In this Ask Evan episode, viewer Nicole asks how to handle buying an established yoga studio that has students on prepaid 1‑month and 3‑month packages. Evan Carmichael advises she can renegotiate the deal by either reducing the purchase price to reflect the prepaid revenue she won’t receive immediately, or by restructuring the payment schedule (e.g., paying 50% up‑front and the rest in installments) so cash flow aligns with incoming student payments. He also highlights that prepaid packages are beneficial because they give the new owner time to prove teaching ability and retain students, and suggests encouraging the seller to sell more of these packages before closing. Guest expert Danny Iny adds that the prepaid revenue should be folded into the purchase price (e.g., adding $10,000 prepaid to a $100,000 asking price) and warns that student loyalty often ties to the instructor, so the buyer must account for potential churn if the previous owner was the primary teacher. Both conclude with encouragement to consider these factors before deciding to purchase.
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Hi, I'm Evan Carmichael. Welcome to another edition of Ask Evan. In today's video, I'm going to answer a question from one of our readers, Nicole, who's looking to buy a yoga studio and had some questions for me. So she wrote in, "Dear Evan, I'm hoping I can receive your opinion. All I can offer you is good karma in return." I'm interested in taking over an established yoga school. Many of the existing students have already bought 1-month, 3-month packages. The seller is claiming that the purchase will not be affected by those, and I just have to allow those students to finish whatever they purchased without any compensation to me. This seems a little bit unfair. What are your thoughts, please? I may be working or teaching for months before I see any money. Nicole. So Nicole, that is part of the deal, and it's great that you discovered that before before signing any agreements, but if you're unhappy with that part of the deal, then you can try to restructure the deal. And my two thoughts for you are: one, reduce the price. So, you know, if you know that you're not going to be making money for a while and he's keeping the money that's been paid even though he's not delivering the services, maybe you can knock a certain portion off the price of the deal. If he's unwilling to do that and you still really want to buy the business, you can agree to that price but maybe stretch the periods out of when you actually pay him. So for example, you could say, I'll pay you 50% I'll pay you 50% right now when I buy the business, and then I'll pay you 25% in a month and another 25% in 3 months. And what that helps make sure is you have some money coming in before you have to pay all the money out to the guy you're buying the business from. So you might be able to change the structure of the deal around a little bit, but that, you know, could be part of the deal. Whenever a business is bought and sold, there's a million different things you can look at to structure it, and so this is one of the things that you want to find out. Factor in. I think it is a good idea though that there are these packages that are 1 month, 3 months, and hopefully longer as well, because what it does is it gives you the opportunity to prove yourself as a yoga instructor or teacher. And I know when people are taking classes, and from my own personal experience, my wife is a salsa dance instructor and has her own business, when people sign up to take a class with somebody, they expect to have that person delivering the classes. And so if in the middle of the class or what they purchased changes, a lot of people may drop off. But if they've committed to buying 1-month or 3-month packages, it pretty much makes sure they're going to want to come and finish off their package and allows you to prove yourself as the instructor and will hopefully allow you to get those people to come back and want to sign up to take more courses with you. So I think that part is actually a really good component of the deal, and you want to try to encourage the sell more of those 1 or 3-month packages, maybe even before you end up buying the business, encourage the current owner to try to do that as well. So I hope that helps, Nicole. I also invited one of my friends, Danny Iny from Fire Pole Marketing. I sent him your question and he had a little video response as well. I'm going to turn it over to Danny now.
Well, Nicole, if I understand your problem correctly, you're thinking about buying this yoga studio, and some of the people for— and some of the students of the yoga studio have prepaid their memberships, and that money has been collected by the previous owner. And so the previous owner doesn't want to reimburse you that amount. You just have to think about the entire package of what you're buying. Let's say they're selling the yoga studio for $100,000, and they've got 100 students who've prepaid $100 a month for 1 month, so that's $10,000. You just have to figure that into the purchase price. It's really that you're buying the yoga studio for $110,000, and is it worth it at that price? And that's for you to decide. One thing I would consider though is that usually, especially with a smaller yoga studio, people don't have a relationship just with the studio, they have a relationship with the instructor that teaches their class. So if the instructor stays, that's one thing, but if the previous owner is the instructor and you're taking over, you might find that you lose at least a portion of those students. And so you've got to figure that into your projections as well when you figure out whether or not this business is worth acquiring. So Nicole, I hope that's helpful. If you have further questions, you can post them where you posted your first question. Or you can contact me directly at firepullmarketing.com. Thank you very much and I'll see you all on the next video.
So I hope that helped Nicole. I hope what I said was useful and I hope Danny's words of wisdom also proved to be useful as well and you have some ideas to go home and make a decision on before you go and buy this business. If you guys like the video, please give a comment below. I love hearing what you guys have to say, and I also love seeing thumbs up on all the videos. It makes me want to make more of these types of videos for you guys. So hopefully you'll do that, and we'll see you for the next episode.
