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Should I buy an RTO or open one myself?

March 15, 2024 by Sally Tansley

We often get asked the question, “Should I buy an RTO, or should I open one myself?” In the ever-evolving landscape of vocational education and training that’s subject to frequent regulatory change, this decision is an important one. Our clients regularly find themselves at a crossroads, contemplating whether they should embark on the rather daunting journey of setting up their own RTO from scratch, or to seize the opportunity to purchase an existing one. Each path presents its own unique set of challenges, advantages and even disadvantages, which demands an extensive examination to make an informed decision.   

Let’s look at the advantages of buying an RTO first. These include:

  • Instant access to a source of revenue – buying an existing RTO offers the advantage of immediate access to a source of revenue, providing the ability to start operating straight away without needing to pay certain costs, such as rent, while waiting for approval. 
  • Inheriting established infrastructure – acquiring an established RTO can give buyers access to existing infrastructure, including premises, equipment, and staff. This saves precious time and resources that would otherwise be spent on building from the ground upwards.  
  • Established market – buying an RTO comes with the advantage of tapping into an established market presence where there may already be a degree of customer loyalty. This offers a promising head start in the process of attracting students and generating revenue.  
  • Longer registration period – Purchasing an RTO also means that you will inherit the RTO’s established registration which could be more than you would get if you set up an RTO (initial two period for new applications). 

Disadvantages of Buying an RTO

The disadvantages of buying an RTO include the following:

  • Inheriting non-compliances – one of the main concerns when buying an RTO is the possibility of inheriting its compliance issues. Setting aside the instant revenue, unresolved compliance issues can lead to regulatory scrutiny, and can tarnish the reputation and profitability of the RTO.  
  • Inheriting resourcing issues – buying an existing RTO may come with its own set of resourcing challenges, ranging from outdated systems to inadequate staffing. Although these issues can be addressed, their presence have the potential to impact the smooth running of the RTO environment.  
  • Ability to put your own stamp on things – there is also the issue of limited customisation, as inheriting existing practices and structures limits the buyers’ ability to transfer their own unique style into the business.  
  • A change of ownership audit – because of the purchase of the RTO, an audit may be triggered. This can mean you have only just bought the RTO and have to gear up for an audit. Further, the audit can identify the non-compliances that you may have unfortunately inherited. 

The advantages and disadvantages above are not the only ones but are what we would consider to be the major areas for consideration.  Let’s have a look then at the advantages and disadvantages of setting up an RTO from scratch. 

The advantages of setting up an RTO include the following:

  • Starting with a clean slate – free from inherited compliance problems, setting up an RTO provides you with the opportunity to build a unique operation from the ground up, crafting every component to align with your values and visions of what a compliance organisation should look like.  
  • A chance to put your own unique stamp on the business – setting up your own RTO has so much potential for individual customisation. This is not just about choosing a colour scheme or logo; it is about infusing your unique identity, values, and offerings into every nuance of the business. 
  • The opportunity for you to set up everything the way you want it – the most empowering aspect of setting up an RTO is the control it affords you. Unlike acquiring an existing RTO, where you may find yourself limited by established frameworks, inherited culture and practices, beginning from nothing grants you full control over every aspect of the organisation, and is an opportunity to be fully compliant by setting up everything in a quality way. This offers your chosen target group exactly what they want.  

Disadvantages of Setting Up an RTO

The disadvantages of setting up an RTO include the following: 

  • Costly – one of the biggest considerations in ownership is the initial investment costs required to establish an RTO. This applies to costs ranging from rent to acquiring essential equipment, resources, and regulatory fees. The financial commitment demanded at the outset can be substantial, underscoring the need for careful financial planning and resource allocation.  
  • No established market – building a clientele and carving out a niche in a competitive landscape requires more than just a compelling vision; it demands strategic marketing efforts and a significant investment of time and resources.  
  • Potential risk of not getting approved – although unlikely, there is always the possibility of not getting approved. This means all the time and money invested could potentially be lost.  
  • Qualifications originally chosen are no longer competitive – due to the changes in industry standards and shifts in market demands, setting up an RTO could mean that by the time you are approved, the qualifications you have chosen are no longer in demand or that many other established RTOs are offering these qualifications, thus limiting your competitive edge.

 

How RTO Works can help you decide!

RTO Works can offer a range of services to assist with the above, including:

If you’d like to speak with a professional compliance expert, call or email our friendly customer service team today!