What to Consider Before Teaming Up

As a result of rising facility costs, many nonprofits throughout the United States are beginning to consider shared workspace arrangements. This is of particular interest in areas where organizations are being priced out of the real estate market. Nonprofits who are looking to cut operating costs can also benefit from such a move.

Options to Choose From

The term “shared space” refers to workspaces shared by small businesses, freelancers, consultants, start-ups and others. Depending on their needs, tenants can pay for short- or long-term access to private offices, conference rooms and common areas. Office equipment and services, such as high-speed Internet; photocopiers, printers and scanners; and coffee and office supplies, are shared among the tenants.

Several options have been developed in recent years as a result of the shared space trend. For example, a nonprofit could rent space in a dedicated shared workspace facility that also might provide “back-office” services such as HR. Many of these arrangements welcome a variety of businesses, but some cater primarily to nonprofits. For example, a facility in Austin, Texas, specifically targets nonprofits, social entrepreneurs, philanthropic organizations and the businesses that support them.

Similarly, some private foundations, with more space than they require, lease out the excess to nonprofits. As tax-exempt organizations, they avoid steep property taxes and pass the savings along to their tenants in the form of reduced rent.

Additionally, a nonprofit could link up with another charity — perhaps one that serves the same population. The two organizations would rent a shared facility and split the cost in half. Unused space might also be rented out to other organizations, generating revenue to offset rent obligations. Another option: Find a for-profit business that is willing to donate space.

Potential Perks

The most obvious benefit of sharing space lies in the cost savings compared with renting or buying full office space. Why, for example, pay annual rent on space that includes a conference room that is only used for semiannual board meetings? Organizations of all sizes benefit from the efficient use of supplies and equipment, and the reduction of utilities and maintenance expenses.

In the early stages of development, flexibility is key for nonprofits. For young organizations, it is generally difficult to determine just how much space will be needed in the months and years to come. Committing to long-term leases isn’t feasible and operating out of a founder’s home comes with its challenges. Sharing space is an appealing alternative.

Additional Cost Sharing Opportunities

Workspace isn’t the only thing that can be shared with other organizations to reap impressive savings. Costs can also be cut by:

Sharing Staff. An organization may, for instance, be too small to justify a full-time IT person – there might not be the need or the budget. But perhaps together with another organization there might be sufficient need and funding for such support.

Sharing Equipment. It is possible that an organization has equipment that goes unused or is used below capacity. It might be wise to think about sharing it with another organization whose needs for such equipment complement theirs. (For example, a summer music program could share instruments with a program that operates during the school year.)

Sharing Buying Power. Lower rates, discounts and even improved service are attainable when buying power is fused with that of another nonprofit.

Not All Rainbows and Candy

Shared space does come with its challenges. Before making the move, organizations need to take multiple factors into consideration. Nonprofits should be wary of sharing space with “competitors” that serve a similar community or go after the same funding.

Also to be considered are:

  • Legal issues, including lease obligations, compliance requirements and potential liabilities
  • Culture considerations (Would the nonprofit’s culture be able to thrive in a shared arrangement? Would it clash with other tenants’ cultures?)
  • Adequacy of technology resources

Many of these issues can be assessed by making site visits, both scheduled (to get the sales pitch) and unscheduled (to get a more realistic lay of the land).

Is It Right for You?

Cutting space-related costs may provide peace of mind and pave the way to sustainability as nonprofit budgets get tighter. Is moving an operation to a shared facility a solid financial decision? Your CPA can help you decide.

 

Sidebar: Beyond the Budget: More than Splitting Expenses

Many times, financial savings are not the only benefit of space sharing. Extending reach and impact is possible when working together on projects with organizations that have similar missions. On the other hand, the ability to bounce ideas off of individuals from different disciplines and industries is also extremely valuable.

In addition to casual workday interactions, facilities that accommodate a range of businesses often offer networking opportunities and events such as happy hours, yoga classes, service projects and community lunches. Facilities that mainly or solely host nonprofits might provide workshops on topics relevant to tenants’ needs, such as proposal writing, advocacy and volunteerism.

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