A cautionary tale on operating yoga studios

It’s almost a year since I closed down the yoga studio, where I worked as studio director, senior teacher, and director of teacher training for almost six years.  Time and distance has given me a chance to reflect upon what went wrong and how to use this knowledge to help others to avoid the same mistakes that I made.

Operating a yoga studio is first and foremost a business, and it needs to be treated as such.  If you do not acknowledge basic business practices when you open a studio, you will spend a lot of time learning through trial and error.

I speak from a unique position.  I’ve worn every hat possible in the yoga industry.  I started as a student, twenty years ago.  I became a teacher, then a studio manager.  I took on the roles of teacher trainer and then studio partner.  Since the closure of my business, I have served as an informal advisor for several yoga studios, local and national.

I’ve never worked in an office. Never been desk-bound in a cubicle.  I’ve always been self-employed, self-directed, self-taught, with lots of wonderful mentors who have guided me on the way, sometimes explicitly, other times through example.

If I failed, it was because I did not apply what I had learned.  I took my eye off the ball.

I don’t have an MBA from Harvard or Stanford.  My MBA is from the School of Hard Knocks.  My case studies were conducted in real time, with real people.  I didn’t get As or Bs on business projects.  I was rewarded with more customers or punished with less customers.  I learned to negotiate business deals, oftentimes at my disadvantage, and had to live with the consequences.

I learned that people are not always honest, trustworthy, or direct, even if they say they are.  Words can mislead, deeds never lie.  One famous instance was when my landlord revised fine print in the lease when we decided to take over more space (Mistake # 9, listed below), telling us in person that nothing except the square footage had been changed.  When we reached year 5 and expected to have half of the deposit returned, he informed me that I should look at the lease again.  He had changed the wording in the fine print so his company would hold all of the $20,000 of security deposits (my savings) in escrow until the end of the 10-year lease.  (Lesson learned: read the lease with a fine tooth comb.  Then spend $300 to hire a lawyer to comb through it a second time.  Compare the results and then proceed if all is good).  That was a bitter pill to swallow, and I lost the money when the business closed in year 6 and the landlord used it to pay for the rent.

There are so many more stories.  Toilets overflowing.  Vandalism.  Early mornings checking the bank account balance.  Late nights brainstorming marketing ideas to increase membership retention.  Endless hours writing emails, newsletters, and handling customer issues and teacher issues.

And more.

But I want to get to the whole point of this post, which is to provide a postmortem of a yoga studio failing.  A cautionary tale, if you will.

These factors are in no particular order, and no single factor was the main cause.  A business is very much an organism. Once one organ starts failing, then systemic problems start to multiply and further wreak havoc on the body.  Sure, the cancer may have started in the liver or the lung, but when it metastasizes, does it really matter which organ was at fault?

It would be wise to read through these points if you have any aspirations to open a yoga studio.

1. High cost of studio rent – commercial rent in DC (and most major cities) is expensive.  By the time we closed, we were paying close to $7,500 a month, just to keep the doors open.  That doesn’t include taxes (retail and employment), utilities, phone, internet, security, cleaning, maintenance, renovations, or any of the other costs associated with running a business.  Basic business monthly operating expenses, just to break even, was close to $30,000.  Lesson learned: Rent is too damn high!  Develop a robust business model, like in #6, with yoga diversified.
   
2. High payroll – If you teach all of the classes yourself, you can reduce your payroll by a lot.  The problem is you will drop dead within a week, after teaching 20 to 30 classes.  So you have to hire other teachers.  It helps if you have a partner to share the workload, but hiring other teachers is inevitable if you want to have any semblance of a work/life balance.  Hire more teachers, and your expenses go up.  But the good thing is you develop a team of experienced teachers who bring a lot of love, commitment and expertise to building a community.  Lesson learned: pretty self-evident.
3. Low revenue from classes – you have to run a lot of yoga classes every week in order to meet your customers’ needs and desires. Stay open seven days a week, most holidays and during all types of weather.  Forget snow days. If people are home, they will want to do yoga (good!)  Run classes morning, afternoon and evening.  An average, one-room yoga studio will have about 25 to 35 classes a week.  Add a second room and you can double your evening classes, and push the weekly schedule to 50 or 55.  Which brings me to point number 4, 5 and 6.  Lesson learned: if you open a yoga studio, you will eat, breathe, sleep yoga, 24/7, 365/year.  Be prepared.
4. Market prices for yoga are too low – Yoga is cheap nowadays.  Plain and simple.  You’ll pay $20 for a single drop-in, compared to SoulCycle’s drop-in rate of $34 (!) and SolidCore’s drop-in for $35.  If you purchase a class pack, you get a few bucks knocked off each class. The downside of class packs is this: they are much more volatile.  Someone buys a class pack and then you hope that they purchase another class pack when they finish the pack.  Memberships, on the other hand, are more reliable source of income: if you have 200 memberships, at $89 per month, then you know you will have $17,800 every month, with maybe 5% fail rate from expired credit card or membership attrition.  Lesson learned: yoga studios need to charge higher prices for yoga classes, to stay competitive with other fitness studios and to meet rising costs.
5. Groupon/LivingSocial/ClassPass were a blessing and a curse.  When we first opened, we ran a deal on LivingSocial, where we sold 5,000 vouchers.  The good thing was that it put us on the map, and provided seed capital to continue to run the business and to grow.  But the bad outweighed the good: the studio became known as a Groupon studio, where, because we educated the client to not want to pay full-price, it was very difficult to completely remove it from our business model.  For a time, we had too many students, trying to get into too few classes, and we were getting slammed on Yelp.  Lesson learned: Do not do daily deals.  They will condition your customers to pay less and will condition you to use it as way of generating revenue.  Believe in the value of the service you are giving to customers, and NEVER be ashamed or shy to ask for payment.
6. Too much dead space during non-primetime hours – This wasn’t always the case.  When we first opened the studio, there was one practice space and then a set of separate rooms where a massage therapist and an acupuncturist offered their services.  It was a nice model – students could take regular yoga classes, supplement their practice with regular massage or acupuncture.  Both arms of the business had different revenue models, so, in retrospect, it seemed more robust, more resilient to volatility.  (If I had to do it all again, I would keep that set-up).  Once we closed down the massage rooms and renovated it into a second space, the big problem became under-utilization of space.  Now, there was a second studio which stood empty on most mornings and afternoons, but was full in the evenings and weekends, with classes, workshops and teacher trainings.  Lesson learned: be careful about how much space you take on.  Figure out how to make the most of it. Negotiate hard with the landlord to get the best price per square footage. If you don’t like the deal, walk away, and mean it.
7. Opening of second location stretched the business too thin – Absolutely do not open a second location until your first location is stable and profitable.  You really have to ask yourself, when you are thinking about opening a second location, “Why do I want to do this?  What could I gain from opening a second studio?”  If you are thinking about trying to sell your yoga studio (as I tried towards the last year to save the business and to pay everyone), just a word of advice from a broker: yoga studios are incredibly slow to sell.  If you are thinking about going corporate or public (as YogaWorks tried to go public earlier this month, before withdrawing their IPO at the last minute due to investors’ concerns of its profitability), then you are in the wrong business.
8. Too many renovations in the early years: We renovated three times in the space of 4 years. That’s three times too many.  It ended up putting a heavy financial strain on the business, even though it did improve the appearance.  Lesson learned: Renovate early, then wait for five or six years before you renovate again.  Make use of the space you are in.
9. Closing the second location caused a huge backlash from the customers –
   People don’t like things taken away from them.  We tried to market the hell out of the second location, and students were genuinely interested in the second location.  Classes were small, but the second location suffered from a lack of attention.  It was in the basement, and the landlords were intractable about fixing signage and addressing flooring issues.  As one businessman described the situation for me, “Imagine going to the ATM every morning.  Take out $400, and then flush it down the toilet.  That’s what is happening here.”  The only choice was to close down, to end it at the right time.

WHEW!  I sweated through my shirt writing this.

You might think, given the chance to do everything over again, I wouldn’t have started this business.

Oddly enough, I don’t regret it at all. I wouldn’t give up these experiences for anything in the world.

I met so many wonderful students and teachers, some of whom have become good friends and trusted allies.  I got to collaborate with some of the most dedicated professionals I have met in my life.  I had the honor to host major yoga teachers, such as David Williams, Tao Porchon-Lynch, AG Mohan, Jules Febre, Tamar Samir, Lama Norbu, and Leslie Kaminoff.  We hosted holiday parties, a business launch, speeches given by activists and prominent thinkers, kirtans, and celebrations.  Over 50 people went through our teacher training, many of them now teaching at local yoga studios around DC. We participated in yoga festivals, international retreats, and fundraising campaigns for local and national non-profit organizations.

The lessons I learned hardened me, made me much more of a realist, tempered my naivete with nerves of steel (although I still get rattled from time to time).  They also made more compassionate, more understanding of people.

The last class (right) I taught there touched me deeper than any class I have ever taught.  Or will ever teach.  Such an outpouring of love, compassion, and appreciation.

The other day, I was re-reading some old Yelp reviews about the studio, as I was researching this post.  Yes, many people complained about one thing or another: too hot, too many student, not enough classes, too vegan (or not vegan enough).  Yes, there were some genuinely eccentric (read: crazy) people who posted some bizarre things. I laughed quite a bit.

But I was overwhelmed with the majority of reviews which were positive, which complemented the beautiful space, the teachers, the sense of community, the overriding mission of the studio, and the students’ appreciation for having an oasis from the stresses of office, school or home.  I was overwhelmed by people sharing what they really wanted from yoga: peace of mind, better health, and a chance to connect.

Yoga is often translated as “union,” which has always struck me as a bit sanitized.  I prefer nowadays that yoga means “relationship, intimacy, connection, contact.”  That’s more compelling.

Would I do it all over again?

Yes, but better, leaner, clearer.

Thank you for reading.