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#939624 - 05/12/04 03:37 PM Teacher selling his business/studio
MadForest Offline
Junior Member

Registered: 08/14/02
Posts: 7
Loc: Florida
I've been approached by a teacher in my area that is leaving town. He has been teaching successfully in the area for 23 years, and has around 30 students. He would like to sell his business to me. Does anyone here have any experience with the selling of businesses like this?

Thanks.

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#939625 - 05/12/04 03:57 PM Re: Teacher selling his business/studio
JohnC Offline
1000 Post Club Member

Registered: 03/10/02
Posts: 1672
Loc: Lower Left Coast
I have experience being a student.

I'm not for sale. A good teacher/student relationship is not bought or sold.

If my teacher left (which she did) I would asses what I want from a new teacher and try and find it. I would nor accept someone because my teacher sold her student list to them.

I would not recommend buying the business at any price. YMMV.
_________________________
There are few joys in life greater than the absence of pain.

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#939626 - 05/12/04 06:08 PM Re: Teacher selling his business/studio
Bob Muir Offline
2000 Post Club Member

Registered: 11/01/03
Posts: 2653
Loc: Lakewood, WA, USA
If you need students, then I would think you would have better luck by advertising in the classifieds, flyers, and posters than by purchasing a list of students from someone.

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#939627 - 05/12/04 10:08 PM Re: Teacher selling his business/studio
Jeffrey Offline
2000 Post Club Member

Registered: 04/18/04
Posts: 2948
Loc: New York
Mad - As a student, I must agree with John. Just because a teacher "sold" my name to someone when he retired would mean absolutely nothing as to whether I would continue with the new person. Value as an ongoing business is zero.

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#939628 - 05/13/04 05:06 PM Re: Teacher selling his business/studio
MadForest Offline
Junior Member

Registered: 08/14/02
Posts: 7
Loc: Florida
Actually, the way it is working so far is that my credentials have been presented to the students to see who would be interested. The teacher that is moving has already told all of his students about his eventual move, and most of them expressed a desire for him to help them find another teacher. I happen to be moving to his area about the same time he is moving, and I have a pretty impressive track record as a teacher. I'm positive I could build up a studio full of students within a year, but this seems like a good way to get a head start, especially if the students are interested. Also, I know the teacher that is moving personally, and I doubt he is trying to con me out of a huge amount of cash. We both are wondering exactly what the fairest way of conducting the change of business would be. I'm assuming it would involve some kind of limited commision on the students that want to transfer to my studio. I've been making inquiries, and I've been told that this kind of transaction is not that uncommon in our business, but I have yet to find anyone that has specific experience with it. Is there anyone out there with experience with this?

Another question then, brought on the by the previous two postings: Assuming that the teacher refers me to his students, and they are willing...what value should be placed on the referal?

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#939629 - 05/13/04 06:00 PM Re: Teacher selling his business/studio
Jeffrey Offline
2000 Post Club Member

Registered: 04/18/04
Posts: 2948
Loc: New York
Mad - In the business I am in (financial advice) private practices sell for about 1 times annual revenue, with some legal language in the contract basing the final fee on how many people stay with the new advisor. I personally would put the value of a piano practice as much much lower than that. Perhaps a referral fee of 25% of the actual first year fees from students who take his advice and choose you would be fair. All this is just my opinion, and has no factual basis whatsoever behind it.

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#939630 - 05/13/04 06:01 PM Re: Teacher selling his business/studio
jdsher Offline
500 Post Club Member

Registered: 02/20/04
Posts: 643
Loc: Plano, Texas
MadForest: When assessing a service business, alot of emphasis is placed on something called "Goodwill". In this case I would define this as meaning how much income does the teacher make over time from teaching . So you could conceivably ask him to have his accountant prepare a profit and loss statement and 3 years of tax returns in order to assess how much he makes from this "business". Then you can determine what it would be worth to replace him multiplied by some percentage factor for loss of students.
Let's say that he made $50k/year from his 30 students and you expect to keep 50% of the students, then you might offer him $25k for his list and an agreement that he help you promote the business for say one year after he leaves.
If you are friendly with this person then you may just come to some agreement that you both think is fair and leave it at that. If you do have an agreement make sure it is in writing and have your attorney look it over before you sign. Unfortunately, the days of handshake deals are long gone.
Jon
_________________________
"In the middle of difficulty lies opportunity." Albert Einstein

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#939631 - 05/13/04 10:34 PM Re: Teacher selling his business/studio
sealsea Offline
Full Member

Registered: 04/28/04
Posts: 24
Loc: southwest florida
I have lots of business experience but not in this particular area. What jdsher is referring to is what we call "blue sky" value. This means putting a value on someone's reputation, the value of their name and/or brand. It is the abstract value of someone's business. What would be the difference between buying a reputable piano teacher's student rolodex and a doctor selling his practice? Sure he might have some students choose to go elsewhere but on the same hand he might have a majority that stay. There is no formulation for "blue sky"...thus the term. It is the "fair market value" which is the price that a seller is willing to accept and a buyer is willing to pay on the open market and in an arm's length transaction.

I disagree with the posters who think that this is a bad business idea. If the gentleman seller has built a sound reputation in his community over 23 years then his business does have value. Of course the gentleman buyer would have to earn the trust of his students the OP doesn't seem to find this problematic. His credentials are sound and he is experienced.

Given the personal nature of your friendship I am sure you can both arrive at a "fair value". What that value is can be negotiated just like any other business with "blue sky" value.

clc

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#939632 - 05/14/04 06:54 PM Re: Teacher selling his business/studio
obrother Offline
Full Member

Registered: 01/07/04
Posts: 182
My two cents. You can't sell what he is selling. Even if you get his students, there is no guarantee they will stay for any particular length of time...just like with any teacher.

Second, if you plan to do this full time, or even part time, you have to ask yourself if you can afford to pay anything to him. Your time is valuable and not all teachers ask for or get top dollar (except me, of course). Teachers who teach in-house in music store pay a commission. No one else should.

Third, the guy has some nerve. If he is leaving a full compliment of students behind...he should be concentrating on getting those students qualified leads on a new teacher(s). To try to make money off this is, simply, silly. It's not like he has a medical practice or tangible assets..or anything really.

Finally, you sound like a great guy...and qualified. I suggest you put an ad in the next yellow pages and any other place that is worthwhile and let 'you' be your best advertisement. Students come and go, but there is a market for good, responsible, and likeable teachers. Helpful hint - I drive to homes to teach and find that it is a rarity...and much appreciated by busy moms/dads. I charge more because I do this..and I find it infinitely more enjoyable than staying cooped up in one place. Something to consider?

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#939633 - 05/14/04 07:06 PM Re: Teacher selling his business/studio
obrother Offline
Full Member

Registered: 01/07/04
Posts: 182
I'm going to follow up on my post, if you will all oblige:

The only, and I repeat, only thing I would offer to this gentleman is this: Take on whatever students he is willing to refer to you with the understanding that you would like to, depending on how many students stick with you for any length of time, send him a thank you check for his gesture at some point. Let 'him' trust you, rather than the other way around.

The only other way I would agree that any amount of money should be paid is if there is an actual studio with an actual value. A location could have value, a piano could have value...but you can't 'force' a student to stick with you for any length of time.

In regard to the suggestion of paying, for example, $25,000 for his 'business' if he earns $50,000: He would be the luckies person in the world if that happened...and you would be one of the most foolish. Please don't consider anything remotely close to such a thing. No offense to that poster, I assure you. Just my opinion.

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