How to Sell Dance Studios

Dance Studios in South Florida

Children-oriented dance studios are an increasingly popular venue for parents who indulge their child’s creative whims in a physically healthy way. Dance studios offer various classes with differing themes including jazz, hip hop, ballet, tap, and modern. Frequently, the children then perform recitals and participate in competitions among teams from other dance studios. Classes take place after school and in the summer months as well. Many parents take great pride in their children’s progress, and look forward to the recitals and competitions. Dance studios are typically owned by former dance teachers well versed in the industry, and South Florida studios often make excellent acquisition candidates for local or out of state dance teachers.

Dance Studio Owners

A successful dance studio almost always has a well trained and experienced dance instructor as the owner or operator. The owner often creates the brand including the design of the classes, a friendly front office staff, a welcoming environment, and well trained teachers. An owner with expert knowledge about dance will be able to properly supervise the dance teachers who actually teach the students, and will be able to guide parents through their child’s progression in the program. Most successful owners do not teach dance classes themselves, nor do they even work in the studio full time. But they are involved enough so that they are accessible to the parents (rarely except for special situations) and staff while ensuring the quality of the brand.

Pricing A Dance Studio for Sale

When it comes time to sell a dance studio, the first step is to use a professional business broker who should determine the worth of the studio. The best asking price for a dance studio is typically a range of 2-4 times the annual adjusted owner benefit. The owner benefit refers to the actual economic profits derived by the owner from a business.

Determine True Owner Benefit of Dance Studio

Uncovering the adjusted owner benefit of a dance studio takes time and effort on the part of the business broker. Generally, the owner benefit is derived by first calculating the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) from the tax return or profit and loss statement. Then other costs that would not be incurred by the buyer must be added back to the EBITDA in order to determine the adjusted owner benefit. This includes the owner’s salary and the owner’s personal expenses that are expensed through the business. Careful consideration should be given to the growth rate of the owner benefit over a two to three year period, as it will play a major role in determining the correct multiple of owner benefit that buyers will be willing to pay.

Factors Affecting Price of Dance Studio

  • Many factors affect the ‘multiple’ of owner benefit that buyers are willing to pay for a South Florida dance studio.
  • First, the value of the physical assets is of critical importance.
  • Physical assets for a dance studio include the moveable equipment or supplies as well as the improvements to the studio itself.
  • The special flooring, mirrors, bathrooms, sound system, waiting room, and computer system are all valuable physical assets of a dance studio.
  • Next, the terms of the lease (unless the facility is owned by the seller) will often either persuade or dissuade a potential buyer from purchasing a particular dance studio.
  • A studio must have a fair lease and preferably the net rent should be 10% or less of sales.
  • Of course, the location of the studio should justify the rent, and be close enough to the studio’s kid-friendly target clientele.
  • Next, the quality of staff at the dance studio plays a large role in the valuation.
  • A dance studio will receive a premium valuation if it has experienced and well trained teachers who are enjoyed by the children and parents, and who will stay on and work for the buyer.
  • This will enable the buyer to keep and retain a dance studio’s most important asset: the current amount of students enrolled in the studio.
  • Some dance studios have as many as 300-400 currently enrolled students.
  • The more students the better valuation for any dance studio!

Seller’s Role After the Sale

Because dance studio owners often play a key role in the business, the transition after the sale is often of paramount concern for the buyer. Most dance studio owners are identifiable in some way with the studio’s brand and generally known by the parents as the owner. In preparing their business for sale, a dance studio owner should limit his or her own role, responsibilities, and time spent in the studio. Otherwise, the valuation of the dance studio will suffer since buyers will fear the loss of clients when the seller is no longer around. In any event, a professional business broker must – early in the sales process –  facilitate substantive discussions about the post-closing transition after the sale.

Example of Smooth Transition for Dance Studio

  • Diane has elected to sell the South Florida dance studio that she has owned and operated for many years.
  • Diane no longer is an active dance teacher in the studio, but still shows up a few days a week and is active in recitals and competitions.
  • Gina is a dance instructor and has made an offer to purchase Diane’s studio through Diane’s business broker.
  • The terms are not acceptable to Diane, and the business broker speaks with Gina about increasing the offer to an acceptable level.
  • Gina reveals that she is worried about some parents canceling their child’s membership from the studio after the sale since they are so familiar with Diane as the owner.
  • The broker then facilitates a personal discussion between Diane and Gina.
  • Diane emphasizes that the studio’s teachers (who are willing to work for Gina), facility, location, and friendly customer support are really what drives student membership.
  • Diane affirms that she is willing to be retained as a ‘consultant’ after the sale for as-needed assistance.
  • Lastly, Diane agrees to personally meet as many parents as possible with Gina after the sale, where she can tell them that she will still be a part of the studio in some capacity.
  • Ultimately, Gina agrees to raise her asking price and the deal successfully closes.

South Florida dance studios serve a special niche as a venue where parents can let their children participate in a healthy art form in a fun and memorable way. When it comes time to sell their dance studio, sellers should reap the rewards of their labor and receive the best possible purchase price.

Give Martin at Five Star Business Brokers of Palm Beach County a call today at 561-827-1181 for a FREE evaluation of your business.