Making Makerspaces: Creating a Business Model

This is the second in a series of posts called Making Makerspaces, a distillation of the information gathered for a series of How to Make a Makerspace workshops produced by Artisan’s Asylum and MAKE. These posts will appear on a more-or-less weekly basis, and will focus on mission-critical topics related to founding and running creative manufacturing spaces. The first post in the series, discussing how to acquire insurance for makerspaces, can be found here.

Creating a Makerspace Business Model

Today, we’ll be discussing common types of expenses and income that makerspaces around the world experience on a regular basis in order to help you create a business model for a space of your own. In the process of identifying these expenses and income, we’ll review examples from several well-established spaces across the U.S. for reference. Please don’t consider this an exhaustive list of either income or expenses; expenses vary wildly based on location and circumstances, and spaces have found a huge number of ways to make money.

A couple of quick notes before we get started. First of all, you probably want to keep a spreadsheet open as you read through this primer so that you can take notes and write down example figures. Secondly, this is intended to help you create a steady-state model of income versus expenses to help you make sure your plan will be sustainable; this doesn’t cover startup costs, which will be explained in a post that’s soon to come. Lastly, please regard all your projected numbers from this exercise with a big grain of salt; you need to confirm your actual expenses before starting down the path of creating a sustainable business.

All that said, let’s jump in!

Characterizing Your Space

1. Type of Space

Before we jump into the numbers, you need to know what kind of space you want to put together, and how big you want it to be. Are you looking to share a garage with your friends? Establish a small, close-knit community of makers with a couple of shared tools? Create a sustainable, staffed business with a diverse income? Create a community center or hardware incubator for your entire institution or city? It doesn’t matter if your space i

sn’t all that you want it to be right now; for the purposes of projections, you need to know where you’d like it to end up. This question will affect the rest of your decision making, so spend some time thinking about it. Some of the most common types of makerspaces that I’ve seen are:

• Small, teaching-only space (500 to 3,000 square feet) with a small number of instructors (1-10 people) that is sustainable by requiring relatively little infrastructure or full-time staff
• Small, volunteer-run community (10-80 active members) that occasionally teach classes, share some amount of tools and space, and pay rent on a 1,000 to 8,000 square foot space with relatively low membership fees
• Shared plots in a large building (4,000 to 25,000+ square feet) where many individuals and small businesses band together to rent a large warehouse space at low per-square-foot cost, sometimes sharing equipment informally, with a generally unpaid small group (1-3 people) nominally in charge
• Large (8,000 to 40,000+ square feet) community workshop usually featuring educational programs, membership access to shared tools/workspace, and sometimes featuring storage or studio rental space
• Very large (40,000 to 150,000+ square feet) community development facility intended to rent large spaces to startup businesses that each need 200-1,000+ sqft, usually featuring a mentorship network, paid staff, and sometimes featuring shared tools/workspace

2. Size of Space

How big is your space? How big do you want it to be eventually? What kinds of uses do you want out of your space? Classrooms, workshops, storage, and rental studios all take up significant amounts of space. In broad terms, we’ve found by informal survey that spaces need to be at least 8,000 square feet (in an area with low rental rates) or larger to support continuously paid, full-time staff (with exceptions for spaces that run exclusively off of grants and/or classes, and don’t offer much in the way of shared equipment or common workspace). We’ve seen successful spaces that are smaller than 8,000 square feet, but they usually run on a volunteer basis or are supported by an outside entity. A couple of examples of spaces with staff include:

• Artisan’s Asylum at 40,000 square feet, supporting 3-5 full-time staff and 40+ part-time instructors
• MakerWorks at 30,000 square feet, supporting 2 full-time staff and 8 part-time staff
• TechShop at 15,000 square feet on average, supporting 5-15 full-time staff per location
• sprout at 2,000 square feet, supporting 3 full-time staff and 5-10 part timers exclusively through grants and classes

3. Space Distribution

How is your space divided up between workshops, classrooms, offices, rental areas, and the like? You don’t have to know for sure, but we have some basic suggestions for how large things turn out to be based on experience and architectural recommendation. Read through the following list and note whatever seems most appropriate right now – based on income and expenses you’ll identify later. You’ll probably choose to come back and adjust these proportions. Most of the population density figures you see below come from The Engineering Toolbox, a handy reference for architects and engineers.

• Fire Lanes. Start your layout estimations by taking 25-35% of your floor area and devote it to to-code fire lanes. This is dead space that you cannot use, and must keep clear in order to pass fire and building code inspections. Your percentage will vary based on your architecture.
• Welcoming Area. Front desks, sign-in kiosks, and the like generally take 50-250 square feet, if you need them.
• Social/Food Area. Your members need to gather somewhere to eat and socialize – if you don’t provide them one, they’ll carve out their own space. Think about how many people you want gathered at any one time, and realize that seated people need a minimum of 15-40 square feet per person.
• Dedicated Classroom/Conference Rooms. Spaces all over the world have found that quiet, noise-isolated classroom areas are invaluable if you’re offering educational programs. Consider including one in your floorplan, and consider that you’d probably need 20-50 square feet per seated person.
• Workshops. Do you want to dedicate space to tools? If so, you need to allow for enough space for people to work safely. I’ve found a good minimum size for workshop space of any one craft type is 300-500 square feet, and you need approximately 75-150 square feet per person working independently in a space. Different craft types usually need separate areas (especially woodworking, fabric arts, and welding), so don’t expect to multi-task too much in these spaces. Many groups have had success using the Grizzly Workshop Planner to lay out their space.
• Rental Studios. One of the big keys to the success of Artisan’s Asylum is in offering a large number of private rental studios. Our hometown is a very crowded city with relatively dense real estate, and our members valued studio space above all else. We’ve found that 50 square feet is the minimum size of a studio, and offer up to 250 square feet.
• Storage Space. Members need some way to store their projects, especially if they don’t have a studio of their own. Make sure to include some space for shelving (8-12 square feet per shelf unit) if you can. Artisan’s Asylum also offers rental space in the form of areas dedicated to pallet-based storage; one pallet takes up 13 square feet.
• Gallery/Display Area. Do you want to display member work, or advertise your services? Keep in mind how much space that might take up.
• Retail Area. Are you selling material, goods, or services? You’ll need to be able to store whatever you’re selling, and provide for a sales terminal.

Identifying Expenses

Before we get into potential income, let’s figure out how much money it takes to actually run your space. Working on expenses first will put you in a mindset of determining what the bare minimum level of participation in your space must be for you to be sustainable – if the required numbers look unattainable to you and your community, it’s time to think about changes to your business model (or ways to start your business that don’t cost as much as your steady-state plan – such as renting a small tenant-at-will space first, and growing into a bigger space once you have a dedicated following). Open up a spreadsheet if you haven’t already, and let’s get started.

1. Rent

To date, our single biggest expense at Artisan’s Asylum is rent. It used to be more than 75 percent of our monthly expenses when we were in a 9,000 square foot location; with paid staff and large utility bills, it’s now hovering around 25-30 percent of total expenses. Pay attention to how much your rent is, as that will drive the rest of your business plan. A word of caution, though – don’t skimp on your building choice in order to pay a lower rent. Fixing broken buildings costs much, much more, over time, than renting good ones, to the point of shutting down makerspaces that don’t acknowledge this fact. Redoing the roof of an industrial space (which usually happens once every 10-20 years) can cost upwards of $5-10 per square foot; installing a sprinkler system because the fire marshal caught you woodworking without sprinklers and threatened you with closure costs $10-15 per square foot; and repairing or replacing a broken or ineffective air conditioner with a new industrial-grade air conditioner can easily run $5,000 to $15,000 – just to name a few common building-scale maintenance expenses. If you know what your building’s rent will be, record it now.

If you don’t have a building chosen yet, think about where you’re located and see if you can estimate what you might pay. Keep in mind that the larger you are, the less you pay per floor area, and the closer you are to a city center, the more you pay. Here’s a sample of commercial rents we know of in the 5,000 to 25,000 square foot range; come up with an estimate for yourself and record it in your spreadsheet.

• Detroit, MI and parts of Oakland, CA are $0.25-1/sq. ft/year for almost any quality of industrial property outside of the city limits
• Philadelphia and Pittsburgh, PA vary between $2-8/sq. ft/year depending on distance from city limits and building condition
• Somerville, MA is $8-14/sq. ft/year for 20-30 year old industrial property located in a heavily populated (77,000 people/4 square miles) small town adjacent to a large city
• Cambridge and Boston, MA are now charging $35-65/sq. ft/year in their extremely centralized “Innovation District” areas, including Kendall Square and the waterfront.

You read those points right – two equally-sized makerspaces, one in Detroit and one in Boston, might have a difference in rent as high as 260,000 percent.  Your entire business plan will likely be driven by this expense, so make your choice wisely.

2. Building Maintenance / Property Tax

Unless you have a very invested and very forgiving landlord (or set of state commercial tenancy laws, as the case may be), most large commercial spaces operate under a triple-net (NNN) lease. This means that, unlike in residential leases, tenants are solely responsible for paying for property tax, insurance, and maintenance on the building envelope (i.e., repairing the roof if it leaks, repairing and painting walls, servicing HVAC, maintaining plumbing fixtures, and so on), and the landlord receives rent as a net sum on top of those costs. When it comes to paying for maintenance, this usually manifests itself in one of three different ways: a) your landlord expects you to repair and maintain your own building to code with licensed professionals, b) your landlord repairs your building for you and sends you the bill (which can catch businesses by surprise if they were expecting free repairs), or c) your landlord bills you on a month-to-month basis and repairs your building envelope for you as part of that regular cost. As far as property tax is concerned, your landlord may bill you for it monthly (or yearly), or they may simply leave it up to you to coordinate with your city.

At Artisan’s Asylum, our landlord charges us a very significant NNN rate of $2.50-3/sq. ft/year in common area maintenance, with around $1.20/sq. ft/year of that being property tax. Investigate whether your landlord charges this fee on top of rent, and what your responsibilities might be. Even if you’re not charged a recurring fee, you should assume that the actual cost of maintaining your building is at least $1-2/sq. ft/year and keep that amount in a separate bank account; if you don’t assume that or have a backup plan, you’ll likely be very surprised by the size of the repair bill when something breaks. As I mentioned before, repairing or replacing a single industrial air conditioner can cost upwards of $5,000 to $15,000 in one shot – don’t get caught off-guard. Record an estimate of building maintenance and property tax in your spreadsheet now.

3. Utilities

Are you used to an electricity bill for your apartment or house in the $50 to $250 per month range? Imagine an electricity bill in the $5,000 to $7,500 per month range. Heating, cooling, and powering large commercial facilities doesn’t scale nicely with size. Use this list of example utility bills to generate an appropriately conservative monthly estimate for your utilities, keeping the rates of your local area in mind.

• Electricity. We’ve seen our rates vary between $0.10-$0.20/sq. ft/month in various locations, and we’re charged $0.15/kWhr in our area
• Natural Gas. We’ve seen rates as high as $0.15/sq. ft/month at the peak of a Boston winter, in a relatively uninsulated facility
• Trash. Maintaining trash pickup for us was always $100-$300, no matter what system we worked out
• Internet. Just providing commercial grade service is easily $75-$150/month, to say nothing of maintaining a website or any internet-based services you use.
• Other Utilities. You may experience other utility costs; common ones include fees for recycling, hazmat disposal, and the like.

Take a moment to record expected utility costs on your spreadsheet.

4. Salaries

Artisan’s Asylum ran as an all-volunteer organization for a year at a size of 9,000 square feet. At the end of the year, all of our volunteers were dead tired, and our programs were starting to fall apart. Classes weren’t being advertised or developed on-time, membership payments weren’t being collected as effectively as they needed to be, and nobody could work on their personal projects because they were constantly developing the space. We decided, in the end, that we needed to be of a size and of a business model that allowed us to operate sustainably with multiple staff members whose entire job was to keep the space running smoothly, keep classes organized, and keep the tools repaired. One of the real costs of your makerspace is your sanity; if you (or your friends/volunteers/coworkers) don’t have the ability to take a break because you’re all barely keeping the space running in your free time, the business will suffer.

I will say that the decision to switch to staff was directly related to our expenses, however; we had to pay more than 10X as much in rent as i3Detroit for a similarly sized space, which after four years still runs as an 8,000 square foot volunteer-run organization with membership dues that equal expenses, that occasionally runs classes for fun (and not because they’re absolutely necessary to the business plan). Simply put, our scramble to make enough money every month to meet expenses was tiring us to the point of collapse

What style of business are you interested in becoming? Here are some example roles that you might hire for in your organization, or may fill with volunteers. Note that one person may take on many roles in parallel, if needed. Assign them a monthly salary (whether full or part-time) as you see fit for your mission. We’ve listed these roles in the rough order in which we’ve hired for them at Artisan’s Asylum, plus a few types of makerspace–related jobs we’ve heard of but don’t have. Your mission and mileage will vary!

• Financial Controller: Head bookkeeper and accountant for the business. We hired someone for this position before we hired anyone else, because income, expenses, and filing taxes is such an existence-threatening big deal that we needed to pay someone for this immediately.
• CEO/Executive Director: Primary point of contact and main organizer for the early life of the organization, head manager for the later life of the organization.
• Facilities Manager: Responsible for repair and maintenance of shop spaces and tools. You need someone like this sooner rather than later; managers and organizers don’t have the time to be elbows-deep in broken machines for long periods.
• Member Services: Answers phone calls, emails, and any in-person complaints, and makes sure the business runs smoothly.
• Development: Seek grants and partnerships with other organizations. A good development lead pays for themselves several times over, especially in a nonprofit setting.
• Programs: Develops classes and programs as a source of income.
• Marketing: Markets the business and its programs to the public.
• Full-Time Trainer: Trains and tests new members on equipment.

You may have ideas for other personnel; take a moment to record their salaries on your spreadsheet. One quick note, though – teachers and trainers may fall under the category of contractors, as opposed to staff. We’ll deal with that soon. Before we leave this section, though, take 10-15 percent of your total salary payment, and add that much to your expenses in the form of payroll tax.

5. Health Insurance & Benefits

Some states require employers to pay for health insurance, others don’t. The Asylum pays for health insurance for its employees. While we may not pay the best salaries, we want to make sure that our employees have the ability to see a doctor whenever they need to. We’ve managed to find health insurance for $500/person/month; we’ve seen quotes from $350 to $1,500/person/month. We also include membership and some rental space as a benefit to employees, which “costs” us between $150 and $300 a month in income we would’ve otherwise earned. It may not make sense you to record this cost as an expense, but for your own clarity we suggest you record both the expense of the benefit and the income of your staff as members (to a total sum of 0) for the purposes of planning. Take a moment to record the cost of benefits on your spreadsheet.

6. Tool Maintenance / Consumables

It costs a lot of money to keep a shop going. Blades get dull, belts break, welders run out of gas, you name it. After three years of tuning, the Asylum is getting to the point where its monthly maintenance budget is on the order of $500 to $1,000/month, and the shop consumables budget is anywhere from $1,300 to $1,700/month for a heavily-utilized 8,000 square feet of $300,000 worth of shop equipment. Given our example, come up with a scaled maintenance budget appropriate for the size of your space and the number of tools you have. Bear in mind that some spaces require their members to pay for some or all of this; those spaces often require members to bring their own consumables, or purchase them from the space itself. Record a figure you think is appropriate in your spreadsheet.

7. Contractors

Artisan’s Asylum employs 35-45 part-time instructors a month to teach our classes. These instructors usually work between 2 and 10 hours a week on their classes, with relatively little oversight from us. As a result, we consider these instructors contractors, pay them hourly, and don’t provide them with a salary or benefits. We’ve paid our instructors 50 percent of class proceeds since we started the space (and 60 percent in our first year). This strategy has proven to be an effective method of getting a lot of interest in teaching at the Asylum, getting our instructors to market their own classes for us, and helping instructors ‘bridge the gap’ between working a full time job and working for themselves in a sustainable way. Other spaces and related businesses in our area pay their instructors fixed rates that vary between $20 and $75 an hour, depending on the class.

The other major contractor payment we make on a regular basis goes towards a certified public accountant. Every year, we hire someone to do our taxes for us. Trust me when I say it’s not worth doing your own, given what can happen if you do them incorrectly (especially for a non-profit, which can lose its 501(c)3 certification for incorrect filings). When we made $100,000 a year at 9,000 square feet, it cost us around $2,500 a year for a full tax preparation. Since then, we’ve grown to the point where we’re required to have a financial review every year (and soon a mandatory audit); our review cost $7,000 a year, and we expect the recurring cost of an audit to be much higher. When we were consulting with attorneys on a regular basis during our incorporation and 501(c)3 filing, we spent on the order of $2,000 to $3,000 in a year for legal services.

This may be hard to estimate now (and you may want to come back to this after you take a look at income), but record an estimate for how much you might pay contractors.

8. Insurance

In order to operate as a legal business in the United States, and fulfill the terms of your commercial lease, you’re required to carry insurance. This is one of the most significant barriers to founding new spaces that we’ve come across, and as such I’ve gone ahead and written an entire primer on familiarizing yourself with and finding insurance for makerspaces. If you haven’t had a chance to read it yet, take a moment to read it now. Example prices for insurance, based on our experience, are as follows:

• General Liability & Property. This is largely dependent on the size of your building, the amount of property you control, and how you insure it, but we’ve found a typical rate to be $.0.20-$0.40/sq. ft/year.
• Umbrella Policy. This is generally linked to how much you paid for general liability & property, and is typically between 15-25 percent of the price of general liability & property insurance.
• Worker’s Compensation. This is linked to how much you pay your staff and what kind of work they do; it typically costs between .61 percent of total yearly salary for clerical and administrative work and 3.17 percent of total yearly salary for trade or vocational instruction.
• Miscellaneous Insurance. We carry a variety of other of insurance, including directors and officers insurance, non-owned auto insurance, and a number of other types. This typically costs us around 10-20 percent of our total insurance bill.

This is absolutely not an exhaustive list of what insurance might be required of you. Please check your lease and applicable state laws to see if you must carry any other significant types of insurance. Note that you may need to pay your insurance in one lump sum upfront, but it’s easiest to project for now if you consider it a recurring, monthly expense.

9. Charges & Fees

Assume all of your income comes from online transactions or credit card transactions – unless you have trained front door staff, accountant-certified cash handling procedures, and a cash safe, you probably don’t want to be accepting cash. As a result, take 3-5 percent of your total income (once you’re done filling it out) and record it as a fee you have to pay banks, payment gateways, and credit card companies.

10. Other Expenses

Unfortunately, the list of expenses we have so far are just a sample of the total expenses paid on a monthly basis to run a space like this. Luckily, we’ve covered the biggest hitters – you can generally expect that you won’t have to pay 10-25 percent more than what we’ve already covered, unless you have a fairly unique business model. Here are some example expenses you might consider putting a monthly number down for:

• Advertising and marketing (graphical design work, print materials, etc.)
• Supplies for classes
• Volunteer food/beer/etc.
• Cost of any goods or services you sell
• Discounts off of memberships or classes (record these as an expense, so you know how much you’re spending on them)
• Office supplies
• Telephone/cell phone plans
• Subscription websites (like SurveyMonkey)

11. Total Expenses

Total your expenses. Does that number look intimidating to you? Good – it should. It takes around $80,000 per month to run Artisan’s Asylum right now, and we’re understaffed for what we’re trying to do at 40,000 square feet. It’s expensive to run these kinds of spaces (even the small ones!), and if you don’t know that from the very beginning you’re in for a rude awakening. Take your expenses seriously, and have a very good plan for how to address them. You don’t have to do everything from the get-go. The Asylum didn’t pay anyone until the start of our second year, for instance – but have a plan in place for how you’re going to grow into a sustainable business that will outlast its overly-enthusiastic founders.

Identifying Income

Let’s switch gears and start talking about making money. Now that you have a rough idea of your expenses, use it to guide your decisions about how you make money. Are you going to teach classes? Offer memberships? Rent studio space? Run regular donation drives? Each of these sources of income have benefits and drawbacks, so consider your blend of income carefully.

When making predictions about your income, consider creating three different estimates; a pessimistic estimate where you barely break even, an educated guess as to what you expect will happen, and an optimistic ‘maximum capacity’ number if everything goes swimmingly. This should help inform you when you start running your business in earnest.

1. Memberships

One of the most common sources of income for makerspaces are memberships. Some makerspaces have a single membership rate, some have sliding scales that vary with your ability to pay, and others like Artisan’s Asylum have different membership levels for different levels of access to the space (based on which hours and days of the week you’re interested in). Some makerspaces consider membership a service they offer to the community – they don’t charge for it, and instead devote themselves to raise money through grants for their running expenses. Brainstorm types of memberships, and come up with rough numbers for how many people your space could support using our guidance. Typical membership rates vary anywhere from $40 per month for a ‘starving hacker’ membership at Noisebridge, to $175 per month at TechShop. Keep your demographic and what it has the ability to pay in mind when setting rates; Artisan’s Asylum‘s home city of Somerville, MA has a per-capita income of $36,500, a median household income of $61,700 a year, and we charge $150 a month for our most popular 24/7 access membership.

When considering the number of people that might be interested in maintaining a membership at your space, consider example density data from spaces across the U.S.:

• Artisan’s Asylum has a very low membership density because of all of our rental studios. Our membership numbers have held steady between 120-180 sq. ft/person throughout our history.
• All-volunteer MakeIt Labs has grown its membership in a 6,000 square foot space over 2-3 years with very little private space, and is now at 60-100 sq. ft/person.
• TechShop has almost no private studio space, an incredibly effective marketing campaign, significant new-member discounts, very good positioning of its locations, and very high end tools. The density of their locations tend to vary between 20-40 sq. ft/person after 5+ years of operation.

Come up with an estimate of how many members your space could sustain, and write down a couple of example income numbers.

2. Rentals

Artisan’s Asylum has grown to the extent that it has by offering more than 50 percent of its floor area as rental studio or storage space for projects. The real estate market in our area is relatively expensive (median home sales are around $450,000), and as a result one of the primary things our members look for is additional personal space. This is a mixed bag; on the one hand, you get steady income that doesn’t vary with the seasons and people’s ability to spare personal time. On the other hand, the income from a studio space is lower than an equivalent floor area of shop space or teaching space for one person.

If you’ve listed studio space or storage space as space you’re interested in offering, use our examples to come up with possible incomes for those spaces (but keep in mind that our ‘rent’ is fairly high, and tracks the commercial property value of the nearby area for small studios):

• 50, 100, 200, 250 sqft studios: $2/sq. ft/month
• Pallet Storage (13sqft): $30/month
• Shelf Storage (2’x2’x2’ shelf space, stackable 4 high on a 2’x2’ floorplan): $10/month

You may want to factor in some amount of vacancy into your total number due to turnover. Write down a couple of example income numbers from rent, if you’re planning on offering any.

3. Classes

Classes provided more than 60-75 percent of the income for Artisan’s Asylum in its early stages, and are a fundamental part of almost all makerspaces I’ve ever seen. Classes train new people in your way of using tools. They provide an easy gateway into the space for those who don’t have projects but want to get involved somehow.  They offer local craftspeople a new way to use their craft to make a sustainable income as instructors, and they raise the skill level of your community dramatically over time. Classes now represent 25-35 percent of the income of the Asylum, but that’s income that is used to pay for our staff on top of infrastructural expenses like rent and utilities.

We charge $10 to $30/student-hour for our classes, and they have an extremely high fill rate at those prices. We have sometimes been accused of ‘undercutting the market’ for craft classes, and most nearby ‘traditional’ craft spaces charge higher prices than we do. Once again, bear in mind that Somerville has a per-capita income of $36,500, and a median household income of $61,700 a year, when considering these rates.

Classes are generally 2-3 hours per session, and most of our classes are 4 sessions long (though some engineering, design, and project-based classes are now 6-8 sessions long, and most of our individual tool training and testing classes are simple one-shot sessions). Also note that the Asylum generally fills each of its independent craft areas with classes roughly 50 percent of peak hours; in other words, we have welding classes 2-3 nights of the week and on one weekend day, machining classes on 2-3 nights of the week, and so on. We’ve found that our members are unhappy with shop availability if classes run any longer than that amount of time. As a final note, bear in mind that tool training loses its efficiency quickly when you have too many students per teacher; we tend to keep classes between 3 and 8 students per instructor, unless the skill is easy to pick up or distribute (like soldering, programming, CAD or other lecture-ready applications).

Figure out how many teachers you have available, how often they’re willing to teach, what workshop availabilities might be like, how many people you can teach in a given class (given the workshop constraints from before and the number of people one teacher can teach) and come up with a rough sense of how much classtime you could provide in each of your craft spaces per month. Keep in mind these sample floor-area price densities from classes taught at Artisan’s Asylum at maximum, 50 percent peak hour capacity, to get a sense for what’s popular and what people are willing to pay in our neck of the woods:

• Woodworking: $10-$25/sq. ft/month, mostly due to the space requirements of moving large raw material around
• Machining: $15-$30/sq. ft/month, due to small space requirements. but relatively low demand
• Welding: $40-$60/sq. ft/month, due to the fact that welding is incredibly popular in our community
• Quiet Classroom: $35-$55/sq. ft/month, due to the sheer variety of classes that can be taught
• Electronics: $20-$35/sq. ft/month, due to significant demand and modest space requirements
• Jewelry and Glassworking: $40-$55/sq. ft/month, due to high demand and small space requirements

Your mileage will vary significantly from ours, depending significantly on your demographics, available instructors, and community interests. When coming up with income numbers for classes, don’t forget to charge for materials fees – in some classes, materials can be incredibly expensive. Make some educated guesses as to what your shops and instructors could support, and write up some income possibilities.

4. Grants and Donations

Artisan’s Asylum has found that donations can help aid general income in the early stages of makerspace development, and can help acquire specific tools and infrastructural projects in later stages of development. If donations are going to be a part of your business plan, estimate how many events you might have and how well they’re attended using our suggestions and average that amount out over a year to come up with monthly income. We’ve found that we can reliably bring in $25-$40/person at large-scale, once-or-twice-a-year fundraising events, and in the case of fundraising drives for specific items can hit averages as high as $100-$200/person.

The number of people participating in these events is directly related to the size of your social network, the scale of the event, and the urgency of your cause. For our grand-opening fundraising events, we would have 200-300 people attend when our available immediate network was between 1,500 and 2,000 people. Our recent fundraising drives for non-emergency infrastructural improvement had 50 people participate, out of a membership community of 300. Your mileage will vary significantly from ours, but try to estimate what you might see as income from donations. I would strongly suggest that you consider a pessimistic case of donation income being close to $0 for any given period, to make sure that your business model is self-sustaining on earned income.

I’ll mention that several spaces (including sprout and The Crucible) run many of their programs by writing and receiving grants as non-profit 501(c)3 organizations. Unfortunately, I don’t have much experience in funding programs through such grants, and can’t comment on strategies you might find helpful or how much you might acquire.

5. Other Income

Makerspaces have extremely varied sources of income past the standard membership, rentals, classes and donations. Take a look at some of these examples, and see if you can think of other ways you might make money (though bear in mind that all of them require additional staff time and expense to implement):

• Several spaces sell raw materials and kits from Sparkfun and Adafruit at a markup (Special note for non-profits: this can get very hairy to explain to the IRS, as you likely need to both charge sales tax and pay sales tax on the goods sold for any retail sales)
• Several spaces offer vending services (for food and drinks) to their members
• TechShop offers design, engineering, and fabrication consultation for a fee
• Columbus Idea Foundry takes commissions from the community at large and pays members to develop responses to those commissions
• Artisan’s Asylum offers flexible studio space without walls, and charges by the day and by the square foot to use it for time-sensitive projects
• EatART generates most of its income from monthly parties in the space, and rental of its large-scale works of art

Feel free to brainstorm potential new types of income, but bear in mind that if you think up something totally novel, it will likely take much more energy and money to implement than you think. Come up with an estimate of how much income you could make from such endeavors, and record it.

6. Total Income

Total your income into a pessimistic (i.e., break-even) projection, a best-educated-guess projection, and a maximum-possible projection. If there’s a wide range between those numbers, you’re probably in a good place. If there’s a very narrow band between your break-even projection and your maximum projection, you’re in trouble.

Income vs. Expense

Compare your income versus your expense. Do you come out ahead at the end of a month? If you’re like most spaces around the country, the gap should be pretty tight. That’s OK! It means you’re being realistic, all things considered. Most industries around the globe have a net income margin after taxes that’s between 5-20 percent. If you’re consistently in the black, you’re doing extremely well.

Make sure you have the ability to put money into your bank account to build up a buffer. It’s not enough to simply break even; that will put your space at risk of closing if you have one bill too many. A good rule of thumb is to build up at least 3 months worth of total operating expenses (note: this includes all of your operating expenses, and not just rent and utilities!) in the bank at all times, to make sure you can survive if a worst case scenario occurs.

That’s it for now, folks. Let me know what issues are most pressing to you in the comments and I’ll work on integrating them into the series as we progress.