Friday is the perfect day to take a bit of time out and go through your numbers for the week – and with Dance Studio Owner Mentor, Clint Salter this is the one place your finances are fun.
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Today I thought I would share with you why dance studio owners fail.
Now, I know this does not sound like a very uplifting topic. But believe me, it is, because you’re going to learn a lot of insights and lessons on why studios don’t make it through the other side, and the things that you can do to prevent and stop you from getting to that point.
I want everyone that’s listening to have thriving, successful studios so that you can impact the lives of more people in your area, but also provide you and your family with an amazing income.
I just want to give you some statistics for a minute.
- 20% of small businesses fail in their first year.
- 34% of small businesses fail in their second year.
- 50% fail in their fifth year, and
- 70% of small businesses fail in their 10th year.Isn’t that so crazy?
I’m going to dive into the mistakes I see in the studio owner world, the dance studio owner world, that really contribute to people essentially putting themselves out of business.
19% are out-competed, so competitors come into the market, and they take all of your students.
23% don’t have the right team. You know how important leadership is, and getting the right people essentially in the right seats, we call it. Getting the right people in the right seats, is so, so crucial.
29% run out of cash. There’s no money in the bank.
42%, there’s no market need for products and services. The great thing here is, generally that’s not a big thing for studio owners, because people are always going to be having babies, and people are always wanting to go to dance classes.
82% experience cash flow problems. Summer might be super challenging for you. Then you get a lot of money up front, when you start the new dance year, and you’ve got to make that stretch over a certain amount of time, and you’ve got to pay teachers, and maybe you need renovations done, and so cash flow always is problematic for studio owners.
I just wanted to give you those statistics upfront, before I share with you some of the things that I’ve seen over the last 16 years in business.
Because it is Financial Friday, I’m just talking about the finance side of things here.
The first one is their ratios are out. What I mean by that, is if you look at a general dance studio, there’s three things that you generally offer: preschool classes, recreational classes, and competitive classes.
Now, you might not have all three of those things, right? And that’s totally okay. You might run a pure recreational studio, with no competition. You might run just preschool classes. If you’ve got all three going with the competitive side of things, all great as well.
But where I see studios get into a lot of trouble is when they are really heavy on the competition side of things, and they’re not focusing on their recreational dance, and preschool programming.
The reason is because it takes a lot of time. Competitive dancers take up a lot of your time. You may have some crazy discounts in place for them like, “Take 100 classes a week, and pay us what is equivalent to like $1.50 a class.”
And you’re out at competitions, and conventions all the time.
But, time is money, right?
So that’s why tip number one is, look at your ratios. Right now, you should be able to say to me, “Okay Clint, 20% of our students fall in the competitive side of things. 40% are in our recreation, and 40% are in our preschool.”
You need to know those ratios.
Then what you need to do is look at the amount of time and energy you and your team are spending, in each of those revenue streams to see how profitable and viable these are.
Tip number two is they’re not charging enough.
Put simply, studios are not charging enough because they actually don’t know their true expenses for running their business. You need to know what your expenses are, and then you need to put in place a fee structure that really supports that. That doesn’t put you out of business, or doesn’t make you think, “Oh my goodness, how am I going to pay for my staff members this month?” You need to know your numbers, there is no way around that.
Number three, is stop discounting.
The amount of studios that I see discounting, sibling discount, early registration discount, pay up front discount, do three classes, get another discount, get 15 …
Again, you need to get back to basics, you need to sit with your budget. You need to sit with that budget template, you need to work out:
- What are my expenses across the year?
- What are my expenses then each month?
- When is my cash coming in?
- When am I taking tuition?
- When do we get income for a recital/concert?”
Then, get rid of your discounts. It might take you two years to phase out certain discounts. But you want to do it step, by step, by step.
No business can run efficiently or profitably with so many discounts in place. If the only reason people are staying with you is because of the discounts, well then you need to look at the service that you’re providing inside of your studio.
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The Dance Studio Owners Association is for studio owners who are ready to commit to building their dream studio through taking consistent action while accepting guidance and advice. It’s for new studio owners and experienced studio owners alike. No matter what stage you’re at in your business, you’ll gain valuable information to take your studio to new levels while becoming a go to studio in your area.
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