Over the past few months, COVID-19 has well and truly manifested itself, not only as a global health crisis, but as a financial one too, causing an economic shock that’s being likened to the crash of 2008-9.
In small business, there were always going to be casualties.
It’s a challenging enough time for business owners who were tracking well before coronavirus came a-calling. For those that weren’t, well, in some cases it’s been a death sentence.
Jodie Imam, who is also general manager at SBE Australia and a Startmate mentor, founded co-working space Depo8 in 2012 along with her husband Erz.
Long story short, towards the end of last year, the pair decided to exit the space and sell the business.
In December last year, they had a contract for sale lined up, Imam tells SmartCompany.
But, discrepancies regarding the rental agreement for the space dragged the process out, she explains. And in February, the deal collapsed.
Of course, it was soon after that that the realities of COVID-19 started to become clear, and the founders were forced to close the doors on Depo8 for good.
“It just happened so quickly,” Imam recalls.
One tenant was an ASX-listed business with five desks in the co-working space, she says. Suddenly “they were just going to be one person”.
Another was a business providing software for franchisees, particularly in the retail space, which was suffering even before the pandemic.
One minute that founder was negotiating discounts with his own customers, and making inquiries about discounted rent in the workspace, she explains.
The next day, he said he wouldn’t be able to stay on at all.
Other tenants were just very progressive in their approach to social distancing, and didn’t want to come into the office from quite an early stage — something Imam understands.
“Being startups and digitally advanced, they’re all well-equipped to work remotely,” she notes.
Like so many others, the business very suddenly found itself with a much-reduced revenue stream.
“Literally within a week we had lost the majority of our members,” Imam says.
There were a few people still around, she recalls, who rented one desk each and were happy to continue coming in.
“But we can’t keep the place open for two people,” Imam explains.
It was never in the business’ nature to lock people into a contract, or ask them to commit to returning after the pandemic passed. The owners even waived the space’s 30-day notice period for tenants.
“That’s not why we started co-working,” she explains.
“We started it because we believe in flexible work.”
And, from the offset, Imam didn’t have a whole lot of optimism about the COVID-19 situation. The couple never believed this would be a shut-down that would last a few weeks.
“This is going to go on and on,” she says.
“We knew that we wouldn’t come through this.”
“We were already defeated”
From the outside, it looks like the decline of Depo8 was remarkably swift. One minute, the founders were about to close on a sale and exit successfully. The next, they were closing the doors for good.
But, from the inside, it all happened a little more slowly. The warning signs regarding the sale were there from as early as late December.
By the time COVID-19 hit, “we were already pretty low”, she says.
“The initial shock and anger really came throughout the Christmas period,” she explains.
“The emotional dip started a bit before the reality kicked in,” she adds.
“That’s probably why we were just ready … to make that hard decision quickly. We were already defeated.”
Of course, this isn’t what any founder wants for their business. Ultimately, Depo8 didn’t grow into the vision that the Imams had harboured for it over eight years of hard work.
On the other hand, it’s almost a comfort that the final nail in the coffin for the business was something absolutely beyond the founders’ control.
“Had it not been for this pandemic, we would have felt like absolute failures,” Imam says.
“In a way, it helps emotionally that everyone is fucked.”
She also says she’s been inspired by the business and startup communities, and by others who have shared their own stories at times when they’re not exactly ‘crushing it’.
The co-founders have been pretty open about their experience, sharing their story on LinkedIn and in a Medium post.
“That’s part of the healing,” Imam says.
“If you name it, that helps with the process.”
Now, looking back on the whole experience, Imam says she’s learnt a few valuable lessons.
“You can’t sell something that’s not yours,” she says.
“We felt that we’d built this business, and we had. We had three strong buyers for the business … but we didn’t own the building,” she explains.
“It was always conditional on the lease — a lease we didn’t have control over,”
This is probably all part and parcel with running a co-working space, Imam notes. But, now they’ve been burned, it’s something she will always take note of.
“In the future, that will always be a major factor.”
The future of co-working
While most of Australia is still in ‘social distancing’ mode, all over the world whole cities have gone into full lock down. There’s certainly fewer people than ever making frequent trips to the office.
For an industry like co-working, which had previously been booming, the coronavirus outbreak is going to have a lasting effect, Imam predicts.
“I cannot imagine us going back to life exactly as it was,” she says.
We still don’t know how long restrictions will be in place, she notes. And when restrictions are lifted, she doesn’t imagine people will be rushing back into crowded cities.
“My gut feeling on it is that people will want flexibility,” she says.
“We always thought that when we started Depo8, that people want flexibility and want to work close to home, and in different spaces,” she explains.
“I feel that people are not going to want to rush straight back into the CBD hustle-bustle; to get on a packed train and go in nine-to-five.
“They will prefer to work closer to home, closer to their community. And there might be an opportunity, especially as rents come down, for more local, smaller co-working spaces to thrive.”
In the shorter term, however, she can see that things are going to be tricky in this space.
Personally, she notes that if Depo8 had been in a better place in the first place, the founders may not have been so quick to pull the plug. Ultimately, she believes that would have been a mistake.
“We would have been pouring over handfuls of money over to an empty warehouse,” she says.
Some Aussie spaces will be able to take advantage of government subsidies and support, she says. Others are government-backed, and so have a bit more flexibility.
“But, for some that have just done big grow-outs and big fit-outs, I can see it’s going to be difficult,” she says.
“The whole thing will have to be reinvented.”