Whatever second (or third) act you’re ready to embark on, your legacy and financial security will be affected by the successor you choose—and the deal you make. Here’s how two dance studio owners navigated the passage.
If you own a dance studio, you know it’s a 24/7 commitment. It’s a tough and rewarding job, but like everything in life, there comes time for a change—a chance to move on to the next life venture and perhaps to slow down. As a successful entrepreneur, you’re entitled to sell the sizable asset you’ve worked so hard to develop and cash out on all that you’ve built. If you’re like Danie Beck, who owned Dance Unlimited for 40 years, a former student may want to take over your business—and need your advice. Or if you’re like Susan Mendoza Friedman, who sold her Cape Cod–based studio to a longtime faculty member, you may find that making a clean break from the business is what’s best for your peace of mind.
Whatever the scenario for your next act, your legacy and financial security may well be affected by the successor you choose and how smooth a transition it is for your staff and students. Two studio directors who have sold their businesses and gone through the succession process offer their stories and advice.
If at First You Don’t Succeed
In 2005, when Danie Beck decided to sell her Miami-based studio, Dance Unlimited, she’d grown it, over 30-plus years, to nearly 500 recreational and competitive dancers. Beck’s daughter, then a teacher and assistant director at Dance Unlimited, bought it. By 2008, though, she’d changed her mind, after the studio became too much to juggle with her family responsibilities. Because a recession had just hit, Beck worried that her daughter would have a hard time finding another buyer. “People are lucky if they can buy bread and milk,” she remembers saying. “There’s not going to be a line outside the door to buy the studio.” When her daughter confessed that she’d have to close the studio without a buyer, Beck bought the studio back.
Shortly thereafter, she approached a student-turned-instructor who had earlier expressed interest in owning her own studio. They struck a deal: In addition to selling her studio plus inventoried equipment, Beck would mentor the new owner in-person for two years and have the option to remain offsite more often during the third year. Additionally, Beck’s sale agreement stipulated that the new owner couldn’t incur major expenses, like painting the studio or giving multiple faculty members raises, until the mentoring period had elapsed. This was because Beck would receive a percentage of the studio’s capital as part of the sale.
Throughout the two years of on-site mentoring, Beck worked the future owner up the ranks so it would be an easy transition. “It was a training period,” says Beck. She spent time going over the studio’s systems and processes with the new owner while also demonstrating the importance of interfacing with parents and students as often as possible and observing staff in-class.
Word of Advice Definitely have a written agreement, Beck says, and spell out everything. “Even with my daughter, we went through lawyers,” she says. “Whether you sell to your family or a stranger out of state, it’s still a business deal. You must have legal guidance.” According to the U.S. Small Business Administration (SBA), a sale agreement should list details such as the names of the seller, buyer and business; all assets being sold; inventory included in the sale; the purchase price; and payment terms. Spell out how the studio will be run up to the close of the sale and the level of access the buyer will have to your information. Be sure to note all adjustments and broker fees, and make sure an attorney reviews your sales agreement.
From Hands-On to Hands-Off
After 30 years of being a studio owner, Susan Mendoza Friedman wanted to focus more on her charity organization, Dancing for a Cure. She put up a few ads to sell her studio, Dance Designs, in Hyannis, MA, but nothing really came of it. “It was 2008 or 2009—the economy was not great,” Friedman says. “Even though I had a really good reputation as the biggest, most successful dance studio on the Cape, it was hard to find the right person.”
Then a faculty member who had worked with Friedman for eight years expressed interest in purchasing the studio.“She was very knowledgeable about the studio, and we had a great relationship,” Friedman says. They talked, and eventually agreed on a price. “Having never sold a business before, I had no idea how to arrive at a number,” says Friedman. “I only knew my gross and net income—and how much a person could make in terms of a salary, as the owner.” Friedman consulted with SCORE, which offers free advice to small businesses, and followed the formula of multiplying her discretionary earnings by a factor of three. She sold her inventory and furnishings at a separate price. Friedman and the new owner structured it as a three-year gradual buyout, with the new owner paying a portion each year toward the sale price while remaining a salaried faculty member. (In addition to consulting with SCORE, Friedman spoke with attorneys before the sales agreement.)
Over the buyout period, she trained the new owner by giving her more tasks and increased accountability—and, consequently, higher pay. “It was very clear what would happen each year in terms of her responsibilities and how much more she would make in salary,” Friedman says.
Word of Advice Don’t stay on as a teacher after you sell, says Friedman. Despite being advised not to, she included a clause in her agreement stating she could remain an instructor. But that lasted only for two years—she found the urge to get involved in the business side too difficult to resist. “You have to be able to have no say or input in the running of the studio,” she says.
Last updated October 1, 2019
Rachel Rizzuto writes the Business column for Dance Teacher and is a second-year MFA student at the University of Illinois at Urbana-Champaign.