ELT needs commercial leaders to take back control of the supply of its clients, Mergers and Acquisitions guru James Dixey tells Melanie Butler

James Dixey is clear about what the British ELT industry needs: ‘big, brave, commercial leadership!’ When James talks business, I listen. Over the last 30 years, I have learned that what he says is often controversial and nearly always right.

He contacted me to talk about the latest sale he has brokered. Studio Cambridge, one of the largest private language school operators in the country, has been bought by Hong Kong investors.

It’s the ninth sale he’s brokered since he came back into ELT five years ago.

The eighth was also in Cambridge. The New School, now part of the St Giles group, had a special place in his heart.

It was the school where, with a year as a VSO volunteer under his belt, he taught in his university holidays. The school where, over 40 years ago, he met up with fellow teacher Mario Rinvolucri, the father figure of humanistic methodology.

Together, they dreamt up the kind of ELT operation which their Cambridge students told them they wanted: a school in a location with fewer foreign students, friendlier host families, and more enthusiastic and innovative teachers.

The combination of James’ commercial acumen and Mario’s pedagogic vision resulted in the creation of Pilgrims, one of the most successful, and ELT brands. Their recipe was simple:

‘We had a brilliant product tailored precisely to the needs of our customers and we employed the very best teachers that our money could buy.’

And commercially?

‘We distributed our programmes though running courses and workshops for teachers all over the world. We knew that teachers recommend students!

And we learned early on how to do Direct Marketing. We never let agents dictate terms to us.’

In 2003, Dixey sold Pilgrims and ‘went fishing for ten years’.

I knew he would be back. Sure enough, in 2015 he called me to tell me he was bored and was going into ‘Mergers and Acquisitions’ for language schools.

When he contacted me about the Studio sale, I decided to pick his ever commercial brain.

What are the biggest change he has seen since he’s been back?

“Many language schools have made the commercial mistake of giving away 
control over the supply of their students to their agents.”

He reeled them off. First the new players:

‘China. The biggest market the UK ELT industry has ever seen is just beginning to emerge and there are lots of other new markets coming on stream.’

As for the product: ‘There’s a massive growth in demand for pathways and for Young Learner courses. But demand for traditional General English for adults is falling.’

The UK EFL market is in a classic ‘Consolidation Phase’, says Dixey. As consolidation occurs, competition intensifies and strong commercial leadership is vital.

‘Many ELT schools are still run by superb and committed educationalists’ he notes’ ‘which is excellent for the quality of the product; and the care of the students. But many have made the commercial mistake of giving away control over the supply of their students to their agents.’

‘Agents are now effectively ‘in control’ of many ELT schools; and are able to ask for more and more commission; up to 50 per cent in recent cases.’

James Dixey is horrified.

‘You cannot run a successful business if you give away 50 per cent of your turnover before you start.’

If you want to be commercially successful he argues, you must control both your supply of customers; and the costs of getting them, ‘Customer Acquisition Costs’ as they are known

They include not just your agents’ commissions, but all the money you spend on acquiring and servicing your agents: brochures, sales trips, sales staff…

Any school that spends more than 30 per cent of its turnover acquiring its students, warns James, is ‘looking at trouble.’

He has a simple message for the UK industry: get together now; and invest in online promotion and direct marketing before it is too late…

‘It is effective and it costs less than you think.’ And it puts you in a much better position, if you want to sell.

According to Dixey, who has a database of buyers looking to buy English Language Schools: ‘investors like language schools because of the positive cash flows…

But the price you can expect depends on the profit margins you make.’

‘What we need in this industry,’ adds the man who built the brand “is visionary commercial leadership. And skilled direct marketing.”