When Bette Winslow decided to sell her eponymous dance studio in 2005, she refused to compromise on one thing: The space had to remain a dance school. Not a rental space. Not a piece of real estate. “I just decided that’s what it needed to be and to keep it that way,” she says.
The now 90-year-old dance instructor opened the Bette Winslow Dance Studio in 1986 on a stretch of pastureland in Taos, NM. But when it came time for her to retire, finding the right person to take over was no easy matter. Winslow’s daughters, Prisca Winslow Bradley, an accomplished dancer in her own right, and Liz Winslow Fruits, who taught at the school for 16 years, had moved on from the business, which still had some debts.
After a year of trying to sell the studio herself, Winslow hired a realtor, a former New York attorney who had recently moved to the area. He was able to find several buyers ready to pay cash, but they had non-dance plans for the property. “I don’t think he quite heard me,” Winslow says, “because he immediately found a buyer, and the buyer assured me that it was not going to be a dance studio.”
It’s no wonder that Winslow had a difficult time parting with her life’s work. Buying or selling a studio is not your average real estate transaction. A studio is a personal place, often reflecting the vision of its owner, a philosophy for teaching students and years of sweat equity, says Suzanne Blake Gerety, co-founder of DanceStudioOwner.com. “It is an emotional business,” she says. “That’s the bottom line.”
But that doesn’t mean dance studio owners can ignore the actual bottom line. “The passion that we all feel for the profession is outside of what the value is,” says Elsa Posey, RDE, director of the National Registry of Dance Educators. Veterans of the dance business agree: When it comes to buying and selling a dance studio, you have to be realistic.
Do Your Research
The advantage of buying an existing business is that, in many ways, the tough work is done. “If it’s already successful, and the community’s going there, they must be doing something right,” Gerety says. But experts recommend researching the location of the school and its reputation in the community before making an offer. “The biggest problem people create for themselves is that they move too fast and they don’t think through the details,” Posey says.
Also, buyers would do well to research the demographics of the neighborhood: Are there a lot of young families or schools in the area? Drive by the studio at different times to scope out the traffic and parking. Ask residents where they would study dance, and check the studio’s reputation with the local Chamber of Commerce or other dancers in the region.
Take an Inventory
Kate Johnson, a dancer since age 3, is in the process of buying a studio from a couple in New York State. (We’ve changed her name to protect confidentiality of the pending sale.) “One of my goals was always to own my own dance studio,” she says. That opportunity fell in her lap when she was laid off from her job, and a friend told her she knew someone who planned to sell his dance school after having run the business for 18 years. “When we figured out we had the same philosophy, then we decided we would go forward and look at the business aspect,” she says.
The first step is to draw up a non-disclosure agreement—a contract that says neither party can reveal details of the business transaction—which an attorney or accountant can put together.
Buyers should examine three years’ worth of financial data, including records of profits and losses; tax documents indicating how the business is set up; and insurance documentation. This can be a time-consuming process, if Johnson’s experience is any indication. “He knew how to run the studio, so he didn’t have to keep detailed books,” she says of the former owner. That left Johnson to figure out where the revenue was coming from: classes, rental income, the dancewear shop?
She turned the studio’s tax statements over to her accountant, who was able to explain in layman’s terms what the top three business expenses were. After many phone conversations and face-to-face meetings with the owner, she and her accountant pieced together a picture of the studio’s finances.
Next, both parties should get appraisals of what the business is worth, starting with the building itself. (Air conditioning, windows and showers are all marketable features.) Then, take a look at the other assets: the floors, ballet barres, sound system and office equipment. One seller’s list was so comprehensive it included the lobby chairs and an old barbecue in the storage room.
“Many studio owners think they have a gold mine,” says longtime teacher Helene Scheff, National Dance Education Organization. “In order to sell it, they need to take a look at it as if they were a buyer.”
Sellers should measure their annual income realistically, Scheff says, and be prepared to defend the numbers. Posey suggests thinking of your school as a florist or a dry cleaner—a business with less emotional weight. Even if you think your business is worth a million dollars, unless you can find a buyer willing to pay that price, she says, it’s not.
Value the Business
Evaluating a studio’s intangible assets is a trickier calculation. But putting a price tag on artistic direction and customer service can be done, and an accountant can help, Gerety says.
Buyers should be aware of how much of the studio’s profits are a result of the current owner. Take a look at what business systems she already has in place: Is the registration process automated? Does the school have a marketing plan?
Tiffany Adoranti admits that she rushed into purchasing the Caledonia Studio of Dance, located near Toronto, Canada. “I don’t know if this is a good or a bad thing, but I said ‘Yes!’ really quickly without even looking into much,” she says. Adoranti, who had taught classes at the studio for about six months, took over the business from its founder in June 2008.
Adoranti agreed to pay 20 percent of the studio’s average revenue over the last three years on top of a lump sum for the inventory. That percentage was intended to cover the added value of the studio’s 11-year history, its status in the community and a roster of 300 students. Adoranti also opted to keep the Caledonia name, since the business had already invested in outdoor signage and merchandise.
For sellers, the question of whether to let a buyer use your name is one you should prepare for in advance. If you plan to retire, you may want to have a trusted new owner keep the name alive. If so, craft a licensing agreement or other legal documentation to protect your rights. “It’s not something you just shake hands over,” Posey says. However, if you plan to leave the community altogether, you may want to take your name with you. “You shake the person’s hand, you sign the papers, and you go,” Scheff says.
Plan for the Transition
In Ohio, one dance studio owner is planning to move out of state to be closer to her family. (She asked not to be named because she has not yet announced the move.) “I’ve been so committed to my studio, and the mission of the studio, that it has been difficult,” she says. She is holding out for a buyer who shares her philosophy of teaching: a focus on anatomy and technique. It’s a concern that many sellers face. A good way to begin this discussion, suggests Gerety, is to ask a prospective buyer, “What are you going to be excited about doing five years from now?”
Meanwhile, the Ohio teacher has spent the last year disentangling herself from the studio: Patrons now see her two or three times a week as opposed to every day, and she has worked to make sure her teachers know how to run the show without her.
A slow transition can help new owners retain current students, both reassuring them and getting them excited about the change in ownership. At Caledonia, it made a difference that Adoranti began filling in as a substitute before the sale. The former owner sent an announcement to parents praising Adoranti’s vision for the business. At Johnson’s new studio, one of the former owners will stay on as artistic director.
It’s important for buyers to remember that the purchase price includes three items: the space, the equipment and a list of names. You don’t own the students, Posey cautions. For sellers, it’s about letting go. “If you are able to say, ‘I’ve done my job for 25 years, I’ve built something that I’m very proud of and now it’s time for somebody else, and I’m not going to look over his or her shoulder,’ then it’s easy,” Scheff says.
In December 2007, Winslow signed a contract to sell her studio. Although she eventually lowered her asking price, she held firm on one key point: Her studio is still a dance school. “I think he finally got it through his head that I wasn’t willing to sell it any other way,” she says of her realtor, who bought her a six-month gift certificate to a local café when the deal closed.
The Bette Winslow Dance Studio has transformed into the Taos Academy of Dance Arts—headed up by the legendary flamenco dancer Teo Morca—and dancers are still taking classes within its stucco walls. For Winslow, the important thing for studio owners to remember is to decide from the beginning what you want. “Unless there’s some reason for making a compromise, don’t,” she says. DT
Is a Franchise Right for You?
In 2003, Heather Hardesty planned to open a dance studio. That is, until her boss asked her to take over the Kinderdance International franchise where she taught in Austin, Texas. Hardesty now oversees half a dozen Kinderdance locations and employs 11 teachers. “Unless somebody gave me the keys to their studio free and clear, I wouldn’t do a studio,” she says.
Franchises make it easy for dance teachers to open their own businesses. Compared to independent studios, they require relatively little experience or financial investment to start up and they consume less overhead on the whole. For a one-time fee, plus a monthly royalty, franchisees gain access to tested educational methods, marketing tips, ongoing training and, hopefully, a built-in following. Franchisees can also buy insurance, dancewear and other studio essentials at a discount. “By purchasing a franchise, you’re in business for yourself but not by yourself,” says Bernard Friedman, the co-founder of Kinderdance.
On the other hand, if would-be studio owners plan to develop their own brands, write their own lesson plans, or “if you want to go be creative and do it your way, then a franchise is not for you,” says Suzanne Blake Gerety of DanceStudioOwner.com.
Franchisees typically sign on for 5- or 10-year or longer contracts. And they must be highly organized, especially in the Kinderdance system, where classes are spread out between childcare centers and public schools. Of the 100 Kinderdance franchisees across the U.S. and five other countries, about 80 percent are happy with the arrangement, and others are looking for buyouts, according to Friedman.
For many Kinderdance owners, who are overwhelmingly women, the business is an opportunity for a second career or a part-time job, and they appreciate a work schedule that allows for family life, Friedman says. The franchisees who get into trouble are the ones who do things their own way. “Usually when they don’t follow the rules, they don’t do well,” Friedman says. —LKC
Let’s Make a Deal
When it comes to buying or selling a dance studio, the way the transaction unfolds depends on what each party wants. With the tips below, buyers and sellers can negotiate a price, a closing date and a deal that will benefit both sides.
A range of formulas exists to determine the fair market value of a business, including ones that rely on investment returns, cash flow, the balance sheet or specific intangible assets, according to the U.S. Small Business Administration. When setting a price:
• Consider how fast the business is growing, as well as more general economic conditions.
• Find out the sale price of similar studios in the area.
• Determine what you can afford.
• Remember that the asking price is simply the starting point of the negotiation.
In addition to agreeing on a price, buyers and sellers may want to discuss conditions that will help make the transition smoother. Before you start negotiating:
• Learn why the studio owner wants to sell her business or, conversely, why the buyer is interested. Whether it’s for personal or financial reasons, the motive for the sale can affect who has more control over the talks.
• Make a list of the major points of the proposed deal, separating out the must-haves from the terms open for compromise, and stick to them.
• Be prepared to strike a deal. Be prepared to walk away.
If a seller is looking to make a hasty exit, the sale may close quickly—and on terms more favorable to the buyer. For those studio owners looking for something specific in a buyer, the process may take more time.
Other Tips for Success
Buyers should steer clear of any studio owner who is unwilling to divulge financial records, and sellers should be prepared to share that information.
• Put everything in writing, even if you’re friendly with the buyer or seller.
• Don’t rely on a professional hired by the other party. Find your own accountant, attorney or real estate broker.
• Don’t be shy. Ask the tough questions before you commit.
Leigh Kamping-Carder is a New York–based journalist who writes about visual culture, the arts, real estate and other topics.