If You Want to Sell Your Studio, What Will Buyers Ask You?
By: Emma Bell
Over the years, I have bought a couple of businesses and I recently even looked into buying a national franchise and negotiated for close to a month before I decided not to buy.
But it wasn’t until last year, when I decided to sell my dance studio, that I realized how many questions get fired at you when you’re in the selling seat. Even though I had been a buyer and had asked a bunch of questions, when the tables were reversed I was sometimes rather taken aback by what was asked!
In a nutshell, I started a preschool dance school and built it to a couple of locations, had a solid, loyal student base and after nearly 2 years decided I needed to sell it for a range of reasons, primarily because I had competing opportunities and limited time. Luckily, I had approached my dance studio from the outset in a very organized and systemized fashion.
Questions Potential Buyers Asked Me:
Venues – are the venues locked in place and secured for the next 6-12 months? What are the rentals and where’s the paperwork outlining the agreement that the set days and times are secured for this dance studio?
Teachers – Have you told your teachers that you’re selling? If yes, how did they react? If not, why and when will you? Have your teachers asked you if they can buy the studio? Why don’t they want to buy it?
My note on this – I decided to tell my teachers as soon as I’d made the decision to sell and I offered them the business. They weren’t in a position to buy it so after they were made aware but declined I looked further afield. I waited a few days to see if the teachers changed their minds and then I approached other dance schools and dance teachers to see if they might like to buy the business.
Students – How many students are there? What is the life cycle of a student? What profit is made per class per student less costs? What is the gross and net profit per year per student?
Financials – What is the detailed P/L? Is this studio profitable? Is this studio in the red? What’s the largest cost/s? What are the fixed costs and variable costs? Does this business have any outstanding debts/liabilities?
Parents and Students – Do they know you’re selling? Have you told them? How have they responded? If you haven’t told them when are you planning to?
Other Dance Schools – What other dance schools are offering similar classes? What price are they charging per term for similar classes?
Money seems to be the focus
Interestingly, I noticed that most of the questions related to money – profit, turnover, price per student, profit per student and all the financials. People also wanted to know about the staff and whether they would stay on. The teachers in my business were a critical piece of the puzzle since I myself wasn’t teaching in the studio; in some studios this might not be so important.
What I found amazing was that no one was really that interested in the brand, the goodwill, the dance programs I’d created or the social media following. The main value they saw in the business was in the monetary side of things, student numbers and staff retention.
What the selling experience taught me was that unless your business systems are tight and your financials are solid it will be very hard to sell a business based on reputation, name or quality programs alone although these are really important to the success of the studio and therefore the profitability, so they are important.
I have attributed this to the fact that a lot of dance teachers who acquire other dance schools will make the assumption, rightly or wrongly, that they already have their own programs, reputation and branding therefore they don’t need to worry about yours as they will just bring the acquisition under their already existing umbrella.
At the end of the day, selling a dance studio is the same as selling any business and a buyer, like a property buyer, wants to know that what they are buying has value and profit.
Ensuring that your business systems, financials and all fees are paid is going to be key when and if you need to sell your dance studio.
Emma Franklin Bell is an entrepreneur, author and mentor. In 2014, she sold 2 small businesses in the children’s entertainment space, wrote and published a book and mentors dance teachers on the strategic direction of their business. She is based in Australia.
The book ‘How to Run a Preschool Dance Studio’ The 7 Step System to Create, Grow and Expand Your Preschool Classes can be bought at www.howtorunapreschooldancestudio.com or the paperback version can be bought at http://www.amazon.com/How-Run-Preschool-Dance-Studio/dp/0646934872