In the coming posts I will expand upon the valuing schools post.

Using information from schools for sale posted online recently and in the past, I have put together some fictitious, hybrid examples.

None of these schools are real in themselves, but are all based on real, published, unexamined information. None are in our group or based on any schools or owners I have had direct contact with.

Please refer to the glossary.

First, let’s look at a very common setup: the foreign teacher and spouse TOO team.

As mentioned in the video, it may be possible for the seller to find a like-for-like replacement couple, but essentially, what is being sold is cash flow and goodwill. Unfortunately, the goodwill resides 100% with the current owners (the sellers), and this could be seriously affected by them leaving.

It may well be that the students love the current owners so much, that when the owners leave, so will a lot of the students.

This puts all the risk on the buyer, and this should mitigate any offer.

It’s also important to look at the leases: What name are they in? What would need to be done to renew?

Are there any outside contracts? Are they in the name of an individual, or hopefully, in the name of the company being sold?

Even if corporate contracts, this does not guarantee the client will continue the contract long-term, as performance satisfaction will dictate this, so any notices to quit and terms thereof would have to be carefully inspected.

So, school number one: PQR English

(1) A ‘large’ private English conversation school(s) in a very small, rural city, pop. 60,000. Not on Honshu, close to a larger city of approx. 700,000.

(2) PQR English Yugen Gaisha established 20+ years ago.

(3) Over 200 students attending the main school and contracts at 20 kindergartens locally.

(4) Classes over 12 hours per day, 6 days a week.

(5) Gross annual revenue is approximately ¥16,000,000.

(6) Rent: None – in a building owned by the company or the company owners (not specified or examined.)

(7) Staff: 3 – 1 NEST (owner), 1 admin staff (owner’s wife) and 1 JTA.

(8) Exact expenses and salaries not listed.

(9) Asking price: ¥13,000,000, non-urgent sale.

(10) Would suit couple.

(11) Great opportunity with potential to increase business by extra promotion.

(1) A very small ‘city’. This would be a town where I come from. What is the local competition? Small, rural cities with very little competition, especially native English speakers, can be fantastic locations. Are there any other games in town? If not, this is a tick.

(2) Another tick. Will be able to see audited accounts.

(3) Another tick. Need to ensure the contracts are with the company, not an individual. Check the length of the contracts, the renewal periods, notices to quit and conditions. What percentage of income comes from the kindergarten contracts and the students at the school?

(4) Ouch! ❌❌❌

(5) Nothing startling. ¥16,000,000 ÷ 12 ÷ 200= ¥6,667. This would be the per student monthly fees if the income came from only students at the main schools alone. This is low. There is other revenue from outside contracts which would apparently lower this. Not promising.

(6) Potentially complicated. Does the company own the building, or does the departing seller as an individual? If the former, must presume this is not included in the asking price. Is it available for sale? Approach with caution. Rural property is often more liability than investment.

If owned by the seller, what are the conditions to stay us a renter? Need to check local reasonable rents.

Does the seller wish to sell to somebody else?

Would the seller hang around as a potentially interfering landlord?

This is potentially very, very tricky.

More information needed. Proceed with caution.


(7) See (4) It seems the foreign teacher teaches 12 hours a day, six days a week. Wife and assistant teachers’ hours not specified. These exact details would need to be verified from the company accounts. ❌❌❌

(8) ❌❌❌

(9) Note the inclusion of “non-urgent”. The seller here is either truly not in a hurry to sell, can afford to wait for the required asking price, and is a tough seller, or is attempting to convey that feeling in the buyer, and is a tricky seller.

(10) If you are not a couple: If you are a couple:

(11) What is the potential? Approach this with caution, too. Investigate why the seller hasn’t exploited this potential, and investigate whether this is real potential. What is the realisation of potential students within the demographic? The statistics are available online. “With great potential” is the lazy equivalent of ad copy: “And much, much more!” Yeah? What is it?

Let’s apply some models and see if this is a reasonable proposition.

See the tabs here but please don’t edit. Duplicate if you’d like to do so.

I’ve assumed: A senior NSET looking after a more junior one, the JT also taking a CRM role; rent of ¥100,000 per month, not buying the property; welfare at a standard approximation of 7.65%; travel for Ts to the school and to kindergartens – have not considered the school owning a car.

Model 1:

Modern English (ME) to buy and own directly.

The school pays an admin fee and our office takes care of all CRM work not done by the JT: back office, admin, phones, schedule, finance etc.

Senior T reports to head office (HO) weekly.  This time is included in Sundries.

Advertising at a low 3% of gross; ¥11,000 per month HO marketing contribution.

Net before tax of approx. ¥1.6M pa. Very hard to get excited about this.

Net after sales taxes of approx. ¥950,000 pa. Net after all taxes of ¥671,000.

Not worth the work involved or further consideration, even without factoring in any losses due to departing owners.,

At best, looking at the net after sales taxes of approx. ¥950,000 pa, I’d struggle to offer ¥3,000,000.

¥3,000,000 in mutual funds should get me 7-12% return pa. That’s ¥210,00 to ¥360,000 pa for doing nothing.*

I’d much rather do that.

*Let’s call this the DNE – the do-nothing earnings comparison.

Model 2:

Couple owned. NSET and spouse replace main NSET and ME roles. No group marketing fund.

This would assume 2 x 40-hour working weeks by the couple. Assume 6 weeks off.

Take home approx. ¥8.1M after sales tax, but before income or corporation tax. Lots of ways to re-arrange this for tax purposes, but that’s approx. ¥2,200 per hour each. I’d boldly suggest the couple could find better paying, less stressful jobs, and this shouldn’t be of much interest.

Best offer: ¥6-8,000,000

DNE:  ¥420,000-¥960,000

Model 3:

Assumes a non-teaching individual owner; bilingual, looks after all staff.

At ¥1-2M, not a terrible return, but the huge risk of departing, long-term TOO and staff remains. At best, I’d want my money back in three years and offer a maximum of ¥4,000,000. I’d start much lower, at ¥2,000,000, at which point a tough or tricky seller would likely decline.

I would also think about trying to reach a deal with a downpayment, and then subsequent payments dependent on the income if it remains stable. Were I the seller, I’d reject this.

Best offer: ¥4,000,000

DNE:  ¥280,000-¥480,000

All in all, this school appears to have been very demanding, but well-paying jobs for a couple. I am sure they have done well from it.

I’m not sure it’s such a great prospect for any buyer under any of these models. I struggled to get close to 50% of the asking price.

Your cash is hard-earnedand can work for you. Always keep in mind the DNE.

Caveat emptor.