STG 028 : Why 50% of New Guitar Teachers Fail

The Start Teaching Guitar PodcastIn this episode, I’ll tell you why over HALF of all small business owners (including guitar teachers) FAIL within the first 5 years, and some things you can do to avoid joining the ranks of the “bottom 50%”. You don’t have to become another statistic…you can have a successful, long-lasting business teaching guitar lessons if you avoid the most common mistakes most teachers make and focus on the things that make you great!

To call in with a question, a comment or to leave feedback for the show, call the Listener Feedback Hotline at (719) 428-5480 and leave a message! I just might include your recorded message in a future episode.

Items Mentioned In This Episode:

Article – Why Small Businesses Fail (SBA)
Book – Guitar Zero by Gary Marcus
Free eBook – Teaching Guitar the SMART Way
Book – Rich Dad, Poor Dad by Robert Kiyosaki
Book – Rich Dad’s Before You Quit Your Job by Robert Kiyosaki

Podcast Transcript

Okay, in this episode of the STG Podcast, we’re going to talk about the main reasons why guitar teachers fail and what you can do to keep that from happening to you. So, the inspiration for this topic, I just want to say from the very beginning, came from a statistic by the US Small Business Association (SBA) claiming that over 50 percent of all new small businesses fail within the first five years. So, I’ll put a link in the show notes to an article. It’s on, and it talks about small businesses and it shares this statistic and a little bit of information about it, but that’s basically where the idea for this topic came from.

And if you think about that, that’s a pretty sobering statistic. 50 percent. That means half of all new small businesses fail within the first five years, and that includes guitar teachers. Statistically speaking, if you just divide everything up that way, then everyone that starts teaching guitar has a 50 percent chance of failing within the first five years. And I have another music-related statistic for you. Only about half of college-degreed musicians are able to make a living in a musical career. Now, that quote comes from a book that I’ve been reading lately. It’s called Guitar Zero, written by Gary Marcus, and I’ll put a link to that in the show notes as well.

But according to this statistic from Gary Marcus, in Guitar Zero, only a small percentage, actually half, of musicians that graduate from music school end up actually doing music for a living. Half of them end up doing something non-musical just because they need to pay their bills. So, if you look at this as far as a guitar teacher goes, only a small percentage of musicians end up making a full-time living as a performer or as a writer, or in some kind of creative outlet for music, even if they get a full-time music degree, a four-year music degree. So, a small percentage of them actually make it to the big time and end up being able to perform or write, or do something creative like that for a living.

The rest of the people of musicians get into teaching kind of like us or they have to just settle for doing music as a hobby. You know, it’s kind of sad to think about it that way, but that’s where a lot of people are. I don’t know how many people I’ve talked to that have music degrees – in a small town, near where I grew up, there was a guy that graduated from college with a four-year music degree and he was owning and operating his own gas station. That’s what he did for a living. He did really well, but he was passionate about music and just never got to live that dream. So, teaching is a great way to actually do that, but even after graduating from Julliard School of Music, one out of four graduates from Julliard can’t make ends meet as a musician and they have to get a different job.

So, the statistics are kind of sobering. It really makes you stop and think about how lucky you are to be able to do music full-time as a guitar teacher or as a performer, or something like that, because it’s doesn’t happen for everyone, so we should really appreciate what we have and try to make the most that we can of our musical abilities and our opportunities. But these kinds of statistics that I’m reading here should put things into perspective for you, right? Starting your own business, honestly, is not a foolproof way to make a living. It’s one of the best ways, in my opinion, to make a living once you get everything figured out and you get the skills that you need to succeed, but the truth is at least of the people who try it do not succeed. They end up joining the bottom 50 percent, or whatever.

So, if you’re a music school graduate, unless you teach – you know, you could have a degree in guitar or something like that, but unless you teach, the odds of having a successful, full-time career as a musician, statistically, are just really slim. And selling gear at a music store doesn’t count as having a full-time music career. Okay, that’s just a stopgap measure or something, but as far as being a performer, being a teacher, actually playing music for a living. Even if you have a music school diploma, the odds are really slim still of graduating and then being a full-time musician.

But the good news is that since you’ve chosen to be a guitar teacher, then you’re in the sweet spot that gives you the best chance for success, according to the numbers. So, if you’re new to all of this and you want more information about why teaching guitar is such a wise move for a musician, then you need to check out my free eBook, Teaching Guitar the Smart Way. It’s got lots of good information in there about why teaching is the best way to make a living as a guitarist, and you can get that for free if you go to, and I’ll put a link in the show notes to that. So, that has a lot of information in it about why teaching is awesome. It’s a great career move for a musician.

But I’m going to assume a few things here. I’m going to assume that since you’re interested in teaching guitar, that’s why you’re listening to this podcast in the first place. So, let’s take a few minutes and talk about what it takes to succeed as a teacher. We’re going to get into the reason why guitar teachers fail, why half of them fail, but first let’s talk about what it takes to succeed.

What It Takes To Succeed

It takes a lot more than just good intention to succeed as a guitar teacher. You could have the best intentions in the world, but you need to be skilled in three key areas if you want to be successful as a teacher. The first one is you have to be a good player. Your musicianship has to be at a decent level for people to want to study with you and for you to be able to really be effective as a teacher. You can’t be a novice player and not have a whole lot of musical skill and get very far as a teacher. You could always teach absolute beginners and things like that, but to really grow a teaching business and be successful, you need to have a certain level of expertise on the instrument. That should go without saying.

The second thing you need to do is you have to be a good teacher. Okay, that gets into pedagogy and teaching skills, and all of the different things that enable you to effectively communicate the knowledge and experience and skill that you have on the instrument to other people and impart that to them so that they can grow and become maybe even a better musician that you are. So, that’s a whole different set of skills than playing the guitar. You’ve got to have all three of these things. Being a good player is the first one. Being a good teacher is the second one.

And the third, and most often neglected, area is you have to be a good business owner. You need business skills. You need marketing skills. You need to understand how to manage your money. You need to understand how to do bookkeeping. You need to understand how a business operates and thrives in order for you to be successful. It’s not enough just to be a good player, although that’s critical. It’s not enough just to be a good teacher, although that is also critical. If you have those two things, but you don’t have the business piece, then there’s a good chance that you’re going to end up in the bottom 50 percent of guitar teachers who fail within the first five years.

So, a lot of guitar teachers are really only good at the first one, playing. Most people don’t try to even step out into teaching guitar unless they have some skill on the instrument, so there’s a lot of good guitar players out there that are trying to teach. There’s a smaller group that are both good players and good teachers, and those are people that get really good results for their students. But a very small minority of the guitar teachers out there are good at all three of these things. And I wish I had some statistics and I could tell you what the numbers are. This is just kind of my impression, just from all the people that I’ve known and talked to in the guitar teaching market, but a very small minority are good at all three of those things.

But this is where you need to be if you want to be truly successful with your teaching business and have something that lasts and is successful long-term. So, what I recommend is building some time for learning and growth in all three of these areas – in your musicianship, in your teaching skills, and in your business skills – to do something in those three things every day. So, you want to keep feeding yourself a steady diet of good information. You know, things like this podcast. You want to read good books. You want to hang around with other business owners and other musicians and other teachers as much as you can so that you can learn and grow. And over time, you’ll become proficient in all three areas.

I’ve talked about this before, and I call it the three-legged stool of being a successful guitar teacher. These are like three legs on the stool, and if one of them is missing, then it’s really hard for you to be solid and steady in your business. But if you practice all three of these things on a regular basis, take some time to work on your own playing skills, work on your teaching skills, and work on your business skills, over time you’re going to be good at them and then your teaching business is going to succeed as a result. So, that’s just a quick synopsis of what it takes to be successful.

And since you’re listening to this, I think I can safely assume that you want to succeed as a guitar teacher. If not, then you probably would’ve turned it off by now. So, obviously you want to increase your chances of success as much as you possibly can so that you don’t become just another statistic in the small business graveyard like I mentioned before. So, the whole point of this episode here is, if you want to succeed, it’s a great idea to try to understand why other people fail so that you can learn from their mistakes. That’s what we’re going to try to do here in this episode today.

Now, that’s not to say that failure and mistakes are necessarily bad things. I just want to make sure and put that out there. Sure, you might be thinking: “Man, you’re crazy. Failure is bad. I don’t want to fail. I don’t want to make mistakes. Well, there’s a quote that I like by Robert Kiyosaki. I recommend a lot of his books for the business stuff, but he said this about failure. “Fail harder. You cannot be successful without failure.” So, failure and mistakes are good when you learn from them. So, sometimes you actually learn more from your failures than you do from anything else, and for that reason failing is beneficial, as long as when you fail, you keep failing forward. You don’t let failure and mistakes be setbacks for you and make you want to give up and quit. You just learn from them and you keep moving forward so that you don’t repeat those mistakes in failures again in the future.

So, even though failure and mistakes are things that can help you to learn and grow and propel your business forward, there’s no reason to keep banging your head on the same wall that everybody else does if you can see it coming and move out of the way. All right? So, you don’t need to be a glutton for punishment and be masochistic and all of that stuff with this. So, you’ll still have plenty of chances to make your own mistakes and to learn from those, but in my opinion, if you can avoid the bigger ones that cause most people to fail, you can save yourself some pain and heartache along the way.

Why 50% Of Guitar Teachers Fail

So, here are some of the biggest things that cause small business, guitar teachers in particular, to fail. So, what I’m going to do is I’ll explain each of one of them first, and then, at the end of the podcast, I’ll give you some advice about each one and how you can avoid getting stuck by it. So, let’s talk about why most guitar teachers fail.

1) Lack Of Experience

The first reason is a lot of times it’s because of lack of experience. Now, here’s a funny quote from Steven Wright that rings a little too true for me sometimes. “Experience is something you don’t get until just after you need it.” That’s the truth, isn’t it? It’s like right after you make a mistake, right after you fail, you know, you get that experience from learning through the failure, but it sure would’ve been cool to have it right before so that you could’ve avoided it in the first place, because it’s painful sometimes. But your biggest obstacle, I think, when you’re just starting out with your teaching business is the fact that you’re just starting out. A lot of times you don’t even know all the things that you don’t know.

I can remember when I first got started several years ago. It was tough because it felt like I was fumbling around in the dark. You know? I didn’t know what questions to ask. I didn’t know all of the things that I needed to do to be successful. I just was kind of trying it out and learning as I went, and I think that’s the way most people do it. But what happens a lot of times is you’re probably a good guitar player and you’ve also had some good experiences helping other people learn how to play. That’s typically how it goes, and then you start thinking that your own business, teaching guitar lessons might be a cool thing to do. You know, you get feedback from people that say, “Man, you should teach lessons. You’re really good at this,” and after a while, maybe you start to listen to them and you decide: “Okay, I’m going to take the plunge.”

But you realize pretty quickly that it’s not all a bed of roses. There are some challenges involved with running your own teaching business as well. So, most of us quickly learn, at that point, that starting your own teaching business does have some pitfalls associated with it. So, some examples. If you’ve been teaching for any length of time, you’ve experienced a lot of these yourself, but things like students who don’t practice. It’s one of the most frustrating things in the world when you’re teaching someone and they refuse to go and practice and master the concepts that you teach them, and then even more frustrating than that is people who don’t pay. You know, maybe they don’t pay on time. Maybe they don’t pay you at all, and then you have to end up firing them as a student or whatever. That’s a tough part of doing business as a guitar teacher.

Then you always have your students that show up late all the time, or some of them that don’t show up at all and don’t call you. And what do you do with people like that? You know, that’s something frustrating that you have to deal with. Ad then you have your last minute cancellations that are always fun. You know, people calling you five minutes before the lesson starts and they’re like: “Oh, I can’t come today. Can we reschedule and do a make-up lesson tomorrow?” So, you have this whole hour where you’re sitting there on your butt, not getting paid. You can’t fit anybody else in because it’s too short notice, so now not only have you lost that hour’s worth of money, but now you’ve got to rearrange your whole schedule tomorrow to fit this person in because their lack of planning, their poor planning has become an emergency for you, so it could be frustrating. Make-up lessons in general are frustrating because they always cost you money.

Various other things that frustrate you and waste your time all bubble to the surface whenever you start doing your own teaching business. And a lot of the things I talk about in this podcast are ways to help you deal with those things and minimize them as much as possible, but when you’re first starting out, you don’t even know. It just happens and you’re like: “Oh man, this is not what I signed up for.” So, just understanding that it’s not always going to be a bed of roses and that there are going to be certain things that you have to avoid helps out quite a bit. Many new guitar teachers over the years, myself included, back when I first got started, have been overwhelmed by all these things because you don’t see them coming. Nobody tells you this stuff ahead of time. You’re not prepared, so basically what happens is, statistically, half of you give up and join the bottom 50 percent. That’s just statistically what happens.

And this is also where your business skills and your marketing skills come into play. I mean without some experience in those things, you can make some common mistakes with that too, and what happen is you end up always struggling to attract new students because you don’t understand how to advertise. You end up always attracting the wrong students, the people that do all the stuff that I just talked about a few minutes, because you don’t understand how marketing works and how to attract the students you want teach and avoid the ones that you don’t. You know, you end up getting into trouble with the tax collectors and stuff because you don’t understand accounting and things like that. Those are all things that are a result of lack of experience.

So, sometimes you can learn from someone like me, who’s been then before and trying to explain it the best that I can. Sometimes you have to just stumble through and fall right into a big, steaming pile of that stuff before you really learn and get some business skills out of it. So, you know, each of us is different. We all learn in different ways, so what I’m trying to do is help you avoid learning the hard way if possible. But experience is not something you can buy. It’s not something that you can gain by listening to a podcast. It has to be earned. You have to earn it. And what I’m going to do is, at the end of the podcast here, I’ll give you some tips on gaining experience in just a few minutes here. So, that’s the first thing: lack of experience. It causes a lot of people to fail in their teaching business.

2) Not Enough Money

The next one is not enough money. Surprise, surprise. Not enough money is another huge reason why 50 percent of all guitar teachers fail. So, money is like oxygen for a small business. I mean you ever tried to go about your daily life without breathing? You know, you can do it for like 30 seconds, a minute or two maybe at the most if you have to, but you know, you can’t go very far unless you have oxygen coming into your body, right? So, money is just like that for your business, for any business. Without money coming into your business, you can’t keep operating, honestly, because money, just like you breathe in oxygen and you breathe out carbon dioxide as a human being, as a mammal on planet earth and the atmosphere that we live in, well, your business breathes in lesson money, tuition fees, income, and then it breathes out expenses.

You need money to keep your business floating. You need money to pay your rent. You need money to keep the utilities turned on. You need money to keep strings on your guitar. You need money to advertise your business. You need money to provide various services to your students. You can’t operate your teaching business if you don’t have enough money to do it. And a lot of new teaching businesses just end up suffocating because of a lack of cash. So, to understand this, you need to understand that there are different categories of money in your business, and this is a pretty big concept. You could kind of picture them as buckets, in a way, and each category of money has a certain use, and you really need to discipline yourself. First understand that they’re there, and then discipline yourself to make sure that you use the money in those categories, or buckets, in the proper way.

And I’m not going to get into all of those in this episode today, but one of the big categories, or buckets, of money in your business is called capital. Capital is money that you invest in your business to start it up and grow it to the point that it can sustain itself. It’s basically a certain segment of your money, your business funds that generates income for you and keeps your business running. So, if you don’t start your business with enough capital to begin with, then that’s a surefire way for it to fail. That happens to every kind of business. If you don’t have enough startup capital to get everything in place and to sustain you until you start getting enough income from your students to pay your way, then you’re going to run out of money to operate your teaching business. It’ll fail.

You’ll have to kick in personal funds maybe to try to keep it running, and then you’ll end up charging stuff on your credit cards to keep it running, and then eventually you’re going to be done and you’ll have to close the doors because you can’t sustain a business long-term if you’re operating that way. You really have to have enough money upfront, and that takes planning. So, in a minute, again, at the end, I’ll give you some advice about how to avoid money troubles like this in your teaching business when you’re first starting out.

3) Poor Location

So, the next reason why 50 percent of guitar teachers fail is poor location. That means having your teaching business in the wrong place. You know, where you locate your teaching business has a huge impact on your success. Location is really, really huge. If you set up shop in the wrong location, it makes it really difficult to keep a steady flow of students coming into your business. You know, if you’re in a bad area of town, for example, they’re not going to feel safe coming over. You’re going to get a certain group of people that are used to that, that are going to come and nobody else will if you’re in a bad part of town. And if those are the students that you’re targeting, that’s fine, but if not, that’s something that could hurt you.

If you’re too far away from where you’re target students live, it’ll be too inconvenient for them. They’re not going to drive an hour across town necessarily just to study with you if there’s another guitar teacher that’s five or ten minutes away. So, distance from your studio is an important thing to think about. And if you’re right next to – I don’t know – a strip club or something like that, then you probably aren’t going to get too many younger students or families, or anything like that, that are going to want to bring their students to study with you because the kids are going to be asking mom, “What kind of place is that,” and it’s better to just avoid things like that sometimes, whenever you have little kids.

So, where you teach has a big impact on your success. That’s just some examples. If you’re renting commercial space for your teaching business, I realize a lot of you are going to be teaching out of your home, which is awesome. That’s one of the huge benefits of being a guitar teacher, but if you’re renting commercial space, if you’re doing something on a little bit larger scale, like you have a music school or something like that, and you get locked into a lease, that’s a whole other set of pitfalls right there. But if you get locked into a lease, you can doom yourself to failure if you choose the wrong location, and that’s because once you sign the lease, you’re stuck. I mean maybe there’s a clause in there where you can get someone to come in and assume the lease for you and get out from under it, but if you sign a lease on a business for a year or two years or three years, or something like that, to lock in a low rate and then you realize that it’s in the wrong part of town, you’re screwed. I mean there’s nothing you can do about that to change it.

So, this is another way that a lack of experience can hurt you. It’s really easy to get starry-eyed and setup your guitar teaching business in a building that’s too fancy and too expensive for you; is something else that can happen, and the last thing that you want really is to be stuck paying a monthly lease on a building that you can’t afford because you can’t get enough students. So, it’s just something to be careful of. That has sunk more than one small business over the years. So, even if you teach from your home though, there could be factors about your house that drive people away, so these are things to think of. Maybe not having enough parking is a problem, and every time your students come to have lessons with you, there’s no place for them to park. They have to park three blocks away, or they get parking tickets, or they get in trouble for parking. I mean that’s not a good thing.

If you’re teaching from your home, if it’s not well lit at night, then it’s going to be scary for people to come in and everything, so you want to think about stuff like that. If you don’t have an adequate waiting area for parents, sometimes that can be an irritation because they’ll have to sit out in the car and they won’t be able to really participate and see what’s going on with their kids, your students. If you’re house is messy or it’s not well maintained, it makes a bad impression. People are less likely to want to come, or if your teaching space is too small, if you’re teaching out of a walk-in closet or something in your master bedroom, those are all things related to your location that can cause problems.

Now, the obvious solution to this is to understand what makes a location good and to make sure that you pick a good location for your students and for your teaching business. So, again, in the end, I’ll talk about that a little bit.

4) Over-Investment In Fixed Assets

So, the next reason why most guitar teachers fail is over-investment in fixed assets. Over-investment in fixed assets. So, that might sound a little technical, but basically what that means is you’re spending too much money on equipment and stuff. So, this goes hand-in-hand with your location, right? A lot of people spend too much money on stuff when they start their teaching businesses. I mean I know. I’ve been there. I understand how it feels and I understand the temptation to want to look professional and to spend a lot of money on things that are really just the icing on the cake and not really the cake. The cake is what makes you money. The icing is just what makes you look like you have money.

So, things like buying fancy amps and guitars, and then justifying it as a business expense. It’s like: “Oh, but my students are going to look at me with so much more respect if I’m playing a Paul Reed Smith electric guitar and I have a Mesa Boogie full stack behind me, and all these effects on the floor is just going to impress them so much.” No, it won’t. All that’s going to do is it’s going to take your money away and spend it on something that could be used better elsewhere, and I’ll tell you what that is in a bit, but you don’t need fancy music equipment when you’re starting out as a guitar teacher. As long as your guitar stays in tune and it works and sounds good, that’s all you need.

Another thing a lot of people spend money on is really nice audio and video equipment, and they say, “Oh yeah, it’s for my students.” It’s a big, flat screen, plasma TV or something like that, with Blu-ray player and an Xbox so that you can play Rocksmith in your lessons, and all these other things. Yeah, sure, that’s for your students all right. Not for you at all, right? You know, as soon as your lessons are over, you’re in there, playing with that stuff and using it for yourself. So, you don’t need nice audio and video equipment to succeed as a guitar teacher. You don’t.

Another temptation, this is one that I was guilty of in the past, is new computer and mobile devices, because you know, you “need them.” You know, “Oh, I’ve got to buy a brand new computer. I’ve got to buy a new Mac so that I can do all of this stuff for my teaching business,” or, “I’ve just got to have an iPad so that I can use that in my teaching business,” or, “I have to have an iPhone because my students need to be able to get a hold of me, and what if I get emails on my phone,” and those are just really excuses to spend money on things that you really don’t need. A computer and all those things can help you in your business, but you don’t have to spend all of your money on brand new, expensive equipment.

Another thing that a lot of people spend too much money on is fancy advertising. They’ll go out and they’ll spends hundreds and thousands of dollars on graphics design work, on logos and website designs, and things like that. They’ll buy these expensive signs. They’ll buy these expensive car magnets and all these expensive ads in movie theaters and things like that. And you don’t need all of that to get started as a guitar teacher. You know, later on, when your business grows and you have a lot of money coming in, and you have a big surplus of cash and capital, you can start investing in things like that, that’ll bring you even more dividends and stuff, but you don’t need to do that to start out, and a lot of people spend way too much money on things like that when they are just getting started, when there are much better uses for that money as a beginning guitar teacher.

You know, there’s a big temptation to just do it right when you start out. That’s the justification a lot of times we use, but some people spend so much money trying to do it right that they end up doing it wrong, so don’t make that mistake. Too many teachers fail because they get dollar signs in their eyes and they spend too much money on the things that they don’t need. So, when your business grows, like I said, later, you can always spend the extra money then. You don’t need all that fancy stuff now. Your success is not going to depend on how fancy your equipment and your stuff is. So, over-investment in fixed assets can kill you. You can waste your valuable business capital on stuff that doesn’t makes a difference on your bottom line, so that’s a big mistake to avoid.

5) Borrowing Too Much

So, the next reason why most guitar teachers fail is borrowing too much. You know, and this goes hand-in-hand with over-investment in fixed assets, because a lot of times if people don’t have the cash to buy those expensive things that they think they need, then they’ll just charge it on a credit card, and that’s like even worse. Man, that’s another nail in the coffin right there if you do that. So, this next problem here that new teachers face is directly related to the last one. The temptation to just open a credit card for your business and charge everything you need for your business is huge. I mean we live in a society. The world that we live in is all based around credit, easy credit, and they’re constantly trying to get you through advertising and all these other airline points and all this stuff. Reward programs to try to get you to spend money that you shouldn’t be spending so that they can make money off of you.

And they’ll give a credit card to almost anybody. I mean as soon as you become a freshman in college, you start getting credit card applications. I mean they’ll give a credit card to almost anybody, and then they try to get you hooked on using it so that you depend on it to manage your finances and stuff. And if you’re one of those people who really likes to buy stuff, like I’m guilty of sometimes – I have a chronic case of this thing called gear acquisition syndrome. Maybe you’ve heard of it. The initials are GAS. Stands for gear acquisition syndrome. If you like to buy stuff like that, like me – I’ve really had to just learn how to discipline myself over the years -, you start thinking that you need all this stuff to start your teaching business out right, and then you get a card to try to buy it. Then look out, because you’re on the path to failure.

So, I know from experience. I’ve talked a little bit about my past and stuff in this episode, but I know from experience and from some of my other business ventures in the past that easy credit is a trap. So, let me give you an example. This is a story from my history as a business owner. When I started an IT consulting business, back in 2003, I was so excited about it. This was my first real full-time foray into business and everything like that. And what I did – my biggest mistake – was I quit my day job too soon. I had this one big account that I would go and do IT support for that brought in 75 percent of my income. It was a huge retirement center in town.

And I had all this money coming in from this one client, and I just got cocky. I got overly confident and I decided that: “Hey, I’m just going to quit this other job and I’m going to go ahead and try to do this full-time and see what happens.” And I had gotten some easy business credit cards, and I charged up loads of debt for equipment that I thought I needed to have to make a good impression on the clients I would go and talk to. So, I bought like one of those early tablet PCs, where the screen spins around and lays down flat, and you write on it with a stylus, and I had all this other cool stuff. I spent a lot of money on logo design and business cards, and all of this stuff. Way too much money.

And after six months, that one company that was bringing in 75 percent of my income got sold and guess what. The new owners brought in their own IT people and I lost almost all of that company’s business. You know, they’d still call me once in a while to help out with things, but it went from 75 percent of my income to like two percent of my income from this one client, and that was a huge mistake and a huge failure that I learned from. And what I ended up doing was I ended up using those same credit cards for a few months to make my mortgage payment. And then, after a while, I ended up with over 50 thousand dollars in credit card debt, not to mention car payments and other consumer loans and stuff. It was over 50 thousand dollars of debt that I saddled myself with because I quit my day job too soon and borrowed too much money.

So, needless to say, that business failed. And I didn’t get the debt paid off until years later. I think it was like seven or eight years of hell basically, and it took a lot of work. It took a lot. There was a couple times when I had three or four things going at the same time, along with teaching guitar lessons, so that I could just pay all this day off. So, that was a lesson learned that I’m never going to forget. So, learn something from my mistakes here, and my advice is just avoid credit cards all together.

6) Personal Use Of Business Funds

So, the next reason that a lot of guitar teachers fail, over 50 percent of them typically fail, is personal use of business funds. You notice a lot of these failure things have to do with money, right? Personal use of business funds is a big reason why small business owners fail. So, do you remember when I mentioned before that there are different categories or buckets for money in your business? Well, you absolutely must keep your business money and your personal money separate from each other. Mixing them together is something called co-mingling of funds. That comes from the investment world, where investment banks and mutual funds have to keep their money and your money separated. They can’t mix it all up in one big bucket.

And it’s the same thing in your business. It’s a recipe for disaster if you do that. Just because they don’t know any better, a lot of new business owners will just keep one checking account for everything or just one drawer full of cash or whatever for everything. They pay their personal bills out of this one account. They pay business expenses out of this one account. There’s no clear distinction between what belongs to the business and what belongs to you, and you really do have to have that distinction. You have to keep something separate there so that you treat your personal money and your business money differently. Okay, if you don’t do that, this can come back and bite you on the butt when tax season rolls around.

The Government wants to see a separate, dedicated set of books for your business. They want to see you operating with what they call fiduciary responsibility, which means that you run your business properly, you’re doing everything according to the rules, and you’re doing it in good faith. So, what happens is if you don’t do that, then you’re really likely to be audited by the IRS if you live in the United States, if you’re American. And usually, when they audit you, it’s a huge ordeal and you end up having to pay fines, penalties and all this other stuff on top of the money that you should’ve paid in the first place. So, it’s a lot easier to keep track of that if you keep it separate.

It’s also really difficult to budget effectively if you mix all your money up into one bucket. What happens is you end up using your advertising money to pay your apartment rent, for example. You end up taking the money set aside for your student recital that you’re going to be putting on in a few weeks and then you use it to buy groceries instead. If you have it all mixed up in one account, it’s really hard to keep track of stuff. And you can also run into trouble if you just spend your business money on personal things. You can’t just take money out of your business and go buy stuff for yourself with it. There are certain bookkeeping procedures that you need to follow. You have to actually pay yourself out of your business, and then there are certain payroll taxes and other things that come into play. It all needs to be done in a certain way.

So, when money goes into your business, it goes in, in a certain way. When it comes out, it needs to come out in a certain way. And if you skip those payroll taxes and just spend your business money, then you can get penalized by the tax collectors and you can get your business shutdown. So, there’s a reason why personal use of business funds causes so many businesses to fail. So, be safe, keep them separate, and just don’t do that and you’ll avoid a lot of heartache.

7) Unexpected Growth

All right, I have one more reason here. One more reason why most guitar teachers fail, the 50 percent of them do, and that is unexpected growth. This final reason why so many teaching businesses fail is kind of surprising, but you actually can become a victim of your own success. Think about this with me for a second. What happens if your marketing does really well, much better than you expected, and you get so many students that you’ve got to expand your operations just to fit all of them in? So, you go out and you rent bigger teaching space. You hire a few people maybe to help you teach all of these people. You invest in some additional equipment. All of that stuff just to keep up with the demand of new students that are coming into your business.

It happens so fast that it seems too good to be true. All these people coming in, in such a short period of time and it’s like: “Wow, man, this business is awesome. This is so cool.” It almost seems too good to be true, and then, after a while, you find out that it is too good to be true. Attrition starts to kick in and then you start to lose a lot of those new students. It happens to everyone. You know, there are ways to minimize that, but attrition, as a guitar teacher, is a fact of life. Managing your cash flow starts to be difficult, and then you have trouble meeting your payroll obligations. These employees that you brought on, all of a sudden you don’t have enough money to pay them on time.

You know, people don’t like that, whenever they work and expect a paycheck and they don’t get it. That makes a lot of people want to abandon you and leave you high and dry. What happens is if it grew so fast that you couldn’t keep up with it and now it starts to contract because you’re locked into a lease on your building that you can’t get out of, right? You remember that teaching space that you rented, that bigger space. You realize, once all this stuff starts happening, you can’t make your payroll. You can’t make your lease payments, but you’re stuck. What happens is the writing is on the wall and you realize that impending doom is approaching and it’s just a matter of time before it falls apart.

It’s way better to grow slowly and steadily over time than to just grow in fast spurts. It’s way better. I mean there are ways to manage that growth – I’ll talk about some of them in a few minutes here – so that you don’t have a lot of these problems, but if you’re just doing it the traditional way and you just get way more students and you try to accommodate them, it can really cause a lot of problems for you. You need to be able to manage the growth of your business and make sure that you grow along with it. It’s huge and it’s very important. So, growing too fast really is a lot like getting swept away by a tidal wave. You know, a tidal wave of guitar student just coming to sweep you away. You can lose control of your business really easily when that happens.

So, it all comes down to two concepts. Net income versus cash flow. I’ll talk about those in a bit. If too many people owe you tuition money, then your expenses can pile up before you have a chance to collect all that money, and then suddenly you can’t pay your bills. You become what they call in the financial world insolvent, and that’s not a good place to be. It’s a common problem with businesses that grow too fast and it can kill your teaching business just like anything else can.

So, now that you understand some of the biggest things that can cause your teaching business to fail, let’s take a few minutes, as we wrap up this episode of the podcast, and talk about how to avoid each of those specific things. [Continued for STG All-Access members]

Thank You For Listening!

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STG 028 : Why 50% of New Guitar Teachers Fail was last modified: June 10th, 2014 by Donnie Schexnayder