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Exceeding your limits

Terry Phillips looks at ways to grow your business

It is a truth universally acknowledged that if a business does not grow in some way, it dies. The problem is, there is always something that is limiting your ability to grow. In fact, there are usually several factors. But you must start with the principal one. So what is your principal limit to growth at this moment? I stress principal and at this moment, because, like the Alps in the Pope poem about a little learning, once you have climbed over the current limit to growth, another will appear. That’s just business.

The most common limit in ELT is pretty obvious – student numbers. If you identify that you have excess capacity – teachers, rooms, host families, etc. – throughout the year or at a particular time, you need to increase or improve your marketing to take up the slack. A word of warning here. Don’t just get on a plane and fly to Brazil to talk to some agents. The return on investment (ROI) of that kind of marketing exercise is likely to be very low.

Think of ROI in terms of student numbers. How many students will pay for the marketing activity? That is the break-even for the project. If a marketing trip is going to cost £2,000 in flights, hotels and other expenses, and your average profit from one student is £200 – say five weeks at £40 profit per week – then you’d better be reasonably sure that the trip is going to gain you at least ten students. (To make a very obvious self-serving point, this kind of ROI calculation makes the low-cost advertising in the Gazette with its enormous global reach an excellent ROI possibility, at least in the long term!)

Here are a number of other common limits to growth, with possible solutions:

Supply of entry-level teachers
• Train them yourself. In my experience, this is not only a very cost-effective way of increasing your teaching pool, it can also produce some of the most effective and loyal members of staff because they understand the company ethos and have bought into it.

Supply of experienced teachers
• Advertise in the right places – the Gazette is good!
• Offer a good salary in the advert (not ‘competitive’, whatever that means).

Retention of teaching staff
• Pay a good salary, ideally with incrementals to encourage retention.
• Offer career progression if you are a large organisation
• Offer portfolio progression if you are not, i.e. give teachers opportunities to increase the breadth and depth of their teaching ability.

Supply of quality host families
• Pay more for hosting! This is just so obvious that I don’t know why it needs saying, but it does. Host families cannot offer a quality service on the average payment they receive, so you attract either people who don’t care about the money – which is great – or those who find a way to make money even out of the low payment, e.g. by overfilling their house or under-delivering to students. It doesn’t matter then how good your teaching is – the reputation of your organisation will be damaged.
• Use alternatives to host families, e.g. hotels or hostels, but remember that students and parents often think the host family is a key part of the learning experience.
• Build your own accommodation blocks – but see above. And remember that the accommodation must be high quality because many students, particularly younger ones, are from very rich families.

Supply of classroom space
• Rent more space – don’t buy at this point. And remember new revenue-earning space is a step cost which may, temporarily at least, grow you into loss. That’s not a misprint. It is quite possible to grow into loss. While you are operating at capacity (classes being held in the library or the principal’s office) you are probably making a good profit, but the cost of renting, equipping and possibly staffing additional premises starts with the first extra student. So you must be sure that space really is a limit to growth, not just the answer to a temporary slight increase.

Supply of management time
• Promote someone, at least part time and temporarily. Many growing businesses are overtrading – working beyond the capacity of the management team to control for quality. Promote someone to give them a role that impacts on quality.

Unfortunately, many ELT businesses find it impossible to deal with a tangible limit to growth, like supply of students or classrooms, because there is a more serious intangible limit – supply of working capital. One definition of working capital is the money you need to trade which is not immediately covered by that trading income. This is the situation when we try to grow. So in many cases, before you can begin to remove a tangible limit, you have to secure a line of credit which will underwrite the growth until it begins to return on the investment.