The statistics are there.  Businesses go bust.  Last week I indicated how most schools start up and grow, but there is always the chance that you won’t make it.

A school requires students, and the greater the surface you occupy to have students, the more students you need.  So all you got to do is get more students, easy! Right?  We’ve talked about marketing before, and there is very little a small business can do apart from being intensely involved in their direct surroundings (Church, hobby clubs, other businesses, …)

I am in my sixth year of running a school, but I am in a situation where, in the near future, cannot see my school grow outside of its current operation.  Current operations as of late have been undercut by other service providers.

It took my three years to get into profit, in other words, it was a case book story for small businesses.  The fourth year, the machine started squeaking, advertising were becoming less effective and step by step I had to simply downsize and cut costs.  All the wile keeping the school in order operationally, and due to cutting capacity, I got myself stuck with too little time to find the core of the problem.  Currently, I am what they call at a break-even point.  A situation I am not too happy with.  I have changed some operations to fit requests parents often made, to no avail.

The source of the problem is the following.  The market is shrinking.  Hagwons let a lot of Korean English teachers go.  These teachers also need income, so they started on their own, offering the same services, from their apartment.  Exactly the way I started, I cannot fault them for that.  The problem is this, I have been doing the rounds with posters in my hand to garner some attention and hopefully get some extra students.  It was difficult to find an open spot …  meaning that currently my LOCAL market is flushed with capacity, and parents can easily pick and choose, and more importantly, lower the cost of education.  Again, no one is at fault.  People do what people do.  As a business, I have to find an answer to this problem, find a way to distinguish myself, and show value for money, or give up.  Luckily, I have very loyal students who do not want another teacher, so I can keep level at the moment.  But that is not going to last.

Therefore differentiation is becoming an important part of my strategy, but I have yet to see how  exactly I can differentiate myself from my surroundings.  Due to the market being flushed, every teacher out there is willing to do exactly what he parents are asking for, and they can do it since they are not restricted in what they can offer.

At the same time, family budgets took a hit in my surroundings, due to a twofold change in real estate.  Rents went up and values went down.  When rents go up, families have less budget to spend on their kids, when property values go down, exactly the same thing happens for those who bought their homes (e.g. loan system in Korea renews the loan every three years).

Starting a price war will only make matter worse, there is a reason why I set the price I have.  Competing on price now would only indicate a lower level of quality provided.

Small business are often very depended on the cash flowing in the direct neighborhood, and you have no control over it.  The reason I decided to build my school in this area is that I saw signs of potential growth in this area, but things didn’t work out that way.  When you decide to start a school, you really need to start in an area where economic growth is happening, so that at least the pie is getting bigger and it will be easier to get a piece of it.  When the pie shrinks, keeping your piece will require so much energy, you have no time to work on other things.

Haa the vagaries of lady Fortuna.