Selling a Private Music Studio

Kathleen Bowman said: Dec 30, 2011
Kathleen Bowman
Suzuki Association Member
Cello
Saratoga Springs, NY
5 posts

Dear Fellow Teachers,

Does anyone have any experience in selling a private Suzuki studio? I am relocating and have a small, but strong base of families in my program. It seems that having a program with twenty plus students would be very desirable for a young teacher looking to start teaching.

If you or someone you know has experience in this, how did you go about pricing your program to sell it?

Thank you for any thoughts you might have.

Sincerely,
KNB

Barb said: Dec 30, 2011
Barb Ennis
Suzuki Association Member
Cello
678 posts

Hello Kathleen,

Sorry I can’t answer your question, but I am curious where you will be relocating to.

Barb

Barb
Music Teachers Helper—for individual teachers
Studio Helper—for entire music studios or schools

Merietta Oviatt said: Dec 31, 2011
Merietta Oviatt
Suzuki Association Member
Violin, Suzuki in the Schools, Cello, Viola
Stevens Point, WI
104 posts

I have not done this, but know someone who has and my husband is a “math” guy. You take your average yearly earnings and multiply that by 7-10 to represent your projected earnings in 7-10 years (there are other sources that say 2-5 years, but we’ll go with 7-10). There can be some variances to this amount depending upon if you teach out of your home or run a business outside of your home. Obviously your earnings would be net and would not include the cost of running your business. Also, there needs to be some kind of a contract with your students so that they will stay with the new teacher for at least a year.

Let’s say that you teach 25 students and your net after taxes and other bills is $25 per lesson (yes, to make it easy on me for math purposes). 25 students per week at $25 per student = $625 per week. There are approximately 52.1 weeks in a year, but you would subtract at least 5 weeks for vacations and holidays, so let’s say 47 weeks, which equals $29,375.00. Multiply that by 8.5 years and that would be $249,687.50. That would be the approximate price of your studio.

Most important thing is to have your past earnings & expenses, current earnings & expenses, projected earnings & expenses, contracts, tax information, etc… organized and available for those who would be interested in purchasing the studio. It would be a good idea to work with your accountant and possibly a business Realtor to come-up with a strategy for your location. My friend used the strategy above but had to sell it for less (she had over 100 students and 3 employees) due to the economy. Ultimately you need to get the advice of a professional, as mentioned above. However, that is the basic idea. I hope this helps!

Dr. Merietta Oviatt
Suzuki Specialist
Viola/Violin Instructor
Aber Suzuki Center, University of Wisconsin, Stevens Point
www.uwsp.edu/suzuki
www.merietta.com
[javascript protected email address]

Diane said: Dec 31, 2011
Diane AllenViolin
245 posts

That’s really interesting.

My first thought was to check out the worth of my own business… Wow! That’s gratifying to know!

My second thought—musician’s seem to be in their own little world with their own weird ideas and rules about business.

My third thought—actually a question—”get the advice of a professional”? A professional who? Accountant? Business Realtor? Lawyer?

Not that I’m going anywhere. But I’m sure I’ll retire at some point!

Smiles! Diane

Diane
http://www.myviolinvideos.com
Videos of student violin recitals and violin tutorials.

Merietta Oviatt said: Jan 1, 2012
Merietta Oviatt
Suzuki Association Member
Violin, Suzuki in the Schools, Cello, Viola
Stevens Point, WI
104 posts

Oh, I’m sorry! I thought I had said who professionals would be. Yes to all three.

Your accountant will be able to help you determine the full value of your business and organize the numbers portion for potential buyers.

A business realtor is an absolute necessity to not only sell the business, but also to let you know what comps are in the area, how the real estate in your area is going, and advise you on how to use the numbers your accountant helped you with in your favor.

A lawyer is necessary so that you can work-out appropriate contracts for your students and potential buyers as well as go over everything before, during, and after the sale.

The following information is from my hubby—the math guy:

Using cash flow or profits to determine the value of your business -

The cost of your business should be based on its ability to generate a stream of profit or cash flow (sales less expenses). You then determine the total cash flow over five or more years to calculate the worth of the business. “Often, discounted future earnings are used which takes into account the time value of money – cash received in year five is discounted based on projected interest rates. This is often called the “net present value” technique.”
The projected money generating power of the business over five years, gives everyone a starting point.
“Many cash flow and EBITA (earnings before interest, taxes and amortization) projections use “recast” numbers to reflect the effect on profits of perks that a business owner takes from the business. The multiplier is a subjective number, but by and large, a profitable, reasonably healthy, small business will sell in the 2.0 to 6.0 times EBIT range, with most of those in the 2.5 to 4.5 range. So, if annual cash flow is $200,000, the selling price will likely be between $500,000 and $900,000. But there are many factors that affect the multiplier.”

This is based on 5 years instead of the 8.5 in the previous post. This is all very generic information that he knew and got from some outside sources. This is just one way of determining value, perhaps the easiest. There are many others that involve equations and careful calculations of many factors. This is why you must involve the professionals listed above if you are serious about selling your business. If you just want a round-about value of your business you take the simple math I did in the first post. To officially sell the business, go to the professionals listed above.

Again, hope I cleared-up any questions and I hope this helps. I wish I knew more about this on my own, but i am NOT a math person (one of the reasons I married my smart husband) ;0)

Dr. Merietta Oviatt
Suzuki Specialist
Viola/Violin Instructor
Aber Suzuki Center, University of Wisconsin, Stevens Point
www.uwsp.edu/suzuki
www.merietta.com
[javascript protected email address]

Patricia said: Jan 2, 2012
 
Suzuki Association Member
Violin, Viola
Martinsville, NJ
58 posts

I can’t help with this—but—not sure which music teacher would actually “buy” a studio from another? I have in the past given studios to new teachers and actually helped them relocate to take over when I was leaving to go build another program. Would never had thought to sell it? Even though you might think the families will be tied into staying together—there is no guarantee of that?
Good Luck?

Julia said: Jan 2, 2012
Julia ProleikoViolin, Piano, Viola
Saint Louis, MO
22 posts

For me personally, I would never feel comfortable “selling” my students. I don’t see my students as a set of charts and graphs. I would recommend each one individually to whichever teacher in the area that I thought would be the best fit and then give them a list to choose from in order to compare or if schedules don’t work, etc. (Then again, there are other teachers in my area where I recommend students; I don’t know about where you are.) I would take it as an insult if my child’s teacher “sold” us to another teacher and quit immediately just on principle! I might try out the new teacher, but would feel no obligation to stay with him/her as this decision would be based upon the relationship he/she would have with my child rather than how much they paid for us. I think the relationship of a music teacher is just too special for that…it’s like selling your children. From a practical standpoint, why would anyone pay for a studio if there is no way to guarantee that the students would actually commit to staying in lessons with you and not moving to another teacher? Are you going to audition teachers or have them teach masterclasses for your students so that they can be part of the choice? Or just sell to whomever would pay the fee? Would you possibly make the students sign some form of contract that the teacher could sue them with if they bailed out early? Could it even be upheld legally? (doubtful, but even saying it could, how much time and money would it cost?!) …Would you want to make them stay even if the new teacher turned out to not be the best thing for that child? What sort of transition did you envision? If you cannot make them stay, how would rate the value?
What is of the most value is you personally and that is going with you, right?

Irene Mitchell said: Jan 3, 2012
Irene Mitchell
Suzuki Association Member
Violin, Viola
Dallas, TX
111 posts

I agree with fpmusic. When I last moved, I spent considerable time, thought and effort matching students with area teachers… I wanted them to continue studying, and was grateful/honored that other teachers would open their studios to my students. That being said, however, sometimes there are no other teachers in the area. In that case, I would enlist parents to form a board and become a hiring agent themselves. They can advertise in the saa journal/website, interview (Skype), watch videos of candidates’ teaching, and band together to pay for a candidate’s travel to a workshop they will host. ‘Selling’ a student list doesn’t seem viable… selling the physical studio space (with its good lighting, parking, bathroom) and studio inventory (books, music, supplies, used instruments, furniture, piano) makes more sense to me.

Irene Mitchell

Patricia said: Jan 3, 2012
 
Suzuki Association Member
Violin, Viola
Martinsville, NJ
58 posts

Yes, I did what Irene said. Both times I was moving (within 90 minutes) but that commute is way too long for violin lessons twice a week. I had already started a parent board to help with rentals and we started looking—when it came down to 2 or 3 teachers…. I asked them to come up here for a few days…. and they taught—all parents were invited to watch any or all lessons/classes the teachers taught. I was happy when the parents came to me asking if I thought so and so was the best teacher and I had thought so all along too. Then I helped her move, 1 of the parents was a real estate agent and helped her find an apt. and I committed myself to go up once a month for the first 6 months to help with groups and getting everything settled. It cost me alot of time, but I was invested with each of my students and wanted to know they would be well taken care of. I still hear from some of those students—they have graduated college and are in Medical School or Graduate School or have started their careers. It is an interesting idea—small business owners—well sometimes a small bakery would sell—but they are selling their name brand and all their recipes….. students are people—not recipes?

Lori Bolt said: Jan 3, 2012
Lori Bolt
Suzuki Association Member
Piano
San Clemente, CA
226 posts

Since I have only moved within the same community I haven’t had to deal with this topic personally….however I agree with Patrizia and fpmusic. How would you “vet” a properly trained, philosophically sound Suzuki teacher for your students? Selling physical property or a business w/ inventory is one thing….children and families are not either of these.

Lori Bolt

Karen said: Jan 3, 2012
Karen Huffman
Suzuki Association Member
Piano, Suzuki Early Childhood Education
Portland, OR
28 posts

I was going to say that I definitely have inherited a few students from a teacher moving out of the area but I don’t think she ever thought of selling her business to me. I came in for a meeting to chat with interested parents and students and walked away with a couple of names added to my roster but not everyone was interested. I am pretty sure even if I “bought” the business I would not have kept all of her students.

Melanie Drake said: Jan 3, 2012
Melanie Drake25 posts

This is an interesting topic. As a parent, I would be very confused if my music school asked me to sign a contract stating that I’d remain with a random replacement teacher for a set period of time. What would be in it for my family? What if I didn’t sign the contract? It doesn’t make sense. I’m trying to imagine how this letter/contract would read.

I know that in the business/marketing world, contact information is sold. This kind of thing makes my skin crawl, but I think it’s commonplace. I think, at best, the contact information of the families could be sold. Contact information has some monetary value, but I don’t think it’s equivalent to X years of lessons. I’m not saying this is ethical or legal. I would be upset to learn that my music school sold my contact information to another school/teacher.

Shelley Hays said: Jan 3, 2012
Shelley HaysPiano
Baton Rouge, LA
3 posts

I think that your studio is a product of your expertise and years of hard work. It is also your BUSINESS that you have spent considerable effort making profitable and successful. Unfortunately, many music teachers do not see this facet of what they do, and cringe from valuing themselves enough to charge a fee worthy of their professional training—and do not consider all the money they themselves have spent for lessons, college, and workshops!

Vetting a new teacher/prospective buyer should not be a problem. You can have them present in the studio for a certain time period to observe how you do things, then have them come in and teach while you are present to be sure there is a good fit. This also allows the students some time to adjust to a different teaching style and begin to bond with the new teacher.

I have found that most of my families are people who have done some research to find out about the Suzuki Method before coming to me for this type of instruction; they have made the choice not to be a traditional studio because they think this method is better. Therefore, their primary concern is that their children be well taught in my absence. In securing a buyer for your studio, part of your job is to meet that concern. This will help minimize attrition, although some is bound to occur. Most parents know little or nothing about music before becoming a Suzuki parent, and trying to find a new teacher may not be easy. They are happy with you and are looking to you to help them make the switch. Also, there is usually a shortage of music teachers in most communities which makes the search for a good teacher more difficult. I think you will know when you find the right person who will make a good replacement.
I have heard that it takes a good 5 years to build a small/medium sized studio. What an opportunity for a teacher to walk into a profitable studio! Years ago, my own piano teacher and her husband purchased their studio, right outside of NYC. It was very successful; they both taught full-time and raised 3 children in a very affluent community.

Ken Hiebert said: Jan 3, 2012
 Guitar
8 posts

Wow, cool topic. The biggest problem with selling a private music studio is that by far your most valuable asset—YOU—is not for sale. So to place any kind of value on it other than a list of contact info doesn’t really make sense. A new teacher who would like to teach full time would be far better off doing what we all have done (or are doing) to make that happen and that’s to work an extra job or two until the studio can support him/her on it’s own.

If you’re looking to make some extra money while you switch things over it might make more sense to charge a consulting fee or a training fee or something to someone who might be interested in taking it over. I might have gone for that when I was starting out if it had been offered. Then you can train the person to do things the way you would like to have them done and you’re not really out any time. After that, it would be up to the students whether they stay or not. Either way, you’ve done what you could and hopefully the new guy got some valuable training and insight into running a music studio.

Diane said: Jan 3, 2012
Diane AllenViolin
245 posts

Shelley’s comment:
I think that your studio is a product of your expertise and years of hard work. It is also your BUSINESS that you have spent considerable effort making profitable and successful. Unfortunately, many music teachers do not see this facet of what they do, and cringe from valuing themselves enough to charge a fee worthy of their professional training—and do not consider all the money they themselves have spent for lessons, college, and workshops!

and Merietta’s math for putting a value on a business

both are putting words to thoughts I’ve had but I never knew how to express them!

Value in the music world is definately it’s own planet. If you consider the training other professions go through—do we not go through the same amount of rigorous training? If not more?

This all raises an enormous amount questions about how people perceive value and what they think it should cost to receive it.

Here’s another thought I’ve tossed around with my husband. If you do a one time teaching event of some sort—you could charge a much higher hourly fee than those who you see regularly week after week.

Now here’s a completely other issue regarding “selling” a studio. If you have 30 students from 30 different families—then you have 30 different employers! The fact that you’ve accumulated that many employers is a testament to your teaching style! Bravo to you!
But—how can you sell that? You are in the service industry!

While I love the idea of feeling good about what I’ve accomplished and can now put a dollar value on it—it does seem pretty weird to sell a studio. However—it’s done all the time in other professions. My husband’s allergist bought a business from someone who retired….

My thoughts are clearly all over the map on this topic!

Smiles! Diane

Diane
http://www.myviolinvideos.com
Videos of student violin recitals and violin tutorials.

Dan Browning said: Jan 10, 2012
Dan BrowningInstitute Director
Suzuki Association Member
73 posts

Sorry I didn’t see this thread earlier (I’m not usually in this discussion section). I don’t teach (my wife does), but I do run a consulting business with a major focus on business appraisal—i.e., figuring out how much various businesses are worth. Kathleen (or others), if you’d like to chat with me individually/privately, feel free to send me a message and I’ll provide whatever advice I can.

For now, here are some broadly applicable thoughts:

It’s definitely possible to sell any professional “practice”—someone above mentioned a doctor’s practice—and a music studio can be in that same realm. However, as also mentioned above, a potential purchaser would be “buying” your referrals and community contacts. The buyer would also be paying for you to “consult” with them in making these referrals (telling all your parents, “Hey, I’m leaving, but you really should consider Dan as your new teacher, he’s great and he’s who I’m recommending all my students to switch to”), and would also be paying a “non-compete” to you—i.e., you promise that if your new gig doesn’t work out, you won’t move back in six months and try to take back all of your former students.

Of course, your ability to sell a studio will also vary depending on whether you’re a solo teacher or whether you do in fact have a larger studio with multiple teachers working with/for you. If the former, there’s much less intrinsic value to be had; if the latter, there’s more value to sell.

Having said all that, I do think there is usually some value in transferring a studio to a new teacher, even if it’s just a one-teacher studio and even if you’re just making referrals to a new teacher. Rather than actually buying the stock of your company, though (assuming you are incorporated), many private transactions are structured as asset sales—i.e., the buyer buys only those assets they want (customer list, furniture, etc.). If they bought your whole company on a stock basis, they’d also be buying any potential liabilities.

Another possible way to structure a purchase of your studio would be simply to work out an arrangement with your buyer/teacher that they would pay you a percentage of the revenues they earn from your former students over a certain period of time (3-5 years, perhaps).

In general terms, the range of multiples mentioned above is, I think, a little on the high side—I don’t often see small, privately owned businesses selling for 6 times earnings. The lower end of that range is usually more accurate.

In terms of experts to retain, you could find a business broker if you did have a solid business entity to sell. If you want to figure out a price for selling a business, I’d recommend a business appraiser rather than simply an accountant. If there is commercial real estate involved, you’ll want a commercial real estate broker. And obviously, you would want a good lawyer who deals in small business transactions to write up the appropriate documents.

Hope this helps in general. Again, if anyone would like to chat with me privately (in strictest confidence), I’m happy to be of service, or if you have general questions you’d like to post to the forum here I’ll monitor this thread also.

Deanna said: Jan 10, 2012
 
Suzuki Association Member
Violin
90 posts

This is an interesting topic.
After reading everything I guess I’m wondering what new teacher that’s just starting out would happen to have several thousand dollars with which to purchase a studio? And would going into debt in order to buy a studio be really much different than just starting off small on their own? (Financially, I mean.)
And there’s the added problem that it seems most teachers don’t in fact “sell” their studios but rather give their students away to other teachers when they move. So can you really sell something that other people give away for free?
Also supposing you do sell your business and move, are you then going to have to start from scratch yourself? A new business name, logo, website, promotional material etc.?

Jeremy said: Jan 12, 2012
Jeremy Waterman
Suzuki Association Member
Viola, Violin
Portland, OR
3 posts

I find this rather a ridiculous idea, and not because I don’t value my studio/ability. Teaching is not a business like other businesses. I find Ken’s simple answer says the key point, YOU are what the students were buying and that is not for sale. Nothing will replace you, and it’s the merits of the new teacher that will merit whether someone pays them for lessons. Perhaps you can sell the right to your students to some buyer (never hurts to try I guess), but it’s not the teacher who owns the student anyways. And I think it’s also ridiculous to think that a violin studio could be worth $250k. The students might only take for those 7 years…if anyone has ever sold a studio for more than 10k I’d eat my shorts. Even 1k seems like a lot. If you do sell your studio, certainly post it on here. Thanks!

said: Jan 12, 2012
 7 posts

The price of something must also be based on current market value and what your target buyers are willing to pay. From the math scenario above, I can’t imagine any musician anywhere in the country being able to afford to spend upwards of $250,000 for studio that is only currently bringing in $29,375 of income! It would take them 8 1/2 years just to break even!! Talk about a straight and narrow road to bankruptcy for anyone who would purchase any type of business with those kinds of numbers. Without selling a physical space complete with equipment (piano, stands, music, etc.), what you are really selling is yourself (your expertise as a teacher) along with a list of potential students (since it is impossible to force anyone to stay with a future unknown teacher). But you will be taking your most valuable asset with you (the teacher), so all you’re left with is a list of students who may or may not even sign up with the buyer.

Ken Hiebert said: Jan 15, 2012
 Guitar
8 posts

I think there’s a huge difference between a “business” and “self employment”. What most music teachers do is much closer to self employment than a business. I see a business as something that can continue to produce some sort of revenue while you are lying on a beach somewhere taking some time off—in other words you have a staff that can keep it going while you are away. Unless you operate an actual “music school” that has several teachers whom you are paying then the term business doesn’t really apply. There’s really nothing to sell other than some equipment. A business has value apart from the owner.
I also build decks and fences in the summer months to keep the cash coming in but because I do all the work myself I don’t really think of that as a business either, but it does keep me employed.

Caitlin said: Jan 18, 2013
Caitlin HunsuckViolin
Merced, CA
41 posts

I know this post is old, but I would like to clarify some things about selling a business for a quarter million. You forgot to discount the money. Money gained in the future is not worth the money you would get to day. So you would need to apply a “discount factor.” I would gestimate it to be 5.7466 times the annual income (to figure out what I did, just google “present value of money formual”). And that actually would be a reasonable amount for that amount of expected income (it would be about $100k). However the problem is your market. If you up and leave the area, your students would be up for grabs. Why as a new teacher would I buy your studio when I could just set up shop and probably pull in most of your students if I have a good product to offer.

Now, if you had bought a location for the studio, had several teachers working under you, equipment, etc. Then that would actually be a business I could see “selling.”

Kathleen Bowman said: Feb 11, 2013
Kathleen Bowman
Suzuki Association Member
Cello
Saratoga Springs, NY
5 posts

Thank you so much for all the interesting thoughts and thought-provoking discussion.

I have already moved to my new locale, and was very happy to find suitable homes for my beloved students in Knoxville, TN. I agree that it would be easier to sell a practice, if you had other teachers working under you, an actual purchased teaching space, etc.

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