Transcript: Episode 039 – Joseph Rocha on the Startup Years

Transcript for Episode 039 – Joseph Rocha on the Startup Years

Intro

In today’s conversation, we get to hear from the owner of a relatively new music school. We’re talking about the very earliest stages of building a music school and some of the practical steps Joseph has taken to finance his studio’s growth. We also talk about Facebook ads and conversion rates and all the fun stuff.

Before we get started, I want to add a bit of context for those listening to this episode long after its Spring 2020 release date. “Hail, Earthlings of the future. It’s helpful to know that this episode was recorded in mid-April 2020, right in the middle of Coronavirus lockdowns, when it wasn’t clear when schools and businesses would be able to re-open. When you hear Joseph expressing uncertainty about summer plans and projections for the year, that’s what he’s talking about.”

OK. End transmission. Jumping back to 2020. Here’s my conversation with Joseph.

Transcript

[00:01:20]

Andrea: Hi Joseph. Welcome to the podcast. Thank you so much for being here today. Can you introduce yourself and tell us about your studio?

Joseph: Yes, my name is Joseph Rocha. I’m 28 years old from Tulare, California. I own and operate Eager Studios music lesson business for all instruments or 90% of all the instruments. We’ve been operating for about two years and yeah.

Andrea: Yeah, and I was excited to have you on the podcast because you’ve only been in business for two years and so I think you’re going to bring a really fresh perspective of what those first years are like. There’s a lot of grind there and I’m glad you’re going to share that with us today. So can you take us back and tell us your story of how you became a music teacher and opened your studio?

Joseph: Yeah, so long story, a little bit less long, I graduated from high school in 2010 with the intents of becoming a music education major to teach a high school level was my goal, probably collegiate level. I did complete about two years of college before I found out college wasn’t for me, the workload, and trying to balance school and work and all that was too much for me to handle at the time so I decided to drop out and I joined my dad working at a dairy farm in a local rural town that we lived in.

A couple of years into that, maybe not even, I think it was 2012; I got a job at my old elementary school to teach music part-time. I didn’t need a credential or a degree or anything so I was like, “Cool.” I get to do what I want to do despite having spent thousands of dollars on an education. I was like, “This is awesome!” So I did that for four years and it’s pretty much building a music program from the ground up and I discovered that my heart wasn’t into how I originally thought that that’s what I wanted to do. It was a lot of bureaucracies and policies and I couldn’t teach my curriculum. I had to meet certain standards that I thought were, frankly, quite bogus.

So after four years of doing that, I quit and went back to the dairy full-time. During all this, I was part of a community band that I was a member of since I was nine years old and they had me volunteer teaching their kids’ theater program. So I was doing that a couple of hours a week just for fun and a student playing baritone at the time, he came up to me and was like, “Hey Mr. Rocha. Do you teach guitar?” And I was like, “Well, guitar is not a concert band instrument but if you want to come in 30 minutes before our class starts, I’ll give you a 30-minute private lesson. I won’t charge you for it. It’s fine, just come on in.”

So we did that for a couple of weeks and then he told another friend and I was like, “Alright, well if you want to come in 30 minutes before he does,” and we kind of make it happen. Next thing I knew, I had three or four different students coming in on like guitar and one wanted to learn how to play piano and I was like, “Maybe I’ve got something here.” So my dad, being my boss at the dairy, I approached him in late March of 2018 and I asked him if I could take a part-time role so that I could build a music studio business on the side. And he was like, “You know what? I’ve seen you how invested you are into that, like I’m going to give you the bereavement to go ahead and do that.”

So I went home that day and I put up the website and I put up the Facebook page and all that stuff, started printing out flyers and passing them around town and opened officially April 4 of 2018. I had about 12 students at the time and I was teaching inside the community band. They have allowed me to use that building and yeah, the rest is pretty much history.

Andrea: Awesome. So you’re just past your two-year birthday, congratulations.

Joseph: Yes, thank you very much.

[00:05:08]

Andrea: And since then you’ve grown quite a bit, right? Where are you at right now with the students?

Joseph: Sixty one students, I think was officially my last count at the end of February and then we’ve stayed stagnant through the whole thing that’s going on. Not a whole lot of students have been coming in and I haven’t been doing a whole lot of marketing, so 61 students right now.

Andrea: And I noticed you said “we” because it’s not just you anymore. What is your staffing like?

Joseph: I moved into a commercial location. Well, there’s a long story there too, but I moved into a commercial location right after Thanksgiving of 2019 and my goal was as soon as I moved into a new commercial location, I want to take a little bit of the load off of myself. I was teaching about 45 students on my own, so I hired a teacher in December to start training and cover a couple of classes so I can evaluate and teach him how to run our systems. He started as an official employee in January so I have a secondary guitar teacher.

[00:06:07]

Andrea: Great. Okay, so let’s backtrack then and fill in some of the details before that. So when you stepped back at the dairy, cut back to part-time, first, what a smart way to do it, keep the part-time income while you’re building up your studio. If you can do that, that’s great to do that. What changed in the way you approached your studio? Do you have a vision for it at that time of what you wanted it to look like? Take us back to what you were thinking at that time.

Joseph: Alright, so during my dairy time, I held a couple of part-time roles at other studios in a city near mine. They didn’t last very long. I was only working there for a couple of months before they stop calling me or when I didn’t even take the position. So I saw how some of the studios here taught and they focused a lot on “quick win” mentality, get the students in, learning by rote and stuff like that. There’s nothing wrong with that but I was brought up as a saxophone student and there’s no real way to teach rote to saxophone students. It’s pretty much, “These are your notes. This is how you play the notes. Memorize the notes. Memorize the fingers.” and then you could play.

So I always valued being able to read music notation. That’s one of the things that I really wanted to put into my studio. As far as certain clientele, I went to school for music so I had some experience in piano and I was self-taught in guitar and other band instruments. I think I’ve played them all by now so I have a wide range of knowledge on different instruments that I felt pretty confident in being able to teach a wide spectrum of instruments to beginning students.

[00:07:43]

Andrea: So you had a sense of what could set you apart from the other music schools in the area in terms of the different instruments you could offer and just the approach with teaching.

Joseph: Yeah, most of the other studios in town were basically just piano, guitar sort of stuff and sort of music, rote pieces. The more advanced students, of course, were getting like private lessons, into groups and something like that. I wasn’t very keen on groups at the time. I’ve since then changed my business model to allow for more group learning. I found a way that works for me but, yeah, I found out that there was no one really teaching the music notation side of it and I feel like that’s a very important part to it. I understand the quick wins and everything like getting students excited in learning how to play their favorite songs and sometimes that works. But if you want to see long-term success, my belief is that if you could get them learning music and through that slog on how to read music notation done earlier, they’ll have much more fun and success in the later years because all the hard stuff is done.

[00:08:44]

Andrea: How about things like the financial side? So you had taught just kind of because opportunities presented themselves. Did you find that as you were looking at really turning it into a business that you had to make any adjustments on the financial side?

Joseph: Yes, big time. So I had saved up about $2,000-$3,000 from my dairy business to start the whole thing, you know, get the website, get the logo done, which actually I did my first logo is very, very poorly done, print the flyers, which were more expensive than I thought, and all that good stuff. So then, as the studio grew, for that first year, I really didn’t even take any income home. I pretty much dumped it all back into advertising and trying to figure out different ways to bring in students. That’s when I started looking into Google AdWords and Facebook marketing, Instagram, and I started buying more courses online and really every single cent that came out that first year went right back in. I think at the end of my tax statement, I made a profit of like $7. I don’t know where that $7 went because my bank account was at zero the whole time.

[00:09:59]

Andrea: Taking advantage of all those self-employment expenses is that’s the way to do it.

Joseph: For sure. Well I had the benefit of having that morning job so I was able to pay the bills and keep myself sustained during all this and I felt like whatever money is coming in, now is the best time to reinvest it back into the studio to really grow it so I can reap the rewards later.

Andrea: How have you seen that pay off now in year 2?

Joseph: Big time. So we’re entering into year 3 right now. I now take a pretty modest salary, I guess, 20% of my earnings I take. I use something called the “Profit first” method. Have you talked about the profit first method?

Andrea: We haven’t talked about that, so go ahead and give us an introduction to that.

Joseph: Sure. So the “Profit first” method is a method created by Mike Michalowicz. He has a book on it called Profit First as well as a plethora of other business books. The essential premise of the book is to pay yourself first before allocating money to your studio needs and your bills and stuff like that. His analogy is kind of like dieting. To get a handle on your diet and to lose weight you shrink the plate size because people have a tendency to fill up their plates and then eat everything that’s on the plate and they tend to overeat that way. So if you shrink the plate size, you’ll save those calories. So you shrink your financial plate size, meaning bills and advertising spending and marketing, and all that money that you usually spend.

If you see $5,000 in your bank account, you have a tendency to spend the whole $5,000 into your business. So he wants you to allocate that money into different buckets or plates first before moving on. So what I do and what he teaches is take out your profit first. You start off by taking 1% off the top of your profits and then take out 15% for your taxes. Take out a healthy percentage for you to live on and then the rest will go into your business expenses account. What I do now is I take 10%. I’ve actually just increased it to 11% profits. I pay myself 20% in owner’s compensation, which is my salary, 15% in taxes to a separate account for the tax season at the end, and then the rest is divided up between my operating expenses, which includes rent, utilities, marketing, payroll, and everything like that. That’s about 50% and then I have 5% off the top goes into a retained earnings account for emergencies like we’re in now.

[00:12:35]

Andrea: Yeah, just having cash available to use. Awesome! Thank you for breaking that down that way. How does that work practically for you like at the end of the month, do you just see what your income was for the month and then write yourself that check or transfer that money? Is that how you handle that?

Joseph: Kind of. So I do it in two ways. In the book he talks about doing an allocation on the 10th of every month and on the 15th of every month, and this is different between studios. I know a lot of people do auto pay, so all the money comes in at the first of the month and then some people do pay by lessons so it’s a little bit more throughout the entire month instead of just one lump sum at the beginning. Mine is kind of a combination of that where I have 65% of my students on auto pay and the rest will pay by cash and check monthly. So I break it down into those 10 and 25 days by taking roughly $3,000 that first allocation and I do a split.

It usually looks like $300 to profit, $600 to myself, $450 to taxes, and then the rest is in the operation account, so which is like $1,500 in operation expenses. And then on the 25th, I take the rest of the money that was left in that bucket for the other allocation. It’s a little over 50/50 but I figure that I’ve run the numbers and I know that $3,000 allows me to do all that and still pay everything off. And I’d rather kind of be a little leaner at the beginning and if I don’t hit those numbers, and have the money coming in at the end to kind of fix it. And I also have all my bills coming out around that same time as well so it makes it super easy to just transfer everything at once and then be done with it.

Andrea: Okay, yeah, it sounds like you’ve kind of optimized your cash flow there.

Joseph: Yeah, it was a learning process so it hasn’t always been that easy but after knowing my financial numbers a little bit more, especially after moving into a commercial location where I now have to pay rent, I had to figure out, “Okay, how am I exactly going to get a rent payment done on the first by splitting everything up this way?” It was a little convoluted but I made it work for me.

[00:14:40]

Andrea: So in the last two years you’ve gone from 12 students when you started kind of investing more in this to 61 now. Talk to us about that growth. Can you tell us kind of the timeline when you were getting students, how you’re acquiring them?

Joseph: Yeah, the first big marketing push that I did right after I got my first trickle of students was I offered a three-month package. This is when I was doing per lesson rates. Now I switched to monthly. And I offered a three-month package at a slightly discounted rate than my per lesson rate which got a lot of students in through the door and then I converted them into the regular rates after their three month trial was over. Then I went into more of a monthly subscription kind of thing where it’s like a gym membership. They pay the monthly subscription they get X amount of lessons per semester and X amount of summer lessons with their tuition. And I found that that was an easier way to market my services as a subscription instead of a per lesson thing and it was easier on my schedule as well.

Andrea: And finances too.

Joseph: Exactly, yeah, everything.

Andrea: Projecting, yeah.

Joseph: For sure. The next big push that I did was getting heavy into Facebook marketing. I learned a lot about that, read like every book that you could probably think of and saw so many videos and started offering free meet and greets to get people coming in through the door and free trial lessons. My idea was I could do like a surprise and delight kind of thing to get people interested. So by offering the free meet and greet, parents and students thought they’re just coming in to meet and talk about the policies, and then I would surprise them with a free bonus lesson at the end of the meet and greet. So that kind of caught a lot of attention and my sign up rate was actually really, really good. I think 9 out of every 10 people that I saw during that time ended up signing up for lessons. So I was able to steadily build up over time.

Last summer I ran a summer exclusive promotion which was eight weeks of summer classes for a discounted rate and those students all stuck around minus one into the Fall and now, it’s just really heavily in the Facebook advertising. I do some local events as well just to get the name out there and for branding purposes because a lot of people come to me and were like, “Oh, we didn’t know we have a music studio in Tulare,” and I’m like, “Well, here we are. We’re here doing public events,” and this is exactly why and I have always garnered at least one to two students from every public event that I do. It’s very time-consuming but they’re usually on the weekends when I have nothing to do anyways, so it kind of helps out there.

[00:17:17]

Andrea: Definitely. I really like that three-month package idea especially for a new studio because it kind of get some commitment and I feel like you need that time to really decide, you know, when people say, we’re going to see if he takes the lessons, or whatever. Every teacher knows it’s kind of not a great metric for whether or not a child should be taking lessons but that three-month commitment is a really good way to get started and kind of know you’ve got some income to depend on for at least three months.

Joseph: Can I expand on that a little bit?

Andrea: Yeah, please do.

Joseph: So what I’ve noticed after doing this for a couple of years is that there is a 12-week cycle of enthusiasm that most students go through and this applies to music. It applies to working out and weight training or in losing weight and anything, any new habit. There’s a 12-week cycle. The first two to three weeks is great enthusiasm. Everything is fresh, it’s new, and it’s exciting. We’re learning things so fast it’s like, here’s C on the piano. Cool! Now here’s this scale. “Oh, my goodness, we learned our first song.” And then it starts to plateau a little bit and kids start like losing a little bit of enthusiasm and that is a steep decline through about Week 9 and 10, and then at Week 11 and 12, when things start finally clicking, their enthusiasm skyrockets up by Week 11 and 12, and they’re more likely to continue on past that.

It also builds in that habit of consistency. Now it’s a part of their weekly routine that it’s Tuesday, 4:00 o’clock, it’s lesson day, and then they have their practice schedules at home and it becomes a routine for them and they’re more likely to stick it through. That was my whole philosophy on that three-month package deal.

Andrea: Yeah, because if it had been two months you’d lose them because they’ll be expiring as their time commitment expires. Yeah, that’s such a great observation. It sounds like you’re really good at kind of dissecting your promotions and just figuring out why things worked or how to treat them to make them better. How do you do that? What’s going through your head when you’re running these promotions and evaluating them.

Joseph: That’s a good question. I’m just very observant at spotting trends. I see similarities happening between students all the time. It’s like a sixth sense where you know that by the time you get to this song and this method book everyone’s going to have troubles with this one note. Jingle Bells is my go-to, that last bit of Jingle Bells, tan-ta-ran-tan-tan, they always miss that third there and I’ve noticed it over like the first three, four, five students that now I anticipate that problem arising before it happens. It’s the same thing with the marketing. I know that if I do X and Y I’ll get Z and if I want to get A instead of Z, then I have to tweak something in X and Y. It’s kind of hard to explain but…

Andrea: I think teachers get that like we know there’s that song in Piano Adventures Level 2A that like that note and after you’ve taught it 15 times, you know to go through that part in advance, like you know that one measure is going to give them trouble, like that’s the first thing you teach. And so, if you can kind of channel that process or that sense into the marketing, yeah, I like that analogy.

Joseph: Thank you.

Andrea: Have you had any marketing flops over the last two years, things that you hoped would work and just didn’t turn out the way you expected?

Joseph: Yes, I spent an exorbitant amount of money on Facebook ads and that just didn’t result in anything. One of the things that I tried was doing a free lesson giveaway kind of trying to see if I can get students in and committed before charging them kind of like a pay after sort of thing and that didn’t work. Getting into technologies that I wasn’t sure how it worked when I first get into Instagram marketing, I just spent a lot of money testing certain things to know and I was like, “Know what? Just stick to the Facebook stuff,” the stuff that’s working. The flyer-ing around town is very time-consuming and I saw very minimal results from all that time as well. There has been a few but I think that as a business owner, you have to go through those flops to really get a grip on the stuff that is working so that you’re confident in the stuff that’s working so you’re not just trying these things for the sake of it. Try it for the sake of learning which things stick and which things don’t, kind of like writing ad copies or testing different photography or pictures with your ad copies as well. There are so many little things in marketing that is kind of hard to pinpoint down to a science and every location is different. So what works for my area won’t necessarily work for the city next to mine.

[00:22:02]

Andrea: Going to Facebook ads, are you running those consistently year round or are there certain times where you run ads?

Joseph: I usually run a campaign per month and my budget on that is usually anywhere from $100 to $300; $100 if I’m testing out a new type of ad, $300 if I’m using one that I know has worked before. So for example, when I run my summer camp, ads for my summer package ads, I know that the ad copy on that works, the photo works just because it has worked in the past two years already so I can kind of feel really confident in that. So I’ll change it up because I feel like every month there’s a different thing that I’m trying to accomplish, a different objective. So at the end of December, beginning of January, it’s big rush on like sign up for the Spring semester, towards the beginning of April to May it’s summer camps, and then in the summer, I’m always trying to fill up Fall. So it’s those cyclical things and then I run shorter ad campaigns if I have three spots open for piano and I get really specific on the openings that I have and I try to target people who’d be interested in those openings or that instrument, and I’m still trying to figure out because Facebook changes their algorithms all the time. So I had it down towards like people interested in learning piano and this income range blah-blah-blah, and they’ve taken all that away, so it’s now it’s different.

[00:23:33]

Andrea: Yeah, Facebook, yeah. Did you arbitrarily set that $100 to $300 budget or is it based on a percentage of sales or how did you come to those numbers?

Joseph: That’s a difficult question to answer to really pinpoint down. It’s a little bit of both, actually. So the reason I picked the dollar amounts is because that’s what I found gave the best return on the investment. So for a $100 ad spend with a really solid, concise targeting on Facebook, I was able to get anywhere between 20 and 30 leads, and from those leads I knew that about 50% of them would convert into a meet and greet. And from there, I would get about 80 to 90% sign up. So what I took is these ads that I know for sure will work and I can get these results at the $100, let’s try it out at a $300 level.

So what happens in that changed level is that now Facebook is taking that ad and showing it to more people and sometimes it’s a timing thing, like it’s the wrong time of the year or something, but it might show the ads to people who aren’t necessarily ready to go, so it’s not a 3x crossover from the $100 to $300 but I do see that boost. So whereas I’d get 30 people interested in the $100, I might see 60 or 70 in the $300. It is a little bit more of a swing in the positive direction so that’s why I do that.

[00:25:14]

Andrea: Okay, that’s a good point to bring out that at the $100 level you were getting the people who are most, most ready to make a purchase to learn piano, and when you open that up, you’re getting those people but also some that are further out on the spectrum less ready. So I can see why your conversion rate might be different, but it’s all numbers in the end, right, like if you’re still profiting, getting enough new students from it, it doesn’t mean it’s not worth it.

Joseph: Exactly.

Andrea: It’s how the lower conversion rate over…

Joseph: Exactly, and if you know that something is working, dump as much money as you can into it. It’s something that I’ve learned from reading Gary Vaynerchuk and the other business gurus, it’s like if you know something’s working, throw all of your eggs at it right now because in 6, 10, 18, 20 months, it won’t work anymore and then you have to find something new.

Andrea: That’s true, yeah. And if you know, to use just round numbers, so you’re $100 a month per student and you toss $100 to get one, like you’ve paid that off in one month and you’ve got, depending on your retention rate, months and months of income recurring from them.

Talk to us about the other– just in finances, like benchmarks, where have you been at Year 1, Year 2, going into Year 3, what are your projections?

Joseph: So like I said at the beginning, Year 1 I dumped everything back into the studio which I feel like in retrospect was a good move on my part because it really allowed me to hit that gas and build up a nice student clientele base that I want to say, I don’t have the exact numbers in front of me, but I think 30% of the students that I ended up with Year 1 are still currently with me going to Year 3, so I think I picked up some really great students by doing that.

So Year 2, last year 2019, was all about growth and sustainability. There was a whole thing with my old commercial building that we didn’t talk about but my Year 2 was about revenue and gross revenue and it was a little over 200% what it was in Year 1 which netted me, I want to say, I think I brought home a little over $15,000 in the year, and this year, projecting forward, I know it’s only been a couple of months, I only have one quarter’s worth of data to go off of, but I’m projecting about $25,000 to $30,000 take home and my studio should eclipse very near $100,000 by the end of this year as gross revenue.

Andrea: Awesome.

Joseph: Yeah. It should get really close. This whole crisis I guess has kind of thrown my projections off just a little bit because of the uncertainty.

Andrea: It’s been an interesting quarter.

Joseph: Yeah, it’s been completely interesting like all my growth plans for the summer and stuff has been put on hold because who knows if we’re going to be able to do summer camp. So I don’t know how it would translate over to online as well, so I’m kind of have to evaluate that, but I’m pretty positive that I’ll be able to hit those numbers come the end of the year and if not hit them, then get extremely close.

[00:28:21]

Andrea: Awesome, okay. Are there any books or resources that had a strong influence on you as a studio owner or entrepreneur?

Joseph: Yes, I’m a huge reader. One of the great things that I like about my day job is that it’s physical labor and not mental labor so I used that six hours that I have every day to listen to audio books and training podcasts and what not to keep me fresh. A few books that come to mind, number one is Mike Michalowicz’s Profit First. I implemented that very, very early on in my business right after year 1 when I was dumping everything in I began doing Profit First in December. I finished reading the book in November so I started implementing that in December and the profits were very meager at the beginning and now they’re fantastic. I look forward to every quarter just for that profit distribution. My last one is over $1,300 and I was like, “This is great. It’s bonus money.” So definitely, highly 100% recommended, Profit First by Mike Michalowicz to get your finances in order.

Other books that come out to me, obviously the E-Myth is a great one about how to create systems in your business. Mike Michalowicz also has another great book on systems called Clockwork but I do prefer the E-Myth book. Atomic Habits, so I just finished reading that one. That one is good for personal habit-building, for business habits and just becoming a better person over all. Gary Vaynerchuk, I subscribe to him. Anything that’s Gary Vaynerchuk I go for full-heartedly. His book Jab, Jab, Jab, Right Hook is a great marketing book about how to put content out in organic fashion and to these different platforms, his book Crushing It is great and the Thank You Economy. Those three I highly recommend.

And then the other book that I really enjoy, I just finished reading it in January, is called Extreme Ownership by Jocko Willink and Leif Babin, because I’m taking that next step and going from just owner/operator to now owner/operator/boss/ leader. And I want to do the best by my employee and so that book was really eye-opening into what it means to be a leader and how to take control and how to empower your–I don’t want to say subordinates but I guess that’s what it is–empowering your employee and you’re building your team…

Andrea: Your team.

Joseph: It’s not really a team. It’s just one guy, a team of one, yeah, how to empower your team to take ownership of the responsibilities and how to praise them and then take the blame. It’s pretty much the essence of that book is anything good that happens to your business is all because of your team. Anything bad that happens to your business is your fault. And I had some experiences this year where I had to cop some of the blame on some things and you know what? It makes you feel good and it makes them feel good and just makes everything run smoothly. So those will be my top books. And then, there’s so many, like right now I have a goal of reading 60 books this year. I just finished my 16th book. I read a lot. But those few that I just rattled off, highly, highly recommended.

Andrea: Yeah, this is like a whole 20/20 reading list that you’ve given us already.

Joseph: Yeah, pretty much.

[00:31:35]

Andrea: You mentioned the setback you had in year 2 with your commercial building. Go ahead and tell that story.

Joseph: Yeah, so this is a fun story. So I was teaching out of the community band location for about a year at that point or not even a year. It was only a bit about six months. I had 20 something students and the directors of the board of that community band kind of approached me and said, “Hey, we appreciate everything that you do for us and we want to help you out as much as possible. Don’t feel like we’re kicking you out but we’re kind of kicking you out. You got to find a place.” So I was like, “You know what? I think it’s about time I find a commercial spot.”

I checked out some different options and there was a place about 900 square feet with three teaching rooms and a nice little lobby for $900 a month. I’m like, “You know what? I can afford this. Let’s do it.” So I met with the landlord and signed the lease, got moved in. This is September 1, 2018. September 29th, it was a Saturday or a Friday, I was sitting at home watching TV and I get a call from the fire department and they say, “Hey, are you the tenant at this building?” and I said, “Yes.” And was like, “Well, there was a fire in the neighboring building and it got into your building. We’ve contained the fire but you need to evacuate all your belongings and this has damages.” and when he talked I was like, “Oh boy. I’ve been in here for a month and this has happened.”

So I rushed over there and thank goodness the fire was contained to the neighbor’s building. Aside from the really bad stench of bonfire in my building, that it took months to get away from all my instruments, nothing was damaged on my end. It wasn’t my fault so my insurance wasn’t raised because of it, but it did put me out of a commercial location for a little bit and talking to the landlord, he first said, “Oh, we’ll have it fixed in 90 days.” I was like, “You know what? 90 days I can do it.” So I called the community band again and I was like, “Hey, I need to use a spot for 90 days. This happened,” and they were like, “You know what? Yeah, come back in until the place is fixed up, then you can leave.”

Well, 90 days turned into “by the summer” and so I told them and they’re like, “No, its fine.” And then “by the summer” turned into “beginning of fall,” September, which then turned into “Oh, we’ll have it ready by November.” And at that point, I was like, “You know what? I’m tired of waiting. I’ve got 40 students just under and I know the community band is not super keen on me being here wasting all their electricity and what not even though I was helping out paying for the utilities a little bit. I said, “You know what? Just give me my security deposit back. We’ll end this. If you guys open up before I find something else, I’ll gladly re-sign.” But I found a better location in downtown for– It was double the size for only $300 more a month and now I was at a much better position in my business to be able to afford that. So I signed the lease immediately, moved in right after Thanksgiving and the rest is history. And then to thank the community band for having me there for over a year, I wrote them a nice $1,000 check for one of their events, so yeah it’s been a wild ride.

[00:34:43]

Andrea: Yeah, all this in two years of business. Good job persevering through all that and yeah, at that early stage and just four weeks after moving in, I just can’t imagine how demoralizing that would be.

Joseph: It was crazy but in retrospect, and we talked about this before we started recording, is I find that there’s always the universe or God or whatever higher power you believe in, has ways of trying to test you to see how badly you really want these things. So I had these two instances happen was when I dropped out of college my counselor at the time said, “Hey, maybe this isn’t meant to be. Maybe this isn’t your path in life and maybe this is your wakeup call.” At the time, I was completely disheartened and felt like I’m an utter failure and looking back on that experience now, I believe that it definitely wasn’t for me and that I needed to go through that hardship to be where I am now.

And then with the fire, I had to look at that hardship and be like, “You know what? Maybe I wasn’t in the best financial situation to move into a commercial location and I needed more time.” And now, I’m in the perfect situation and at the perfect location. This location is 20 times better than my old one. And I think it’s just a test from God or the universe or said higher power that how badly do you want something? We’re going to throw everything at you and if you can survive through all these crazy situations then you’ll be fine in the long run. And I try to keep that at the back of my mind that things do happen for a reason. It might not seem to you what that reason is in the moment, but just keep going through it and you’ll figure out what the reason is and you’ll be glad you went through those hardships.

[00:36:27]

Andrea: I love that. Man, how do I follow that? That was great.

Joseph: I have no idea.

[Laughter]

Andrea: How about what’s next? Any goals you’re working towards right now?

Joseph: So for the end of this year, I guess, my overall goal is just to survive and stay sustainable and make sure that my students are getting that education throughout this tough period and be there for them in any way possible. With everything that’s happening, we’re looking into some online options. I’m thinking about doing some online starter courses that people can use at home without any instruction from a teacher but also be available to them if they need that. I feel that I will spend my market reach into other areas. Looking down the road, maybe 5-10 year goal is to open up another couple locations.

My big thing is that when I was growing up, I lived in a small town, a small community. I didn’t have a band in my elementary school. I learned through the community band that I’m currently still a part of. I want to bring music education to areas that aren’t as affluent in that because I was sitting first chair saxophone in high school and I went to college and was sitting fourth or fifth chair in their B band just because I lacked that education growing up and I was already behind. So I want to expand into some less affluent neighborhoods or communities to provide their kids with the opportunity of music whether or not they decide to pursue it in the long run. Just because, as we all know, there are so many benefits that come with music and they should be exposed to that and learn it and get involved in it because it does open so many doors, not necessarily as a profession, but just as a form of enjoyment, entertainment or trying to keep kids off of the street.

There’s a business nearby that there are two brothers who were going down the road to a very bad life, drugs and gangs and stuff and they got involved in a little band with some friends and that changed the course of their life. And now, they’re business owners here and it’s something small like that, like if I can impact just a few more students who didn’t have that opportunity, that’s what I’m all about. So my 5 year to 10 year plan is to try to reach out into another couple of underserved communities like that.

[00:38:50]

Andrea: Thank you for being here today and just kind of taking us through the first two years, I mean, you’ve accomplished a lot in two years but I think that just seeing kind of what it looks like on the ground of those early years is really helpful. Where can listeners get in touch with you?

Joseph: The best way to get in touch with me is you could email me. It’s Jo****@ea**********.com or you can call me or text me. I’ll put the number out there, I guess, 559-3150-BAND (2263). Yeah, just give me a call, give me a text, and if you need any help with anything or just a motivation and you want to know more about the crazy stuff that I went through, or if you need a book recommendation, just hit me up. I’m an open book.

Andrea: All right Joseph. Thank you so much.

Joseph: You’re very welcome. Thank you so much for having me. I’m a huge fan of the podcast. I look forward to it every Wednesday and to be featured as a guest is a dream come true. Thank you very much for having me. I appreciate it so much.

Recap

I had so much fun talking to Joseph.

I couldn’t help but notice the way he makes the most of every situation he’s in, extracting all the value he possibly can, whether that’s by listening to audiobooks while he’s working his dairy job or studying the results of a Facebook ad campaign so he can tweak it in the future. He’s analyzing and learning through everything.

Speaking of Facebook ads, I want to pull out some generalities about how Joseph tracks his results that will apply to any studio.

Notice how Joseph tracks every level of his sales funnel. He knows that spending $100 on ads for a summer camp will get him 20-30 leads, of those 50% will follow through with a meet & greet, and of those, 80-90% will enroll. If we take the conservative end of those ranges, that amounts to about 8 students from that ad.

Having awareness of these conversion rates at the different levels of the funnel, tells Joseph several important things.

First, it lets him compare ads to see which are most effective.

It also shows him what level of the funnel to hone in on if he’s trying to improve it. If he tries a new ad and only gets 2 leads, he might need to tweak the ad copy or the audience, whereas, if the top of the funnel looks great and 20 students schedule meet & greets, but only 10% become students, then he’d want to look at things like the experience prospective students have when they visit the studio.

I actually have a worksheet for using a sales funnel as a diagnostic tool that I’ll share in the show notes at musicstudiostartup.com/episode039

The last thing I want to touch on is an important metric that Joseph eluded to without naming it, and that’s the customer acquisition cost. This is what it costs to bring a new student into the studio.

In Joseph’s example, $100 in ad spend, ultimately translated to 8 students enrolling. That means that his customer acquisition cost is about $12.50.

Knowing THIS number is really powerful.

Now we can compare the effectiveness of ALL our different marketing efforts. If a booth at the farmer’s market is $100 and it generates 10 students, the cost of acquisition here is $10.

If we advertise in a school newsletter for $150 and get 5 students, the cost of acquisition there is $30.

It’s not the only factor for consideration, but it is an important one.

Knowing the cost of acquisition can also help us set realistic advertising budgets to achieve our goals.

For example, if I’m promoting summer camps for Joseph’s studio next summer and our goal is to have 100 students, but I only put $500 into advertising, we might hit our goal, but I shouldn’t be surprised if we fall short because I know in the past, it cost us $12.50 to get a student, so with a $500 budget, I would only expect to get 40 students. For the best shot at reaching our goal, I should budget $1250 and build that assumption into the cost of the camp.

OK, I think I’ve done enough numbers for today.

I’ll save the rest for my finance course, which delves into all of this and breaks it down to help you make meaningful decisions about your business. To get updates about this course, drop your name in the interest form at musicstudiostartup.com/finance.

You can also find links for all the resources mentioned in today’s episode at musicstudiostartup.com/episode039

Thank you, Joseph, for letting us dissect and learn from your business. Keep up the great work!

That’s all for today. I hope you’re all doing well. I’ll be back next week.