[Transcript] Episode 071 – Ashwin Kotian
Transcript: Episode 071 – Ashwin Kotian
Transcript for Episode 071 – Ashwin Kotian on opening a Bach to Rock Franchise
071 – Ashwin Kotian on Opening a Bach to Rock Franchise
Today I’m talking to someone with a background in tech who came into music school ownership by opening a franchise! He brings a really interesting perspective to the conversation and there’s a ton to learn.
We did have some audio issues early on in the conversation, but we get them worked out about 15 minutes in, so I ask for your patience through those or you can jump ahead at the risk of missing something awesome. Your choice!
With that, here’s my conversation with Ashwin:
Andrea: Hi Ashwin. Welcome to the podcast. Thanks for being here today. Can you introduce yourself and just tell us a little bit about your background?
Ashwin: Hi Andrea. This is Ashwin Kotian. I live in Austin, Texas. I am now a small business entrepreneur but I come from 20 years of background in the high tech industry as a product leader amongst various things but happy to be here and tell you about my experience in the music industry so far with the music school.
Andrea: Yeah. I’m excited to hear your perspective because you’ve had a career in other fields and are new to the music industry. So talk about you just opened a music school. Can you tell us a little bit about that?
Ashwin: Yeah, absolutely. So the music school that I opened is called Bach to Rock. And Bach to Rock is part of a franchise or about 45 Back to Rock music schools in the United States. The system has been in place for the last 10 plus years and I basically decided to bring a Bach to Rock Music School to the Austin area, I would say, to accomplish a couple of goals, one is I have always wanted to have a career in the music industry. My passion has always been in music. I have been a drummer in a heavy metal band. I’ve been a DJ for the last three plus years but my foundation has always been in tech. They have been in business all the way from Silicon Valley to Austin and I’ve sort of, after reflecting on the last 20 plus years of my career, I feel I’ve come to a point where I want to try something else. I want to do something different in, you know, having two young kids at home and have been part of their after school activities, taking them to music school, swimming and a bunch of other activities. I realized that my true passion really revolves around something to do with music, something to do with kids and giving back to the community.
So I think it was just the perfect inflection point in terms of me wanting to sort of step away from tech for a bit, take a pause. Some may call it a sabbatical from tech and kind of do something else so I decided to open a music school and after a lot of due diligence in terms of opening a non-franchise school versus opening another kids-related business and not music related. I decided to head down this path and ended up opening outside the Austin areas the first Bach to Rock Music School.
Andrea: Alright. Interesting. Okay, so you knew you want to start it sounds like a kid-focused community focused business was sort of the goal and it sounds like you considered a few different options in that arena before settling on the Bach to Rock. How did you evaluate those opportunities?
Ashwin: Well, a couple of things. One is I wanted to focus on the community that I lived in. So I’ve lived in this neighborhood since moving from California about eight years ago. I’ve been in this area, you know, for quite some time. I would consider myself an Austinite after eight years of living here, although my heart is still with California. But sort of having met a lot of people in the community here and most of the folks in this part of Austin, you know, first of all, most people who live in Austin are not originating from Austin. People born in Austin, you could consider them a minority but most folks who have moved to Austin they’ve come from different parts of the United States, you know mostly from California, New York, Boston, the DC area, and have gotten to know that there is a large affinity for people of this demographic who work in tech, who work in education, who work in healthcare. They’re always looking for things to do with their families, with their kids, and I felt that I had the opportunity to offer something in music or something else that I have what I consider a core competency. My core competency is tech. It is really business and when after, you know, kind of exploring a few other non-music opportunities, doing some due diligence in terms of both the market, the financial elements around it, as well as looking at what are the success metrics and competencies I can bring to the table to make this a potentially profitable venture, I decided to go down the music school.
Andrea: Okay. Alright. Did you consider other music franchises and it is Bach to Rock and several other music and arts. I’m not sure if that’s franchise or that’s company-owned but did you consider other music franchises?
Ashwin: Yeah, actually before I went down the franchise route I was looking at investing in a music school in the area, always looking to support small businesses, always buy local, support local, and my kids were going to this music school where I was really impressed by the way they educated their kids. They didn’t really have a formal structured mode of education but it was the personality is well registered once I came in and I really wanted to invest in that venture, but later on when I spoke to the owner and founder she let me know that there were a bunch of other investors in play and after sort of looking up the profiles, I kind of realized that I don’t think that I would be able to execute on the vision of what I have for a music school. To give you a little bit of a backdrop, I mean, I wouldn’t even call myself a part-time musician because the last musical gig I had was back in 2005 in my heavy metal band where we used to play gigs open for some large metal bands in San Francisco. We got featured in a trash metal documentary. That was back in 2005 but I was looking to bring in elements of not just rock, all genres of music. I wanted to cover all sorts of instruments from classical to neo school to electronic music. You know I have a home studio, not quite a recording studio but I was sort of billing it out and I wanted all of those elements in my music school and I didn’t see that [00:07:22]. I had decided to pursue that in-depth. But at that point, when I decided to invest in that music school I knew that if it wasn’t that music school investment I didn’t want to invest in music. I wanted to learn music and that’s when I decided to explore.
Coming back to your question about other franchises, I did look at School of Rock but I wasn’t too impressed with a couple of things. One is I didn’t quite get that they were going to be a partner in terms of making you a new music school successful. They were definitely providing a playbook. They were definitely talking about branding. They were talking about all of the things you would like to hear but it’s not the vision I have for my music school. A lot of elements in terms of the elements were missing and they were very much focused on rock music and I did not want that to be a limiting factor, I mean, I’m obviously biased coming from a heavy metal background but I didn’t want the music school to be just about rock.
So as I started looking at all the boxes I wanted to check in terms of my music school, School of Rock did not fit the bill and it just so happen that as I was researching all alternative options, Bach to Rock sort of came on my radar. I did my due diligence in terms of content that was out there, looked at some of the financials and at the end of the day decided to speak with their business development rep with whom I had a very enlightening conversation and several more of those afterwards. It took me about six months before I decided to move forward with that franchise.
Andrea: I see. Okay. So it sounds like there were some personal values you had in terms of variety of music you wanted to be able to offer and not all the franchises gave you maybe that flexibility.
Ashwin: Yeah, and to be honest it was the School of Rock. I did not look at another franchise. I also looked at research that seemed to suggest that Bach to Rock has a music school establishment, had been growing over the years, obviously until Covid hit which impacted everyone. I would say from an offering point of view in terms of what they had to provide to prospective students in terms of the curriculum, again, going back to those boxes that I wanted to check, everything from a recording studio to a performance stage to having a well-structured curriculum to multiple genres all ages and I would say something that was very near and dear to my heart, you know, having been a DJ for the last three plus years. I wanted to be able to teach people how to DJ and they had that offering as well. So it was a no-brainer because I obviously have a lot of experience in running a business and businesses, everything from a small startup generating $10 million to large corporates that did a 100 plus million dollar PNL but I had no background in running a music school, right? And I’ve always been a self-taught musician, so for me, having a structure, a set of options that aligned well with my goal for a music school, I think Bach to Rock was the best fit.
Andrea: Yeah, it sounds like it. And what was the process like from the time you decided Bach to Rock was the franchise you’re going to go with? What happened then? Are you meeting with people or are you signing contracts? What are the next steps?
Ashwin: So I would say right from the first call I had with Bach to Rock up until the time I decided to sign the preliminary paperwork, to come to investing in the franchise, it was about six to eight months. That mainly involved a lot of weekly calls with Bach to Rock going over every aspect of the business right from what does the startup phase look like. What does operation looks like? What does customer acquisition look like? What does student enrollment look like? What does sustainability look like? What are the metrics for success in terms of running a successful Bach to Rock music school? How do we do marketing? What are the trends that Bach to Rock has seen. And obviously all of this was pre-Covid. In terms of markers to identify when you are behind the curve, when you are ahead of the curve?
I’m kind of looking at everything from market metrics to financial metrics to customer satisfaction metrics, kind of understanding the business in and out was my primary goal and once I sort of had a better understanding of the various mechanisms in play, if I were to open and run a Bach to Rock music school, it was then down to really looking at the numbers. Is it something I’m willing to invest in? What sort of ROI should I be targeting for the investment I would be looking at thinking? And really, what it really boiled down to was the communication I had with the Bach to Rock team across all levels. All the way from the CEO to the BizDev team to the marketing team to the Operations team. I also spoke with a couple of other Bach to Rock franchisees, one in the Atlanta area and another in the Houston area, and they have been around for, I think, anywhere from three to five or more years. They gave me a lot of feedback and they gave me pointers in terms of what to look for based on their own experiences.
So collectively, after looking at various aspects of the Bach to Rock business and also doing my own research here with my core market which is Cedar Park, Austin, Leander, Round Rock, kind of looked at all of the demographics around potential parents looking at the students, looking at school systems, looking at drive times, peak hours. So it was both a qualitative and quantitative exercise across those six plus months that this is the path I want to take.
Andrea: Okay. And those conversations with Bach to Rock, were you leading those? Were you asking questions or were they guiding you through metrics and things that were important?
Ashwin: Well I think I was probably—in their own words—I was one of the few folks that had challenged the numbers they threw at me. Again, coming from a tech business background and you know, in general, I always rely on data. The data they provided was very much cookie-cutter based on what they had out there on the web. They did their own research so for my market when I looked at the data I collected on my own then those data points didn’t seem to match. Their data was outdated. So I questioned them on a lot of things and not just the market data but also growth trends. I presented scenarios and, again, all of this was pre-Covid, right?
So they sort of appreciated me poking holes in their business model and I think their openness and their communication and acknowledgement that some of their data points were flawed, not just specific to my market, but also with they had gone about things maybe from a marketing point of view. Again, having spent a lot of time in tech marketing, I basically asked them why they were not doing Task A versus Task B. Why were they focused on events versus visual marketing, the proportional bend across those different marketing channels? All of those questions I think they were also looking to make sure that I am the right investor to bring in as a franchisee. And for me, I was trying to do my own due diligence to see on paper Bach to Rock looks great. But if I were to actually dip my toes in that water, will I be able to swim once we kick things up, right? So it was really that goal of getting comfortable, getting to know the business inside out and then wedding my data points versus theirs.
Andrea: Yeah. I can imagine that. Someone with your background with maybe be more equipped to ask those questions than the average music teacher or even just first time franchisee, so I could see how that would be valuable to Bach to Rock as well just upping their game with their data. What kind of investment does it take to start a franchise from a franchisee?
Ashwin: I think that’s a very open ended question because that answer would depend on which franchise you’re interested in. If you are talking about a music school franchise specifically, I’m a little blurry on the School of Rock proposed investment structure but I would say a music school similar to Bach to Rock you are looking at an initial investment of approximately half a million to just get started and that is just the capital cost of investment. I would say for the first couple of years you’re looking at adding another quarter million dollars every year to be able to run operations for the offerings similar to what Back to Rock provides.
Andrea: What’s the value that you get for that? I know when I started my first music school I naively didn’t understand the value of a franchise and then it was up to me to invent all of those systems and develop sign up forms and all these simple little things that really pile on. So can you describe for someone who’s maybe never thought about franchise what the value is? What is it that they’d get that makes it worth that investment?
Ashwin: I think there are two parts of it. If it’s related to the previous question of how much investment is required, that investment is not specific to a franchise. That investment is specific to the type of music school you want to build and offer and continue to operate. If the question is only specific to value associated with a franchise, I would say at least for me it was in the context of flattening the learning curve. More so in terms of having a curriculum to be able to be taught to students in terms of having the back office systems to be able to basically start enrolling students from day 1 without having to build it yourself. And again, that’s not really a complicated set of mechanisms but the fact that you are looking at everything from capturing leads to enrollment systems to billing systems to curriculum delivery systems to training systems.
Everything around, both the student lifecycle as well as the parent lifecycle, from the time that they come in as a lead to the time that they graduate across various programs that we offer, I would say at least the context of Bach to Rock it’s a lesser known brand than something like School of Rock. Otherwise, I would say some franchises you can stand to gain from the brand equity that’s already in place. So you do have to spend in marketing but at least some of that marketing investment is preloaded if you were to join a more established franchise. But again, a lot of that value is perceived value based on what you have to bring to the table versus what the franchise brings to the table. For someone who maybe does not have a business background, for them a franchise will probably add a lot more value because they have the business playbook figured out, right? It’s a matter of you just kind of running with that playbook in your market and executing on all of those whatever, 100 steps, 150 steps, et cetera, right?
For me, I actually challenge that playbook. I customize that playbook for my market because I feel I am the expert in my market. I know how to run a business. What I do not know up until four months ago was I did not know how to run a music school. I did not have any experience running operations from enrolling students to scheduling teachers to ensuring that the right teacher was set up with the right student and we have the ability to monitor and report on how a teacher is doing, how a student is doing, how a parent is doing, in terms of their perceived value from my music school, right? So if you look at across the board, there’s a lot of value that a franchise brings to the table but the true value is I would say a net of your competencies that you bring to the table. Subtract it from the overall franchise value. I think that’s the true value you gain with going with the franchise. But at the end of the day, for me specifically, it was about shortening the learning curve and having the expertise, having the backend systems to be able to enroll students from Day 1 and be successful from Day 1, relatively speaking of course.
Andrea: What’s been different as you started this music school versus the other businesses you’ve started?
Ashwin: That’s a good question. I would probably say learning the operation side of things has been the most distinctive element of it. And just to give you a comparison, so when we talk about any business, my philosophy has been understand what market you’re operating in, who the players are, who are your customers, who are potentially going to be your partners, what problem are you looking to solve, how do you solve that problem, what product or service are you going to introduce to solve that problem and what is the value in that solution or product that you bring to the table? Now from a philosophy or structure point of view, everything remains the same. But as you sort of peel the onion a little bit, you kind of look at it, “Okay, marketing, is that the same in both markets?” No. You’re talking about two different demographics.
My background in business has been mostly in enterprise, everything from small to mid to large size businesses. Here, I’m operating in a consumer market. Understanding while I knew what the community was like and you would type off demographics I wanted to target. I did not know what the buyer propensity was for let’s say a DJ curriculum because this was brand new. There are not many DJ schools at least in this area, right? How do you prioritize that? How do you sell that? How do you market that, right? So those were some of I would say the operational side was very different for me. In the tech world I would say it’s always about new technology that you keep researching, you keep innovating and that sort of where a lot of the learning curve comes from. The market intelligence is sort of built in you sort of expand on over the years. You sort of know that market because you’re always in touch with the market. But as a new small business owner in the consumer segment, for me it was really a learning curve for what the consumers want, what do their kids want. How do you sell the value of a music offering to parents? How are you going to differentiate yourself from any other music school? So all of those elements of what, who, why, how is what I have to go through.
Andrea: I see, yeah. Yeah, then I talk to music teachers all the time about how we’re marketing our lessons often to parents but then the lesson itself, in person experience, is marketed kind of towards the kids. They have to enjoy it too and we’ve got two customers even though only one is paying.
Ashwin: At least on the tech side we sort of broke that down in terms of who is the customer and who is a user. There’s a customer experience element and there’s a user experience element and I think that principle also applies here because your customer there is the parent. The user in that example is the student.
Andrea: Yeah. I guess you have done some of that with your enterprise offerings where you might be selling to a buying manager but it’s a staff using the software or something.
Andrea: What’s the ongoing financial arrangement, like with the franchise, once you bought in and you’ve got your location running? How does that work?
Ashwin: In general terms, without being too specific, there’s a certain range that most franchises operate on and the business model in terms of royalty, which is where they make their money, it can be anywhere from I would say anywhere from 9% to 13% of your gross revenues. That’s the fee you pay to be continually invested in the franchise. There is an initial startup fee that you pay to become part of the franchise and basically obtain the license to open a new establishment under that brand. That can range anywhere from $30,000 up to $50,000 depending on the franchise and the investment.
Andrea: Okay. And then the other startup investment from you is things like a building and building up that building?
Ashwin: Yeah. So the music school, and again, it really depends on how you go about with your buildout. So buildout is very expensive. You break down the number that I sort of quoted in terms of the initial investment to start or to buildout the music school off that half a million, the number that I mentioned, for a Bach to Rock type music school buildout you’re looking at something in the vicinity of $250,000 to almost up to $350,000 just in the buildout, depending on how much square footage you’re going to have for the music school. There are a lot of music schools out there which are basically no different than an office condo if you maybe have just walls and doors. They might have some sound panels in there but depending on how you go about soundproofing your music school, how you go about thinking about what you need to put in as part of the buildout, whether it’s the wall type, whether it’s a flooring, whether it’s putting a hard lead on the ceiling. There are a lot of factors that go into the cost associated with building it out. So got to have a pulse on this is what it costs to build a music school. I can tell you what it costs to build a Bach to Rock music school but then it depends on what sort of quality are you looking to build it.
Andrea: Yeah and you described like you’ve got a recording studio, don’t you? And there’s plenty of technology to go in there and lots of ways to spend money.
Ashwin: Yeah, the recording studio, the performance space, I would say those are definitely the cost drivers. I would say one of the biggest considerations in terms of the build out was that we wanted to make sure that we know that we’re going to generate a lot of “sound” or we want to call it music. Others may consider it noise. How do you keep noise out of the tenant’s premises, right? There will always be some amount of noise that are coming through but what’s the best you can do so that you are not in violation of your lease agreement? Landlords have all sorts of stipulations that they’ll put in there and, actually, thinking back on the journey through the build out, a lot of time was spent in just negotiating the lease. So not just in the context of the cost associated with running a music school because one of your biggest costs is going to be rent, right? And depending on the location, you obviously want to pick the best location that you can afford and that’s something I did not want to make a compromise on. So the building is definitely going to be one of your biggest cost drivers.
Andrea: Is negotiating that lease and identifying the space something that Bach to Rock helps you, guide you through that process?
Ashwin: Yes, but I’m sort of a Type A personality. I wanted to make sure I drive all those decisions and they were happy to let me make those decisions just based on some of the data I had made available to them and also knowing my background, they were very comfortable in me making that choice. At the end of the day it’s really up to the franchisee to make the choice on location as long as it’s approved by the franchise.
Andrea: Where are some places where Bach to Rock does dictate this is the way you need to do things and where are you given more freedom to do things the way you want?
Ashwin: I would say the area where Bach to Rock dictates things is really the curriculum and I’m happy that they have control over that because you don’t want to have customized versions of the curriculum floating at every other Bach to Rock location. Consistency is key because we pride ourselves in delivering a consistent music education and experience. For something that’s been proven over 10 plus years so why change that? There is control on the franchise and in terms of the branding. There are a few, I would say, rigid structures in place which might be valid in terms of what they want to be able to control. Of late, we have been given leverage in terms of content creation for local and regional marketing because you know content is key in this day and age. Digital marketing is key and the franchise realize that they cannot control all elements of it because it’s going to stunt our ability to reach broader markets or to reach deep within our market, so they have to let go on some aspects of it. So I would say curriculum, national level branding and maybe the systems in play, the back office systems in play that I really do not want to touch. I would love to add additional things to the mix, something like a CRM if you may, integrating things like Salesforce, Hubspot, things that every other company is using in the digital marketing field. But some of those things are not quite there yet but, again, I’m not complaining as much.
Andrea: It is 10 years in development, is there still growth?
Ashwin: Yeah. As I said earlier, there are about 45 Bach to Rock schools in the United States and counting so they clearly have that going for a while, they have done something right and most of the Bach to Rock owners that I have engaged with, many of them come from either a strong musical background or they come from a strong business background, I mean, the proof is in the pudding. They have invested in these businesses for a really long time. I don’t know of a single Bach to Rock owner who has exited their investment yet. So all of this, again, data points give me more comfort in terms of moving forward with this investment.
Andrea: Yeah, it sounds like it’s well thought through and you have evaluated it thoroughly. I’m sure with Bach to Rock they’ve got their financial models and know what it takes to build a sustainable music school and to give you guidance as to how large of a school, both in terms of square footage, lesson rooms and how many students it takes to have a sustainable studio?
Ashwin: So the first part is a relatively easy one. In terms of the size, a typical Bach to Rock school looks for square footage in the region of 2,000 square feet up to 3,000 square feet. Anything more than that I would say is a bonus because at the end of the day, putting the financial hat on, you’re trying to maximize dollars of student revenue per square footage. That’s the end goal, right? So the more square footage you have, you have the ability to maximize your capacity and maximize the revenues you can bring in and circulate within your location. I would say the sustainability factor really varies by market. It really varies by location because there is a Type A location, there is a Type B location and Type A is basically the best location money can buy. Type B is something that’s acceptable but it’s not something where your sign may not be seen from a busy road. People may not know about it unless someone tells you where to go find it. Location dictates everything. That essentially translates into how much rent you are paying. As I said earlier, that’s the biggest cost driver.
That breakeven and sustainability is really dependent on the market, the location of the school and square footage. So I don’t think there’s a specific number. I think it would vary for each location. Looking at other businesses, other music schools in the area, I would speculate that you need to have a minimum of a hundred students to break even and depending on square footage, I would say with a Bach to Rock model, you can hit up to 500 or more students in a typical Bach to Rock facility. It also depends on how you design and the design phase was for me one of the most exciting parts of this exercise. I learned a lot about building architecture on the commercial side as part of this journey and we were able to, in my location, we have 10 lesson rooms and we managed to get 10 lesson rooms in a 2200 square foot space. So it depends on the architect. Make sure you find a good architect to get the best bang for your buck.
Andrea: That’s a really good piece of advice, using that square footage well since that is rent and that’s the driver, yeah. You’ve mentioned Covid, obviously that’s had an impact on every business. When did you open your location?
Ashwin: We opened in August this year.
Andrea: August of 2020 so right in the thick of things. Do you have any perspective on growth like what would be normal growth for a Bach to Rock studio in the first year versus what it’s been for a location in the Covid year?
Ashwin: Well, pre-Covid I obviously had a profit and loss projection outline for the next three years. That got thrown out of the door as soon as Covid entered. I sort of adjusted my projections by 70%. It’s hard to answer the growth number because it depends on what are you basing the growth on? Are you trying to base growth on number of students? Are you trying to base growth on revenue? Obviously, those are interrelated. Those two are the key metrics obviously. I personally would say your growth numbers should be modeled around your breakeven points. A break even timeframe is and should be your number one goal. So the timeframe for that breakeven point as well as the revenue since student enrollment associated with breakeven is what each business owner should try to model and project. Before that, any growth is just an artificial number and obviously all of this is Covid. I personally am looking at getting to about 150 students to break even.
Andrea: And that’s your focus right now is keeping cost low to keep that breakeven point.
Ashwin: It’s hard to keep cost low model in this market. The variable costs are really marketing and without marketing you can’t get anywhere. We rely on obviously digital marketing that’s my primary focus. We rely heavily on word of mouth, which is happening but obviously not as much as we would like to because the more students we have, the more people venture out, the more people interact with each other, which is obviously not happening with social distancing and people just not venturing out. That’s limited. We rely a lot on events to promote ourselves to have teachers and students come out and play. We don’t have many events happening, so all of those are stunted. So you have to double down in areas where you see some activities so digital marketing. So we have to increase our spending there in order to be visible in whatever markets are willing to come for and personalize it.
The other challenge that we may or may not have is virtual or online lessons. We believe that music is a form of education where the experience can be best delivered only in an in-person setting. A virtual lesson or an online lesson I think has merit if there is already a student-teacher connection established. If you’re looking at bringing on new students in a virtual setting with an instrument focus, it’s going to be a difficult user experience to be dealt with.
Andrea: Are you mostly in-person right now?
Ashwin: I would say, except for maybe one student who just reached to online this week because of the rising number of cases, all of our students right now are in person.
Andrea: Alright, yeah. And I’m sure that brings its own set of expenses that wouldn’t normally be occurring for a startup.
Ashwin: Not really, I mean, as I said, most of our big ticket expenses, these are fixed expenses–rent, electricity, internet. We have equipment that we have purchased. Those are sunk cost. I wouldn’t really say that the cost element changes given that we are in a lease. We have to pay rent every month. There’s no escaping that. We actually have to spend more in Covid, again, from a marketing point of view, because the other avenues are shut down.
Andrea: Yeah. What’s been working for you with marketing right now?
Ashwin: I would say digital marketing took a while so make sure you have a good SEO, SEM person you’re contracting with. It takes time for SEO results to come through. I think what’s really working for us is really focusing on the parent and the student. We have a curriculum so that works for us but then we have to make sure our teachers are following the curriculum. With Bach to Rock we essentially provide a parent photo where parents know what’s going on in every lesson. They see notes. They see homework assignments. They see what page of what book has been worked upon, both in terms of your standard Hal Leonard, your Alfred books, as well as Bach to Rock’s own proprietary books. So parents have a pulse on where the student is at. I think that sort of transparency, visibility, communication, delivers a lot of value, so that’s been working for us. We try to participate in as many events where they will have us because music is a great sell. We basically offer them music and tutor for no charge to them.
Andrea: That’s right.
Ashwin: So that’s been working so far wherever events are happening.
Andrea: That’s awesome. Switching gears, there are some questions I ask every studio owner who comes on the podcast. Are there any books that have had a strong influence on you as a business owner?
Ashwin: For me, I would say I mainly focus on books that talk about teambuilding, whether it’s tech, whether it’s music, whether it’s any industry. If you’re running a business or if you’re leading a team, you got to make sure that your team is enabled, they have the tools, they have all the things they need to be successful. There is a book that I came across when I was in my MBA program in San Jose, California. It’s called Multipliers. It talks about how you can multiply the probability of you succeeding as a leader whether you are in a business or in a large organization by enabling your team to have almost the same authority as you, giving them full control over things that you think they are best at. So by virtue of giving them the controls, the tools, the platform, they will have a multiplying effect on your overall team’s outcomes.
I tend to practice that a lot in any team setting I’m involved in. So for me, my main focus is the Bach to Rock and this music school business is to make sure my team is enabled. They have everything they need to be successful right from my assistant director to my teachers. I’m right now running point as the director of the school. Eventually I want to step out of the director role and just be an investor or a business owner but when that happens I want my director to be able to do everything that I am doing right now, both from a financial side, from a marketing point of view. At the end of the day, make them successful. Focus on their success and that’s how you become successful.
Andrea: I like that. Is there a team size that you think that book is really helpful for?
Ashwin: I would say it works best with smaller teams. When I say small I’m talking about 20 and less. I would say any team that’s bigger than 20, you have to think about it in terms of micro segmented teams. At the end of the day you could run a large organization, if not in a business, by practicing those same concepts but you’ll have to take bite sized approaches to implementing the teachings from that book.
Andrea: That’s really great because there are lots of teachers, let’s say the majority of my listeners probably have fewer than 20 on their team and that’s a great recommendation for smaller teams. And what goals are you working towards in the next year?
Ashwin: For next year, we hope to be Covid-free. My goal is to as I said, my goal pre-Covid as well as in Covid, my goal is to be break even in Year 1. I want to be able to get to 50% of my max capacity in year 2 and work towards that in year 1. But I would say, most importantly, a personal goal I have is to create bands and have bands performing at events in the community, all of whom are trained at Bach to Rock.
Andrea: That’s fun, like you’ve got the business schools and the developing musicians schools there, is there anything I haven’t asked about the process of starting a franchise or what you’ve learned through it that might be helpful to a listener who’s considering this?
Ashwin: Anyone who’s considering opening up a music school, I mean, make sure you have the passion for music. Don’t just invest in it because you think you’re going to make money off of it. I actually think that I could have invested in a few other ventures and my ROI could have been shorter, better, et cetera, but let passion drive your investment. Do your research. Know your market really well and my philosophy with regards to competition is know your competition but don’t downplay your competition. Don’t berate your competition. Learn from your competition if you think they are better than you in some aspect because at the end of the day, the only way you’d win is by delivering value. If you focus on the value you are able to generate and deliver, that will give you the best chances of winning. If you focus on emulating the competition and started negative marketing, if you may, it’s not the right approach in the long run. Don’t plan on exiting unless you have to for financial reasons. Plan on this being a long term investment.
Andrea: Alright. That’s great, thank you. And where can listeners get in touch with you and follow what’s going on with you or location?
Ashwin: Well for our location, I would say you can always reach us out at Cedarpark.bachtorock.com or look us up on Facebook and Instagram. You will also see examples of other Bach to Rock locations that are probably local to each of your listeners. If anyone wants to reach out to me directly or personally with regards to business or tech advice, just reach me on LinkedIn.
Andrea: Alright. We’ll put all those links in the show notes for this episode. Thank you so much for being here and giving us a glimpse into a franchise experience. It’s not very common I don’t think to music teachers. I really appreciate your transparency here.
Ashwin: Yeah, absolutely. It’s a pleasure. Thank you for reaching out and inviting me to your podcast. Hopefully some of the tidbits that I shared are helpful to folks that are considering opening a music school. Again, we learn from experience so I’m looking forward to the next few years of learning more.
Andrea: Absolutely. Thank you so much.
Ashwin: Thanks Andrea.
[00:44:36] [End of interview]
I don’t know about you, but I thought it was absolutely fascinating to hear Ashwin talk about his experience opening a music school franchise. I enjoyed the mix of passion and pragmatism he brought to the conversation.
If it was strictly about maximizing the return on his investment, Ashwin might have opened a franchise in a completely different field, but this wasn’t the only factor in his calculation. On the other hand, when you’re looking at a startup investment of half a million dollars, there’s no kidding around. This is serious business and profitability matters.
Ashwin is crystal clear on his financials and what it will take in terms of enrollment and revenue to reach that break-even point, where his business becomes profitable.
I want to dig in to what Ashwin said about maximizing student revenue per square foot. It might sound like a crude measure, but I thought it was really insightful.
Rent is a fixed cost. It’s the same whether Ashwin serves 1 student or 500 students. Ashwin mentioned that, thanks to a skilled architect, they were able to get 10 lesson rooms into 2200sf.
Let’s talk about why this is significant.
Let me paint a hypothetical picture: Let’s say we’re responsible for building out Ashwin’s school and we’re reluctant to spend money on an architect so we just get out our graph paper and start drawing floor plans. Let’s say we come up with a layout that has 9 rooms.
What’s the difference, really, between 9 rooms and 10, after all? Especially when many of those rooms sit empty during the day, am I right?
No. No, I am not right.
Let’s run some quick numbers to see why.
If you cater to school-aged students, you are well aware that those lesson slots in the 3-4 hours after school along with the weekends, are the most coveted. For simplicity in our example, let’s say that this extra lesson room will get used 3hrs/day on weekdays and 10 hours over the weekends. That’s 25 hours a week. Let’s also say we’re teaching 30 minute private lessons, which means that this room will allow us to accommodate 50 additional students each week. Now let’s say that each of these students is paying $125/mo for lessons. 50 students at $125/mo comes out to $6,250/mo or a whopping $75,000 a year.
That, my friends, is the difference between 9 rooms and 10. $75,000+ per year.
It puts into perspective the value of that architect, doesn’t it? And that isn’t even the most important thing.
The other significant thing to remember with this 10th room is that it doesn’t cost anymore to have it. The rent on the building is fixed. It’s the same whether the space is divided into 9 rooms or 10, but by having the 10th room, Ashwin has effectively increased his earning potential by 11% without any additional fixed expense.
It sounds like Ashwin’s space could be sustainable with fewer rooms, but fitting 10 in was a bonus.
If we’re not clear on our financials, this can go the other way, though. A studio owner might have a great space with 5 rooms and be doing really well by all metrics, but still struggle to pay themselves simply because their business model doesn’t work with 5 rooms. If everything else stayed equal but they had two more rooms, everything might be golden! And that brings us full circle to where we started and the importance of knowing that break-even point.
OK, there are at least three more things I want to talk about from this conversation – fixed costs, variable costs, business playbooks – but this is not a two hour podcast, so I’ll save it for another
Let me leave you with two other episode recommendations. Ashwin talked about Type A locations and Type B locations in terms of visibility and how they help market the school. If you want to hear more on that topic, check out my conversation with Lauren Bateman in episode 057. And one of my all-time favorite episodes that touches on the topic of business models and scale is the episode 031 with Ken Thompson.
I’ll link to both of these in the show notes at musicstudiostartup.com/episode071.
And if this episode raised questions for you, generally or specific to your studio, drop me an email or DM. I love hearing what you’re thinking about and working on.
That’s all for today. Thanks for listening! I’ll be back next week.