Who Should Buy a Ballroom Dance Studio?

In this series, CapForge’s owner and founder gives us a little behind-the-scenes on what a good or bad business would be. CapForge helps tons of clients either buy or sell business and Matt was a business broker before starting CapForge. Let’s look at some of these businesses up for sale and see if Matt would be interested in buying them.

Video Transcript: 

So this is another one of the “Would I buy it?” business reviews. And today’s subject is a ballroom dance studio in Florida. So would I buy it? No, because I don’t know anything about ballroom dance. And that’s the kind of challenge with these kinds of businesses. It’s a very specific person who’s going to know enough to run a business like this, but not be interested in starting their own take on it. They’re going to want to acquire someone else’s. If this was a big enough business, if it had a million dollars in revenue and $250,000 in profit, you could probably run it as a non-dance person and hire people who could teach the classes and still have enough money left over for it to make sense. But in this case, the metrics are the gross revenue is 259,000. And considering how round of a number that is, I’m always a little suspicious that that’s really the right number. It sounds more like an estimate, and the cash flow is $47,000. So, essentially, buying this business, you’re going to make about as much as if you worked as a full-time barista at Starbucks, maybe a little bit more. But with all the headaches of running a business, which is a 24/7 365-day-a-year operation. 

And the other challenge is, of course, they want you to first pay them $175,000 to acquire the business, which means that you’re going to be working for the first three and a half years for free. And there’s very few people with enough passion for what they do to work for three and a half years for free before they start getting paid at the same rate as your average coffee shop employee. So I think this is going to be a very tough sell at this price. If they were willing to sell it for maybe $50,000, then they might be able to find somebody who is going to be interested in taking it over. Or like I said, if this business was three or four times the size, there might be buyers, a bigger buyer pool interested, who would be willing to buy it and run it, even if they weren’t dancers or dance teachers themselves. But this kind of business at this size is very tough to sell just because there’s so few people who have the money to invest and the interest to work at that pay level for years and years. So I wish them luck. But I think this is going to be a tough sell.