Job Discussion Forums

[edwinagirl]

This is something I hear quite often. I have a few comments for anyone who may be considering it.

The chances are against you. All the more so if you've never managed a business before. Do you have any busienss experience? How about legal and financial aspects of business?

Whether to open a school or not surely depends on what you want to achieve. Do you understand that the only possible way to protect your investment/ownership is through a Joint Venture? No other contractual arrangement gives you legal ownership in China. The minimum investment for a JV is 200k and it immediately saddles you with tons of responsibilities, including nasty things if it goes bankrupt and you cannot pay your debts. If, therfore, you want ultimately to build a long term business, it has to be legal, a JV.

Alternatively, you could just go ahead and open a school with your friends without a JV. If you do that, however, then you must be out of your mind. How would you distribute the shares? What happens if later, you want out and he wants to stay in? What happens if it loses money? Who pays what? How do you determine legal responsibilities? What happens if a student decides to sue for some reason? There are guidelines to all of these issues written into a JV. Without that license you'd have to negotiatate every possible issue that could arise, a complete nightmare, an an open door to some local competitor to shaft you and take you business. You would get screwed seven ways from Sunday.

On the othger hand, imagine it actually went well, but you had no legal claim to ownership of the business becuase you didn't do a JV. Just watch how quickly you would lose friends and business partners. Think divorce, if the company was in your wife's name. What would be the point of building uip a successful school for 4 or 5 years if you didn't officially own it?

In my experience the the barriers to exit can be as tough as the barriers to entry in this business. It could possibly run reasonably well, but without making money. Two years down the road you may want out because it's too stressful and will never make money, but you can't because your cash is tied up in liability towards the students. Nightmare.

The TEFL industry is a cottage industry. There are 1,000 providers in the UK. This is a sure sign of a low-margin business - no one player consolidates because the margins are not attractive. Wall Street had a winning strategy for a few years, but that is collapsing now. EF are slowly committing suicide in China. A school may provide an OK living but making real money is seriously challenging. I only know of one foreign owned, privately invested school that has managed to do it and make money in China (in Shanghai, actually.) Believe me, the chances are against you.

[burnsie]

Yes, agree with you that there are alot of things against you. In Beijing it a satuated market with over 2,500 language/training schools. It's too competitive for many so alot of people replicate the successful ones in smaller cities and capture the market.

You mentioned JV's. As WOFE's (Wholly owned foreign enterprises) are becoming easier to setup and able to compete in the Chinese market there probably is no need to develop these unless you have technical advantages or revenues to take out of China. Actually I still think you cannot set up them in the education industry but I am sure this will change in the next year or two.

In saying all this it doesn't mean that without a good business strategy or model you can't make money. You have to do your homework and research the future requirements of the market.

As China continues to open up to the global market and with some major events happening late this decade I still think there are opportunities as the market changes. All markets change, for the better or the worse but there will still be opportunities to be had with the right attitude, timing and strategy.