Lessons from starting a language school

1. Include everything in your list of expenditures. Some things might sound trivial, but you might not dismiss them so easily if they mount up or are higher than budgeted and you have to pay them. The bottom line is that if you go broke, it's over.

2. Keep a close eye on your finances and report frequently. Watch your cash flow; it is much easier to go broke than you think.

3. Expect money to be very tight at first in a new venture. "It costs more than you think and takes longer than you think" (Peter B.) You will start with not many students and build up. Calculate break-even points on classes, so you know when you're making a loss. At first, you have so few students that you have to accept the loss; it's just part of your initial investment.

4. You will need to build up working funds so that you can take unexpected hits and pay for developments. For example, the currency collapsed, losing 80% of its value. That was a big hit. The roof sprang big leaks. The place looked too scruffy and needed tidying up. The rent contract came up. You will need much more money in the kitty (i.e. capital reserves) than you think.

5. Get your accounting structure worked out sooner rather than later. The reasons are many:
· It keep things recorded and honest.
· It keeps you up with student billing.
· It allows for auditing.
· It allows you to make management decisions. (This will prevent you going broke)

6. Do a financial audit at least annually, perhaps more often in the first year. Audits will allow you to:
· evaluate whether your bookwork system is coping with your needs,
· find mistakes,
· identify ad hoc systems that will eventually collapse, and,
· prevent and find dishonesty.
If you do not have the policy in place first and get people used to it, some workers may feel that you are accusing them of dishonesty. By having the rule in place first, you can put things on a sounder footing.