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Opening Your Own School - Part Two

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Choosing a Partner and City Location

You will need a really good Chinese partner to open your own private English language school. The same can be said for nearly any business in China, but particularly so for a school.

China takes considerable interest in its education system. As such, the educational system is well regulated. Furthermore, local officials can and often do impose additional requirements that make opening a school burdensome and even close to impossible.

One requirement I have seen is that training schools must be licensed in the name of a local citizen who is a career educator.

Another requirement I have encountered is a stipulation that a new training school must outright purchase, not rent, its premises.

Clearly, some of these requirements seem designed not so much to enhance the quality of education but to serve as a barrier to entry: a form of protectionism and territoriality.

Your partner is the one who will have to meet with key governmental officials and determine the level of resistance, as well as the correct path, to opening a new school in your proposed location.

I have encountered different qualitative levels of reception by government officials. They ranged from warm and welcoming to all but being tossed out on my ear by hostile officials. In general, I have found most officials to be professional and polite.

You should plan on accompanying your Chinese partner to meetings with Chinese officials, even if you don’t speak a word of Chinese. Bringing you adds credibility to your partner’s presentation.

The biggest cause of failure in joint ventures in China is the selection of the wrong partner. This cannot be overemphasized.

You should use a titular partner only if circumstances dictate. In all cases, you should have an active Chinese partner whom you can fully trust

I have seen titular partners attempt to take control of a school even though their roles were supposed to be entirely nominal. Part of your planning should include protective measures that need to be stipulated in writing.

You should select a partner who has a record of doing successful business in China. Simply being Chinese, although a necessary condition, is by no means a sufficient one.

Your girlfriend, wife or neighbor may be well-intentioned, sincere and hard working but without business experience, they can bring little to the table. Being a school teacher is not sufficient experience with which to be a Chinese partner in the business of running a school.

You should choose someone who has done business with the public as well as the government. Real business people in China can instantly recognize when they are dealing with one of their own, as if it were a sixth sense. An amateur can easily get eaten alive.

You need to have a long, frank talk with your proposed partner over a spreadsheet. You need to project the next five years’ growth of your school.

In my experience, Chinese business people have very high expectations of achieving their ROI (return on investment) in a rather short time. That notion is founded in cost opportunity.

The current situation is what I call the “Crazy Money From the Sky” syndrome. China has been flooded with investors looking to do business. Imagine, if you will, that the U.S. Army’s 82nd Airborne dropped a division of paratroopers over Beijing every month. But instead of paratroopers, they were businessmen with rucksacks full of money—with a burning eagerness to spend it all.

Chinese businessmen went from obscurity to prosperity overnight. And every month, another division of moneymen land in Beijing. Soon, the norm, the expectation, was that wealth can and will be attained nearly overnight.

Contrast that expectation with the reality of running a school. The first years are a money pit and the school requires constant nursing and attention. Many Chinese businessmen don’t have the patience for a school as an investment. And why would they? Money spent on a school could be put into a “Crazy Money from the Sky” venture with near-immediate potential returns. So, in an irrational market, their rational decision is to focus on investments with rapid returns.

You need to be very sure your partner fully understands that opening a school is the slow boat, not the express train, to profitability.

If you plan to have foreign teachers, you’ll need to apply for an SAFEA license. Obtaining an SAFEA License is not a trivial bit of business. For starters, your school will need to be open for one year before it can even apply for a license. Next, you will need to go through the approval process. This will require inspection visits from officials at the local and provincial levels, with final approval lying with and coming from Beijing.

It can take a year, or longer, to complete the SAFEA licensing process. In any event, you should plan on not having a SAFEA license for at least eighteen months.

During this time, you’ll need sponsorship, or a working partnership with an established, government agency that is licensed to hire foreigners, e.g., the Women and Children’s Ministry, Labor Department, a public school, etc.

You should enter into such relationships only with the prior approval of both the provincial and local city officials.

You’ll need to choose a city location. I wouldn’t recommend a city with less than a half-million residents. In China, that is not a big city.

If you have a lot of money, a lot of China business experience and connections, Beijing, Shanghai and the like may be your cup of tea. If not, cities of four to six million may be more to your liking. They will be competitive but less so than, say, Beijing.

You may want to be a big fish in a small pond, going to a smaller city and trying to establish a dominant presence there.

One thing to remember is that you will have to recruit teachers to come live and teach in your school’s city. Attracting teachers to Kunming is a whole order of magnitude easier than attracting teachers to Harbin or Inner Mongolia.

At this point we have covered selecting a partner and selecting a city. In the next episode, Opening Up an English Language School, Part III, I’ll write about how to choose a property for your school.


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