Even an admitted risk-taker like Darci K. Ward knew that opening a third location of her DK Dance Productions during the pandemic was a bold endeavor.
But the gamble paid off: with a goal of 60 students, the new studio in Jerseyville, Illinois, saw 85 signed up by 9am on the first day of registration, with a total of 150 joining by season’s end. The success of the new studio even helped to support her studios in Alton, Illinois, and Florissant, Missouri, which were experiencing pandemic-related revenue dips.
Expanding your business by adding a new location can indeed be risky: do it before you’re ready and the challenges can be insurmountable. Yet if done right, a second, third, or even fourth location can be an exciting manifestation of your studio’s strength and brand, and can spur additional revenue, expanded programming, employment opportunities, and a greater community impact.
Think your studio is ready to grow? Let these benchmarks—and advice from Darci and two other owners with multiple locations—help you decide if the risk of expanding will lead your studio to eventual rewards.
Your current studio should be comfortably profitable and debt-free before taking on the additional expense and financial risk of a new studio, Darci says. (A 15 percent net profit is considered a healthy minimum in the dance industry.)
Having cash reserves in the bank will help you avoid using credit cards for start-up costs and serve as a buffer until your new location is up and profitable, she says. Three months of operating expenses is typically recommended.
But using cash for start-up costs may not always be feasible: should you need to seek out a loan, make sure you’ve spoken with your accountant or bookkeeper to work through a payoff plan, and to ensure that your growth expectations are realistic.
Alison Brown suggests working towards boosting your emergency fund, since your operating expenses will increase—perhaps even double—with a new location. Brown, who owns Hearts in Motion Dance Project and HMD Boutique in Grand Rapids and Ada, Michigan, adds that it’s important to ensure you’ll be able to sustain that new, larger emergency fund moving forward.
With two or more studios, there’s a lot of organization to juggle. That’s why Alison Brown says that your existing studio should be able to “run itself” before you start thinking about adding another one. Systems for recitals and other events should be seamless, parent communications should run like clockwork, and daily studio logistics should operate pain-free. “Make sure that if you had to step away and put your focus on the new studio, your original studio would be okay,” she says.
You’ll likely be able to transfer most systems to your new location, but additional ones may be needed. Allison Porter, owner of four Allison’s Dance Academy locations in South Dakota and Iowa, says these might address communication between multiple front desks, transporting items between locations, or planning and operating multiple recitals.
As much as you’ll need to be systematic, be prepared to be flexible, too. Darci had to adjust to her new studio community’s commitment to soccer, which meant avoiding Saturday rehearsals. Alison Brown learned that her new location’s parents had a very different attitude about snow days: unlike her first studio, if her new students’ academic school was canceled, they expected dance to be canceled, too. And Allison Porter found that she needed bilingual marketing materials to serve her new studio’s Spanish-speaking population.
Expansion plans are often fueled by growing enrollment. Alison Brown was inspired to launch her second boutique studio focused on preschool and elementary-aged dancers because of high enrollment among young students at her original location. Darci advises looking at “heads in classes” (also known as units) as well as total registered students, which can help answer this question: is your “growing” enrollment actually more students, or fewer students taking lots of classes?
And while enrollment numbers should certainly factor into your decision, retention can be an even more important metric. Retention is the percentage of students who stay enrolled at your studio year-over-year. For example, if your previous season’s enrollment was 200 and 150 students continued dancing this season, your retention rate is 75 percent. Low retention (below 70 percent) is a sign that something is not working; it could be the result of teacher turnover or lack of personalized communications to parents. Darci suggests finding and fixing the cause or causes of low retention before you open a new studio that might suffer from the same flaw.
A competent, trusted staff
With multiple locations, you won’t have time to visit each studio every day. It’s imperative that all of your locations are run by competent, trusted staff who are on board with your vision and mission, says Darci. Strong leaders and long-term staffers are also a familiar comfort to other staff, parents, and students at your original location who might be missing your presence, says Alison Brown. (Allison Porter’s advice for any inter-studio jealousy that may crop up: lead with care, and keep providing the same quality, consistent service. “Then they don’t feel like they’re being put on the backburner.”)
You’ll likely need to hire some new faces. With recent hiring shortages in dance and other industries, research available teachers in your new studio’s area or gauge interest for dance teaching jobs to ensure that you’ll be able to staff your studios without making concessions or overworking current teachers. You’ll need excellent teachers who are also good communicators, Darci says, since they’ll be handling many of the important first-impressions of families new to your studio.
The rewards of expansion
Calculate your expansion correctly and a new studio location can be a boon not only to your business, but to your staff, students, and community—and yourself.
Darci’s experience shows that multiple financially healthy studios can function as a safety net when unexpected setbacks arise. And more revenue means more budget to invest back into your studio and staff—which could look like expanding your team to include a marketing director, for instance, or offering better pay and benefits to employees.
Expanding has even helped Darci grow as a leader. “In the beginning, I was probably not a super-great boss—I was just willy-nilly everything,” she says. “It’s forced me to hone my skills and have structure, which has been good for me.”
Your growing business will also result in additional opportunities for students—both existing dancers, who can reap benefits like more chances to perform or bigger-budget recitals, and new ones, who may not have even been introduced to dance without your expansion. For Allison Porter, this is the greatest reward of growing her studio: “Dance is for everyone, and I wanted little girls in those towns to not have to travel in order to dance,” she says. “They might not ever have the opportunity if I wasn’t there.”
How to Gauge Demand
Both Darci and Alison Brown knew demand for additional studios was high because of parents’ queries about possible new locations. Even if you don’t have clients in neighboring towns knocking on your door, there is research you can do to ensure there will be enough interested clientele to fill a new location.
Start by researching these metrics:
- other dance studios in the area, subjects/genres offered, and cost
- the number of academic schools in the area
- other after-school activities in the area, and cost
- the median income
- the number and ages of children in the area
As you get to know a new possible community, it will behoove your potential future studio to let that community also get to know you. Before opening her third location in Jerseyville, Darci made her studio’s name known by working with local organizations on sponsorships and donations. She believes these efforts led to an immediate high enrollment, even with three other studios in the area. Another idea to see if your studio would be met with excitement: try setting up shop temporarily, with pop-up classes at a gym or daycare in the area. Be sure to collect contact information and other relevant data points—perhaps through a short survey—to inform your decision.
The Unplanned Expansion
Opening a new studio is an enormous decision, yet many studio owners don’t have the luxury of waiting until the perfect time to do so. Neither Darci nor Allison Porter had intentions of opening additional locations until golden opportunities fell into their laps.
Some of Allison Porter’s locations have come about through scenarios that just made too much financial sense to pass up—like when her sister opened a fitness studio and wanted to share the space, and when she was offered to rent space in a community building for free.
For Darci, it was an appealing offer from a local studio owner who had closed down suddenly. Given just days to decide, she agonized over what to do, ultimately taking the leap to open the new studio. She struggled with only 20 students for several months, but by the spring, her new location was turning a profit.
“I never thought I would have two studios,” says Darci. “And then my second one happened, and I was like, I can’t believe I’m doing this. And then the third one comes along and I’m like, I can barely handle two studios, I would never do three! And here we are—now I’m looking at a fourth community.”
If an opportunity comes knocking on your door, learn from Darci’s and Allison Porter’s experiences and do your homework (quickly!) to see if it makes sense for your studio.