If you hear the words “business plan” and feel a chill of fear ripple down your spine, chances are you’re like the majority of studio owners. Business plans are lengthy, exhaustively researched documents reserved for high-tech start-ups pitching their ventures to wealthy investors—right? Think again. A business plan is a roadmap for your studio’s success, outlining your goals as an owner and detailing how you’ll achieve them. If you want to create a sustainable, successful business, you need to develop a plan and keep reviewing and updating it; you can’t just wing it.
When Tracy Schwend decided to apply for a $55,000 small-business loan to open up her Warrendale, Pennsylvania–based Premier Dance Academy, she wanted to be well-prepared. With the help of a business counselor from SCORE, a free business consulting service, Schwend drew up a business plan that convinced her bank to approve a loan in just four days. “My banker said he could actually see how my business would progress,” she says.
There’s no need to get caught up in formatting and unnecessary details—instead, focus on what business planning expert Tim Berry refers to as the “lean business plan.” We’ve outlined Berry’s four crucial sections below, including what kind of information should go into each. For business plan templates, visit the U.S. Small Business Administration at sba.gov/writing-business-plan.
“This isn’t an academic text,” says Berry, author of The Plan-As-You-Go Business Plan. “It’s a few bullet points—key reminders of why you’re doing this in the first place.”
Who are you? When Schwend was compiling her business plan, she gave a brief bio of her dance history, mentioning that she’d been dancing for 32 years and teaching for 13.
What are you planning to do? “I wanted to create a comfortable, stimulating environment for students of all ages and abilities within my studio,” says Schwend. She provided such details as: when her school year would run (September through June), when the studio would be open (Monday through Friday, 4 to 8 pm), the approximate square footage of the studio and the number of bathrooms.
What need will this business fulfill? Schwend highlighted her commitment to education and physical activity. After asking around, she found that people were most willing to spend money on their kids—that is, her target market.
How will this business be different from the competition? It’s important to educate yourself about your competition and separate your studio from the pack. Schwend originally planned to offer a unique combination class: While a babies’ tumbling class took place, moms could take a Pilates class in the studio next door.
“Strategy without tactics is meaningless,” says Berry. “In this context, this means what sort of classes you’ll offer and for what prices, and how you’ll advertise.”
How will you implement your strategy? Schwend described every class she planned to offer, noting the age group, how long it would last and what genre of dance would be taught. “I included how many nights a week I’d offer these classes and got a mock schedule going,” she says. She detailed her plans for private lessons—$20 per half hour—and explained the difference between her future recreational students and competition students, noting that her competition kids would need to take at least seven classes a week.
How will you advertise? Schwend’s business plan mentioned advertising via the newspaper, word of mouth, bulletin boards and bulk mailings.
“This section is more fleshing out the tactics. These specifics give you things that you can track, allowing you to focus on management,” says Berry.
Who is your management team? When creating her plan, Schwend identified herself and another teacher—the only faculty at the time. But Berry recommends using this section to also divvy up who’s in charge of what: “Who’s responsible for social media? What about advertising?”
What are your dates and deadlines? “What are the dates for the next session?” says Berry. When will your recital be? When will you open your studio? “There’s a huge value in saying, ‘I’m going to have this done by September,’” he says. “If you give it a date, you double the chances that it will happen.”
“People think you need an MBA to forecast sales and expenses, and that’s not true,” Berry says. “You just need to estimate sales and expenses. You can do it all with a simple spreadsheet.” Budget how much money you need to get started—and get going.
Sales Estimate how many students per class, how many classes and how these numbers will increase over the course of three years. For the first year, project your sales month by month; for the second and third years, a quarterly basis is fine. The spreadsheet you create should have a column for unit sales (the number of students); one for pricing (the cost of a class); one to multiply units by price (to determine sales); one for unit costs (like sound equipment or the instructor’s salary); and one to multiply units by unit costs (to figure out cost of sales, or your direct costs). Duplicate this spreadsheet for each new revenue stream—if you plan to sell merchandise at your studio or if you’ll offer a summer intensive.
Expenses “Who are you paying to do the instruction and marketing?” asks Berry. “What about overhead costs?” Remember that you’ll have fixed costs each month that don’t change—like rent and payroll—as well as variable costs, like advertising.
Projected income With the prices you plan to charge, and the sales and expenses you project over the next three years, will you eventually be able to make money—i.e. a profit—that you can invest back in the business? An estimated profit and loss statement will help you determine your gross margin (sales minus cost of sales) and net profit (gross margin minus expenses).
Cash flow Making a profit can still leave a business with an empty bank account. How much money will be coming in and going out—and when? Chart your projected cash flow month by month for at least a year.
Don’t expect to compile all these numbers chronologically. You’ll constantly be doubling back as you make your projections, revising as you go.
Review and Revise
Berry advises setting aside an hour or two every month to review and revise your business plan. “Look at the difference between what you planned and what happened,” he says. “The shelf life of your business plan is only a few weeks.” Schwend ended up scrapping or altering a lot of her plans: Her babies’ tumbling/Mommy Pilates class combo never took off—instead, her moms were more interested in starting an adult tap class. She didn’t see much success with bulk-mailing advertising, either. “Now we do an in-house thing. If you recommend a friend, you get $15 off a month’s tuition and so do they,” she says. The flexibility of Berry’s “lean” business plan easily lends itself to frequent revision—ensuring that your business will stay alive and thrive. DT