Location, Location, Location!
We have all read these words in books, magazines and web sites. If you are reading these articles you are most probably thinking to build your own school. You will be excited and ambitious in this enterprise and that is the frame of mind which your start up needs. Put these things together: excitement, ambition and the words Location, Location, Location.
Now close your eyes and visualize the kind of place you will be looking for: what does it look like, where is it?
It is 99% sure you saw a bustling area with a high density population, large numbers of people pouring through public areas and a nicely decorated business premises with a plate glass window. This image translates to “large money” which is more than likely not required to accomplish the mission of establishing your own English school.
So what kind of location are we looking for and how should it look?
The truth is and I am often heard saying that if you put me in an airplane with a parachute, flew me over Japan and pushed me out over any populated area, I will build you a profitable school wherever I land. Now we know that almost anywhere in Japan is OK to build a school; we need to figure out where is right for you and how elaborate the set up needs to be. These two points, area and set up costs, will be paramount in determining both the time it takes you to break even and your ongoing profitability.
The key to making the right decision here is to begin with the end in mind. To see how much you want to profit from this school when it is built.
One thing is for certain: if you choose the wrong location for your dream school, it will be problematic, perhaps even disastrous.
A location too big and too expensive for your budget will crash your business on the rocks faster than anything else. You rent is a fixed cost and all fixed costs must be minimized and aligned with your needs.
Therefore the first key to choosing the right location for you is in deciding your schools costs, future student population and your desired income after costs. In other words to decide your “level of initial financial expectation” (LIFE).
Once we know our desired income (LIFE), all that needs to be done is choose an area to suit your LIFE and negotiate the rent and security deposits to a minimum.
I can imagine about now you are saying “OK, I can figure out how much I want to make, LIFE, but what is a suitable security deposit and rent? Great theory, now give me some detail!
OK that’s not so easy within the confines of a single article but let’s try to scope it in on some averages gleaned from opening over 40 schools in Japan.
I break start ups into four LIFE categories. Small, Medium, Large and Big. To each I can suggest a suitable property structure.
SMALL. LIFE is set at between JPY250,000 and JPY450,000 in pocket per month. Your security deposit should not exceed JPY500,000 and rent should be set at between JPY50,000 per month and JPY100,000 per month. One room will be plenty. You need no waiting area. This will be a one-teacher school.
MEDIUM. LIFE is set at between JPY450,000 and JPY800,000 in pocket per month. Your security deposit should not exceed JPY1,000,000 and rent should be set at between JPY50,000 per month and JPY170,000 per month. You can squeeze into one classroom but two classrooms are better. This is a one-teacher school supported by a part timer for maybe 6 hours a week.
LARGE. LIFE is set at between JPY 800.000 and JPY1.300.000 in pocket per month. Your security deposit should not exceed JPY1,000,000 and rent should be set at between JPY50,000 per month and JPY250,000 per month. You need 2 classrooms. This school has one full time teacher supported by part timers a few nights a week.
BIG. I am not going to discuss this category within this article. The financial exposure at this level is high. You need to seek face-to-face advice with a mentor.
In closing remember it’s all about balance. Figure your LIFE, then determine the correct location and premises.
When we first sold franchises, we sold at a very low price. In those days everyone wanted big areas. Today we know you must suit an area to suit your income and expenditure budgets. If the area is too big it will slow you down. Just as when buying an investment property, we should decide upon the price we offer determined by the rent we believe we can charge. Choosing a location for your first school should be determined in accordance with your LIFE.
Chairman, Smith’s School of English