Why you should understand your possible exit strategies, right from the day you launch. A business financial expert outlines four options.
Your exit strategy: Believe it or not, it’s something everyone starting a dance business should think about, with a goal and a long-term strategy in mind. “At the start of things, it’s really exciting—you’re hiring, you’re getting a space—but something like half of business owners don’t have an exit strategy,” says Priyanka Prakash, a business financial expert for Fundera, a company that helps small businesses obtain financing. An exit strategy, Prakash says, gives a business owner a way to reduce or eliminate their stake in the business once they no longer want to be involved in it—for whatever reason. What if you want to move across the country? Embark on a different career at a dance nonprofit? Even if you can’t imagine giving up your studio, or retiring until decades down the line, it’s smart to be prepared so that option is open to you. “It’s important that you not go into entrepreneurship with rose-colored glasses, because things happen unexpectedly,” says Prakash. “It’s good to have a plan.”
Keep your studio in the family by passing it on to a family member.
PRO “The business remains with those who are nearest and dearest to you,” says Prakash. “It’s possible that you can stay on in an advisory capacity or as a consultant, so you still have some say in what happens to the studio in the future.”
CON “There could be family conflicts—especially if multiple people in your family are interested in taking over the business,” she says.
Turn your business over to a staff member—someone who’s already intimately familiar with how your business operates.
PRO Your faculty understand your studio well and are most likely passionate about it. “They might even be willing to invest the time and money that’s needed to turn around a studio that’s not doing well,” says Prakash. “Plus, you don’t need to look for an outside buyer—you already have someone.”
CON Despite their excitement to take over your studio, a staff member might not be ready to take on the reins of ownership, says Prakash, even if they’re good at their current job. “They might be good at their niche role at your studio, but a studio owner—like any entrepreneur—has a hundred things to juggle,” she says.
Sell your studio to someone not currently connected to it.
PRO “Your business ‘lives on,’” says Prakash, “and the buyer can improve and expand it and put their own spin on it. If your business was doing well, then you as the seller can walk away with a good profit from the sale.”
CON Finding a buyer can be hard. “It’s like when you sell your house,” explains Prakash. “A lot of people might come to your open house and take a look, but that doesn’t necessarily mean you’re going to get a good offer or a committed buyer.” If you need a broker’s help, be prepared to part with about 10 percent of the sale price. It’s also difficult to price the value of a business, says Prakash. “It’s more of an art than a science,” she says. “The number that’s placed on your business might not reflect the passion and work you put into it.”
Fold your studio and sell off your assets.
PRO “It can get you out of an emergency situation,” says Prakash. “If you have a health emergency, for example, and just can’t run your business anymore, liquidation could be a good option.”
CON Assets depreciate quickly, Prakash points out, so depending on what or how much your studio owns, you might not even see half or a third of what you put into the business to start. “If your studio had any debts, creditors will get the first claim to your assets,” she says. “You might not have very much to give away.”
The Bottom Line
An exit strategy should be part of every business plan. Thinking about exit strategies right from the get-go frees you up to enjoy running your studio business for decades to come. But if you ever need an out for any reason, you’ll have been laying the groundwork for that, as well—whether that means identifying a successor and training them in the business side, or making sure the studio’s financials are in good shape for a sale.
Rachel Rizzuto writes the Business column for Dance Teacher and is a second-year MFA student at the University of Illinois at Urbana-Champaign.