In the Spotlight:
Starting a Music School?
MTNA Business Digest, Volume 2, Issue 3
Many independent music teachers think about expanding their studios and starting a music school when their student load exceeds their available teaching hours. To start a music school that follows best business practices is not as simple as renting a commercial space, hiring a couple of teachers and printing new business cards. Careful preparation and planning are necessary to not only be financially successful, but to also be professionally responsible.
Teachers may consider bringing another teacher on board or perhaps hiring an assistant. As we grow professionally, some teachers begin thinking about ways to leave a musical legacy or to make a musical impact in their local community. The first step is to do extensive research in the following areas: market share, location, financing, budgeting and staffing.
Market share and location look at demographics, saturation, demand and cost. If there are not enough students in the age group you want to teach in your selected area, you may have a difficult time staying afloat. Conversely, if there are already too many music schools in your selected area, the market may be over saturated, and you may have a difficult time getting your foot in the door. There must be a demand for the type of music your school will teach and the way you teach it. (Communication with parents can be an unforeseen issue: will you need a translator or bilingual staff?)
Zoning is also a limiting factor; confirm that music schools are permitted at your chosen location. In many cities, one-on-one private lessons, group classes, performance spaces and sheet music sales are four different business uses that fall under four different zoning classifications. Check on parking requirements. Some municipalities mandate a minimum number of parking spaces per 1,000 square feet, and parking may be a separate monthly charge, potentially doubling your monthly rent expenses.
In addition to zoning, sound management comes into play when opening a music school. Cities and office buildings may have decibel ordinances. If you open your music school and your neighbors complain that they cannot operate their businesses because of the “nuisance noise” coming from your business, you may receive a cease-and-desist letter, essentially shutting down your music school, at least until you can successfully appeal.
Most importantly, you need to be able to afford the cost of leasing or purchasing a commercial property in your chosen location. Commercial lease rates per square foot vary greatly from one area to the next. In a large metropolis like Los Angeles, the rent for the same 5,000 square foot building may be $5,000 per month in one part of the city and $50,000 per month in another. Although the rent may be significantly higher, affluent areas command higher hourly teaching rates—so the net income may be the same—and are typically populated by families with higher disposable incomes to spend on “luxury” items such as music lessons. Finding the balance between a location you can afford and a location that can afford you is the key.
Having a sound financial plan is critical for the success of your business. It is too easy to go into massive debt or to lose everything. If you do not have a solid retirement plan and enough savings to support your golden years, funneling your current and future assets into a music school may not be financially prudent. If you are not independently wealthy, you may need to save for a couple of years or secure a small business loan to get started.1 Otherwise, your personal teaching income will need to cover the music school’s basic expenses as you grow your business. Working with a financial planner/CPA is worthwhile, particularly to choose the best business structure (i.e., sole proprietorship, partnership, LLC, S-Corp, C-Corp, nonprofit) for your music school.2
Once you have secured financing, start working on a budget. There are overhead and operational expenses that may be unexpected, especially if you have been teaching from a home studio.3 Overhead expenses are generally fixed costs that must be paid, regardless of whether your music school is actively running.
Understanding commercial leases will help you budget expenses. The most common commercial leases are Net Leases and Modified Gross Leases. Knowing their differences will clarify the monthly and/or annual expenses you must pay on top of your monthly rent.4 You may be responsible for a portion or all the building’s property tax, operational costs, utilities (such as electricity, gas, water, trash, phone/internet, alarm/security) as well as maintenance (such as janitor, gardener, HVAC, fire extinguisher services). Working with a licensed commercial realtor is recommended to help you navigate through the different types of leases and expenses. It is also their job to negotiate the best possible terms for your business.
Other overhead expenses may include licenses/permits (check with your city) and insurance policies (e.g., commercial liability, sexual harassment, commercial umbrella, workers’ compensation, instrument coverage). These policies can be costly; set up a meeting with a commercial insurance broker to get a rough estimate. If your insurance requires specific building standards, you may need to spend money up front to bring your space up to par. If the space is not already in a configuration suitable for a music school, there will be construction costs, which can range from a few thousand to over a million dollars, depending on the design and square footage of your space. A realtor can assist with brokering a deal with the building owner that includes a construction allowance or covers a percentage of the build-out costs.
Depending on the size of your music school and enrollment, hiring administrative staff may be necessary, unless you want to give up some or all your teaching hours to be the receptionist, scheduler, bookkeeper, bill payer, marketer, sales representative, and customer service agent. Some music schools offer health care coverage to their full-time employees as an incentive. Full-time salaried administration positions with a benefits package can be a huge line item. Hiring a part-time administrative assistant who works remotely can keep costs down, since they do not need a physical office space.
Operating expenses are costs associated with the everyday running of your business and cannot be avoided. For a music school, these may include teacher salaries, cost of instruments (if their use is included as part of taking lessons), office/janitorial supplies, drinking water/coffee, payment processing platforms and software/print media subscriptions. And don’t forget office equipment, furniture, computers/technology, and pianos. (These are also operating expenses, although typically considered operating fixed assets since you do not need to buy them monthly or annually.)
Plan each studio and office; count the number of desks, tables, and chairs required. Will you need a desktop in each office or just Wi-Fi connectivity? You may need an electronic keyboard, digital piano, upright and/or grand piano in each studio. This can range from hundreds to hundreds of thousands of dollars. Keep in mind that optics are important for your brand. Families with Steinway Bs in their living room are unlikely to enroll their children in a music school with electronic keyboards. Students working on advanced piano concerto literature for competitions will expect teaching studios with side-by-side grand pianos. Parents who are interested in putting their children in a rock band program will expect electric guitars, drum kits and hi-fidelity audio equipment.
Putting together a high-quality teaching staff is a challenge; the interview and hiring process can be daunting. Ask teachers for references/referrals, transcripts and résumés as well as a teaching demonstration and playing audition. Contact nearby undergraduate/graduate music departments to see if they have candidates who would make good teaching assistants and potential permanent faculty upon graduation. One of the biggest fears that music school owners have is bringing in teachers who will “steal” their students. Creating an incredible community, supportive environment and sense of belonging at your music school will help retain students. Another fear is not being able to assemble a good teaching staff because of the erroneous belief that “serious” teachers do not want to work in a music school, since they make more teaching from home. There are, however, highly qualified teachers who actively seek music school positions. Not all applied music teachers live in places where they can teach from home. They may be in an area without enough potential students, or they may simply want to keep their personal living situations private. Keep in mind that you can avoid the interview and hiring process altogether by renting out studios to teachers, instead of building a faculty.
No matter which model you choose to start a music school, the bottom line is to do as much research as possible, keeping market share, location, financing, budgeting and staffing at the forefront of your business planning. Financial scenarios in this article are meant for larger cities and urban areas, where population size can better support a stand-alone music school. In smaller communities, alternatives include affiliating a multi-teacher school with a music store, theater, church, university or other organizations to split costs and share facilities. Although the challenges may seem formidable, the rewards can be substantial. A realistic vision for the future, a good business plan and the advice of commercial real estate and financial professionals will lay a solid foundation for a successful music school.
- For more ideas about funding your music school, see “Top Five Ways to Fund a Start-Up Business” by Tim Stephenson.
- To learn more about business structures, see https://www.mtna.org/downloads/MembersOnly/25247_StartUp.pdf.
- For an overview of overhead vs. operational expenses, visit: https://www.investopedia.com/ask/answers/101314/what-are-differences-between-operating-expenses-and-overhead-expenses.asp.
- There are five main types of commercial leases: Full-Service/Gross Leases; Net Leases, Modified Gross Leases, Absolute NNN Leases, and Percentage Leases. For a detailed explanation of commercial lease types, visit: https://www.squarefoot.com/leasopedia/different-types-of-commercial-leases/ .
Deborah H. How, PhD, MBA, is widely known as a connection builder and fundraising architect for nonprofit music organizations. She is a frequent presenter on both studio management and pedagogy topics. Deborah is a member of the MTNA Business Resource Network.