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McKinsey Easy Profitability

WeShare

#Real Estate #Commercial Real Estate #Flexible Workspace #Shared Office Space
ProHub Comment

This is a classic profitability case in the flex workspace industry, testing the candidate's ability to diagnose why a high-revenue company with strong historical growth is unprofitable. The case requires analyzing both revenue dynamics (pricing, volume, customer mix) and cost structure (rent arbitrage, operational expenses). The pandemic context creates a compelling external factor that forces candidates to think about occupancy rates and demand volatility.

Estimated Time 16 minutes
Difficulty Easy
Source PeterK
40 / 100
Your client is a shared office space provider – WeShare. WeShare offers office spaces to freelancers, entrepreneurs, and companies in 10 major cities across the U.S. and has 25k members. The company generates $160M in sales annually but is unprofitable. They hired your team to help them break-even in 18 months.

Clarifying Information

  1. Before the pandemic the client aggressively grew, pushing its top-line (sales) by 50% every year. In 2020 though its sales decreased
  2. Most of revenue comes from renting out flex working space. The client also offers office management services (e.g. room booking system, office supply management) and office design consulting
  3. The client doesn’t plan to expand outside of the U.S.
  4. Top-5 players in this space capture 71% of the market (incl. WeWork that controls 47%). The client isn’t part of top-5
Mock Interview
Interviewer

Your client is a shared office space provider – WeShare. WeShare offers office spaces to freelancers, entrepreneurs, and companies in 10 major cities across the U.S. and has 25k members. The company generates $160M in sales annually but is unprofitable. They hired your team to help them break-even in 18 months.

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
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Practice this case with AI Mock Interview

WeShare, a shared office space provider with $160M in sales across 10 U.S. cities, is unprofitable despite aggressive pre-pandemic growth. The candidate must develop a framework to identify profitability drivers and recommend a path to break-even in 18 months, considering the competitive landscape dominated by top-5 players and post-pandemic demand shifts.

Key Insights:

  1. Rent arbitrage model: WeShare likely leases buildings at bulk rates and subleases at retail rates, making rent the largest fixed cost
  2. Occupancy rate volatility: With short-term contracts and remote work trends, occupancy rates likely declined post-pandemic, directly impacting profitability
  3. Scale paradox: $160M in revenue with unprofitability suggests either poor pricing strategy, high variable costs, or excessive overhead relative to market position
  4. Competitive pressure: Operating outside top-5 market leaders (WeWork controls 47%) indicates difficulty in achieving scale efficiencies and pricing power
  5. Multi-lever approach: Solutions likely involve revenue growth (pricing, volume, mix), cost reduction (operational efficiency, rent renegotiation), or both