing flexible office spaces to Small & Mid-sized Businesses (SMBs) in India. TOP offices are warm, friendly, ready to use & affordable.
TOP currently runs 10 Coworking & Managed offices in the New Delhi area. Over 140 SMBs are using TOP offices. The business is growing at a healthy rate of over 180% YoY. TOP will achieve a ARR of USD 1.8 Mil in the current financial year and target to reach USD 7.3 Mil over the next 24 months.
What's your backstory and how did you come up with the idea?
I did B.Tech in Electronic Engineering from Harcourt Butler Technological University (HBTU), Kanpur, India, and an MBA in Marketing from International Management Institute (IMI), Delhi, India. Post my education, I have held leadership positions in consumer internet companies in India. Before founding The Office Pass (TOP), I was the Co-founder & CEO of Makaan.com (one of India’s leading real estate websites) which was acquired by a NewsCorp investee company in 2015. This was among the very few successful exits in the Indian online real estate space.
At TOP, I drive the company's vision, strategy, and growth. I enjoy creating workspaces that have energy, soul, and momentum. Workspaces that make “working” an enjoyable experience.
In developing countries like India, people waste significant time, effort, and money just commuting to work. In large cities, this can be over 2-3 hours each day. Developing nations can ill afford this wastage. This time can be effectively utilized to grow the business and improve productivity – only if someone solves for this long office commute. TOP was conceptualized as an effective alternative to this problem.
TOP is the only company in India offering Neighbourhood Coworking which is different from conventional Coworking as it caters to a target audience nearby (< 5 km). The fundamental premise is that people love to work in a high-quality office facility close to their place of residence/business rather than commuting long distances. This makes TOP unique in its target segment, pricing, marketing, and size of offices. TOP offices are located in the CBD areas as well as near residential neighborhoods so people can reach the nearest office without having to commute long distances.
I think of The Office Pass (TOP) as a convenient store (like 7-ELEVEN) of Coworking contrary to a superstore (like Walmart) being pursued in the developed nations.
Take us through the process of designing, prototyping, and manufacturing your first product.
My initial idea was to start a managed apartment business in India. It was the logical extension of what I had done at Makaan.com. While studying this concept, I stumbled upon a company called WeWork which was doing Coworking in the US and was gaining traction. Over the next 4-5 months, I studied both the model and concluded that the Coworking business has far greater scale and margin compared to the serviced apartment business.
It is difficult to scale a business whose cost of servicing the customer is more than the customer revenue. As an entrepreneur, you need to re-look at such business models or face an uncertain future.
I also figured that unlike in the developed world where commuting to work is not a big hassle with multiple means of transport; the situation in India is very different; so, I re-hashed the developed world’s Coworking model to make it suitable for the Indian scenario. This led to coining the term Neighborhood Coworking or Work Near Home which we are successfully pursuing now. TOP was borne out of this extensive study.
TOP made a humble beginning in 2017-18 from a small 2800 SqFt office in Sohna Road, Gurgaon, India. TOP currently operates 10 Flexible offices in the New Delhi NCR area (8 offices are in Gurgaon and 1 each in Noida and Delhi). TOP could have scaled much faster at the cost of unit economics, but I did not want to build such a business.
We believe in real money and not paper money. Real money will bring paper money - not the other way round. Over the next 2 years, I plan to have 55-60 offices with a wider geographical footprint catering to over 1,000 companies.
Describe the process of launching the business.
The process of conceptualizing the business started in late 2016. Multiple business plans and models were created on an excel sheet. I took the help of a creative agency to help give a visual identity to the business – before it is presented to people. We discussed several themes, color pallets, fonts that would depict our corporate identity and give a personality to our brand. This included the company's logo, look & feel of the website, office interior layouts, specifications of the office & services that we intend to provide.
Out of the shortlisted logos, we opted for Option 5 as it was considered to be the best fit for the B2B segment.
Most of the initial money was contributed by me & the two co-founders in the business. This helped us start our first Coworking office as a minimum viable product in 2017. This allowed us to validate many hypotheses that we had before starting the business. It was important to get answers to some critical business metrics like
- what is the area per square feet (PSF) required to accommodate a member?
- what is the cost of acquiring a member?
- for how long does a member remain in a Coworking space?
- what is the price per month that members are willing to pay?
- what is the member attrition rate & why do members leave a Coworking space?
Answers to these were critical before we started to expand. It took me a good 7-8 months to figure out these answers. In some cases, I had to rework the strategy as some metrics were way off, compared to my initial business model. We made corrections and changes till the numbers improved to our satisfaction. We achieved break-even in our 1st office only after 11 months of launch. It was only after that we started to expand. Now we can achieve operational break-even in about 4-5 months.
My biggest learning from the initial phase was that, unlike popular belief, demand is less of a challenge in the Indian Coworking office business. There seems to be huge demand but the real challenge is to aggregate office supply so the product can be offered at an affordable price to Indian customers. A per-seat cost of INR 7000/- ($100) per month is an ideal price point.
Another challenge is to keep the cost under check so the business makes 20-30% RoI per office. Coworking business is more like a restaurant business where-in every restaurant needs to make money for the business to be successful.
Since launch, what has worked to attract and retain customers?
For any business to be sustainable, its cost of unit acquisition, cost of seat acquisition (COSA) in the case of TOP Coworking business, should be small compared to the lifetime value (LTV) of that acquisition. In the post-pandemic world, where there is an excessive focus to optimize cost, I worked hard to achieve this goal. See the table and graph below that highlights that improvement.
Currently TOP is achieving more site visits and can sell more seats by spending lower amounts on Digital Marketing i.e., Google & Facebook. Our cost of seat acquisition (INR) has dropped from INR 8,256 (in JAS’20) to INR 3,953 (in JFM’21). This is over 50% saving in marketing spends per acquired seat. This was achieved by implementing a 306-degree virtual tour of all our offices due to which my team can show the tour of the office virtually. Only if the customer is interested, we request him/her to come for a physical visit. This saves time, money & effort for both sides.
The lifetime value of customers has gone up from INR 72,765 to INR 102,789. This reflects positively on our quality of signups and reduced competition in the market due to COVID. Many Coworking companies in India were unable to sustain through the pandemic. With then exiting the space, TOP can realize a higher Revenue per Seat (INR per month) (see table). We could not have done it if we had not kept enough cash reserves. So, it is important to save for the rainy day and be around when the sun starts to shine again.
Company’s cost of acquisition as a % of customer LTV has been brought down from 11% (in JAS’20) to 4% (in JFM’21). It means, if a TOP customer spends just 15 days with us, we can recover his cost of acquisition. Currently, we can retain a customer for 11 months (our average), during which they pay us an amount that is 2600% more than his acquisition cost. This is truly remarkable.
How are you doing today and what does the future look like?
The business went through a roller-coaster over the past 18 months due to the Covid pandemic. Like all businesses, the pandemic has had a major negative impact on the TOP Coworking business. Just to elaborate, of the 166 companies that were using TOP Coworking spaces in Feb-20 only 45 continued posts the nationwide lockdown in India. This was an erosion of -73% customers that translates into a -62% reduction in paid seat count and a -64% reduction in revenue from the Feb-20 cohort. It was unprecedented and we did not know how to deal with the situation. This was the most challenging time for TOP and I had to take multiple steps to restore and repair.
TOP taken steps during pandemic:
Driving demand through discounting: we offered 25-30% discount to companies that sign-up with us during July-Sept 2020. This discount was gradually withdrawn when we reached 40-50% occupancy in each office.
Going aggressive on digital marketing: we re-started advertising on Google & Facebook and saw good lead inflow due to low competitive intensity during a pandemic. This helped us gain mindshare among people looking for offices.
Offline marketing in Neighbourhood areas: we have identified residential complexes in the neighborhood of each office where we did a Notice board promotion activity. The theme of the campaign is to make people move out of their homes.
Focus on teams Vs individuals: the focus for TOP shifted towards teams and not individuals. This helped us achieve a faster ramp-up. The incentive plan for our Office Managers & Telesales teams was modified to drive this change.
These steps helped us stay afloat while several businesses perished during the pandemic. Now that the pandemic is receding and the economy is back on a growth trajectory, TOP is benefiting from demand revival. Percentage occupancy which fell to 22%, during the peak of the pandemic, is back to 68%. TOP achieves breakeven at 60% occupancy – so the business is currently profitable and growing at 30-40% quarter or quarter. We have opened two new Coworking offices during the pandemic period. Over the next 2 years, I plan to have 55-60 offices with a wider geographical footprint catering to over 1,000 companies.
Through starting the business, have you learned anything particularly helpful or advantageous?
When I started the business in 2017-18, there was less realization of the power of Public Relations (PR). Like most other startups, I was spending money on Digital & Offline advertising which was good for this month or that quarter but it had a very limited long-term positive impact. It was only during the pandemic when I was under pressure to realign our marketing spending with our reduced revenues, that I thought of PR.
Marketing is easy but PR is hard to execute. It requires you to spare personal time to interact with journalists & media houses so that they become your voice. Over the past 2-3 quarters, I am spending 10% of my time interacting with media & publications to talk about TOP Coworking business. Many of these interactions have got covered in both online & offline media.
The power of PR is much stronger than advertising. It carries more credibility and people relate with PR far more than they do with advertising. It also feels - PR has more legs - the impact of a good coverage goes far beyond that month or quarter. It helps you create a lasting impact in the mind of the customers.
This has helped TOP get more serious customer inquiries and references than any time in the past. Some links are attached here:
Advice for other entrepreneurs who want to get started or are just starting out?
Every crisis brings its own set of learning and the COVID pandemic is no different. Here are my 3 key learning’s that young entrepreneurs can benefit from
Learning #1: There is no substitute to a scalable business model – Short-term momentum around an idea or concept has limited legs. Ultimately the business has to make economic sense to sustain and scale. It is difficult to scale a business whose cost of servicing the customer is more than the customer revenue. As an entrepreneur, you need to re-look at such business models or face an uncertain future.
Learning #2: Plan for the rainy day – All entrepreneurs should plan a contingency fund. This can come in handy when the going gets tough or the business is faced with uncertain times (like a pandemic). Depending on the type of industry, this fund should help the business sustain for 6-12 months of uncertainty. Without this planning, you are putting your business at high risk.
Learning #3: Genuine help always gets reciprocated – If you help someone during their hour of need, they always reciprocate the gesture. During the lockdown last year, The Office Pass (TOP) identified travel, tourism, recruitment, hospitality, and wedding planning as the most adversely impacted segments. When the lockdown was lifted, TOP offered rent-free periods ranging from 3-6 months to members from these industries so they could focus on work, without worrying about office-related expenses. TOP also promoted these members among our social circle. This gesture was reciprocated by members by way of business leads to TOP sales team. Ultimately it was a Win-Win for both sides.
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